DALLAS -- Texas could sell $500 million of cash-management notes by mid-September, but the final size of the issue hinges on the budget lawmakers could pass next week.
John Bell, the state's deputy treasurer, said the size of the program will depend on the amount and types of new revenues lawmakers use to balance the two-year, $57 billion budget. Because revenue measures -- including new and restructured taxes -- usually take effect in January, it could increase Texas's need for a cash-flow borrowing.
"It's all up in the air right now," Mr. Bell said.
Lawmakers are scheduled to end a 30-day special budget-writing session next Thursday, but there is already talk of a second session to adopt budget measures being worked out now in legislative committees.
"It's impossible to do [the borrowing] until the Legislature has done a budget and appropriations bill," said Mr. Bell, who oversees finance matters for the treasury. "Who knows when they are going to finish?"
In the five years since Texas began its annual fall borrowings, the state has never issued notes to cover a deficit. Instead, the program is meant only to ensure an even cash flow for the state in the coming fiscal year.
On Monday, the Texas House of Representatives approved a bill that would let voters decide Nov. 5 whether the state will start a lottery. A favorable vote is expected late this week in the Senate.
John Sharp, the state comptroller, has estimated a lottery would net the state $340 million in the next two-year budget cycle, which begins Sept. 1. That number is small, compared with an estimated $4.8 billion budget shortfall lawmakers must close.
Also late on Monday, the budget-writing process became fractious as representatives stripped away much of the $3.3 billion in proposed fee and tax increases that would be necessary to finance the provisions in the early draft of the budget already approved by the House.
Lobbyists blamed parochial politics by individual House members trying to protect the interests of their districts from revenue-raising measures.
"They were going at it pretty strong, but I would be surprised if they didn't come to their senses," said one lobbyist, who asked not to be identified. "They have a budget to balance, and somebody has got to pay for it. We don't know yet where the money is all going to come from, but we know it won't come from an income tax."
Texas does not have a business or personal income tax, though a gubernatorial task force last month recommended that one would be needed to finance growing state operations.
While the budget process is uncertain, officials say that how the state finances education could have the greatest effect on the size of the note sale.
Vince Matrone, first vice president at Rauscher Pierce Refsnes Inc. in Dallas, the financial adviser for the issue, said the note deal could grow if the state had to accelerate payments to districts under the new school finance law.
"it could mean they might have to borrow more," he said. "Nobody knows what that numbers is."
While other states and major cities do deficit financings, Texas does not. In fact, it was not until 1986 that the Legislature authorized cash-flow borrowing for the double-A rated state.
Since then, the programs have ranged from $450 million to a record $1.25 billion of paper in 1987 when the state was suffering from a crash in the oil and real estate markets.
Mr. Matrone said -- as in past years -- the state expects to sell 12-month notes with ratings of MIG-1 from Moody's Investors Service and SP1-plus by Standard & Poor's Corp.
He said the notes are secured by a pledge of tax and revenue to the state's general fund, adding, "It's a very high-quality issue."
