Tag Archives: Rainy Day Fund

Texas projected to face $4.6 billion deficit by the end of the current biennium

Texas Comptroller Glenn Hegar, the elected official charged with overseeing the state’s finances, now expects Texas will face a $4.6 billion deficit by the end of the current two-year budget cycle. The state had as recently as February been looking at a multi-billion dollar surplus heading into next session.

One of the comptroller’s primary jobs is releasing state revenue estimates, which project how much tax revenue the state is expected to collect in relation to how much it is budgeted to spend. These estimates are revised periodically, particularly in the event of a drastic change in economic circumstances. The economic downturn caused by the simultaneous events of the COVID-19 pandemic and the oil price war certainly marked a drastic change.

Certification Revenue Estimate 2020-21 Info-graphic from the Texas Comptroller

The comptroller told legislators back in April that the economic double-whammy had sent Texas officially into a recession. On Monday, Hegar testified before the Legislative Budget Board (LBB) and shared a revised revenue estimate that offered sobering numbers. The state is projected to end fiscal year (FY) 2021 with a budget shortfall of $4.6 billion — a $7.5 billion reversal from the $2.9 billion surplus his office projected in the certified revenue estimate (CRE) released in October 2019. The state is now expected to have $110.2 billion in available general revenue for the 2020-2021 budget biennium, representing an $11.6 billion decline from $121.8 projected in the 2019 CRE.

A mathematically-minded observer may note that the numbers do not exactly match up. Hegar explained that while revenue collections dropped by $11.6 billion, the budget fell by only $7.5 billion as a result of a handful of factors that reduced the amount of money the state was expecting to spend. Among them, Texas received $1.2 billion of federal CARES Act funding for public education that it used to offset state spending. Changes in the assumptions regarding the state share and the local share of public education funding resulted in $1.7 billion in unanticipated local funding. The state also received an additional $700 million in recapture (or “Robin Hood”) payments that it had not anticipated.

Source: Texas Comptroller

Sen. Finance Committee Chair state Sen. Jane Nelson (R-Flower Mound) asked Hegar in Monday’s LBB hearing whether legislators should expect to tighten their belts during the next legislative session. Hegar was reticent to prognosticate beyond the current budget cycle. However, he was quick to point out that he had pushed early on for agencies to reduce their spending ahead of next session. State leaders have since instructed state agencies to reduce spending by 5% across the board. Hegar noted that instruction is not factored into this projection. Any savings will however reduce the need for supplemental spending in the next legislative session, reducing the overall pressure on the next biennium’s budget.

In response to a question posed by Senate Education Committee Chair Larry Taylor (R-Friendswood), Hegar indicated that the state will be able to ensure schools receive the additional funding promised this budget cycle as a result of the school finance bill House Bill (HB) 3. Yet Hegar suggested there is tremendous uncertainty as to what the state will be able to provide in the upcoming 2022-23 budget cycle.

Lt. Gov. Dan Patrick (R-Texas) said Monday that school districts across the state have roughly $14 billion in fund balances, which represents each district’s cash reserves. Patrick suggested that the state could tap those fund balances to offset the budget deficit. Patrick separately acknowledged that teachers are now included in the list of “frontline” workers in the COVID-19 pandemic.

Texas Tribune Executive Editor Ross Ramsey (left) interviews Texas Comptroller Glenn Hegar (R-Texas).

The revised estimate released this week does not take into account agency budget cuts, whether schools reopen for in-person versus remote instruction, or any future federal relief money. Hegar explained Wednesday in an interview with Texas Tribune Executive Editor Ross Ramsey that the estimate does not factor in any additional federal relief money until a bill is passed by Congress and signed by the president. Hegar also told Ramsey that the estimate was based upon the assumptions that the economic recovery is already underway, that there will not be an additional spike in COVID-19 cases in the fall that would spark another shutdown, and that GDP may return to normal by the end of 2021.

Hegar said that the state saw a less drastic decline in sales tax revenue than he had previously feared. The state also took in $950 million more in taxes from online purchases as a result of legislation passed during the last legislative session that expanded the sales tax.

Source: Texas Comptroller.

The economic stabilization fund (ESF), commonly referred to as the “rainy day fund,” is projected to end FY 2021 with a balance of $8.8 billion. This fund is fed by taxes collected from oil and gas operations, which have been hit hard by the combination of lower oil prices and a reduction in production following the precipitous drop in demand caused by the economic impacts of the pandemic. The ESF was designed as a safety feature to enable legislators to dip into the fund to during lean years, smoothing out the fluctuations in available tax revenue caused by volatility in the oil and gas market and enabling the state to maintain critical government services.

In both testimony and interviews this week, Hegar has emphasized the need for the community to come to terms with the reality of a protracted battle against COVID-19. Hegar highlighted citizens’ responsibility to wear masks and engage in safe practices designed to slow the disease’s spread and prevent another shutdown. On a positive note, Hegar noted the healthy ESF and potential savings from agency budget cuts are among the measures at the state’s disposal to help manage the budget shortfall.

“There’s plenty of tools in the toolbox to be able deal with it as this current revenue estimate projects,” said Hegar, while adding the caveat, “Every revenue estimate has clouds of uncertainty, yet this one has greater clouds of uncertainty than ever before.”

The comptroller discussed other potential sources of revenue and savings in Wednesday’s interview. Hegar contended that an income tax is unlikely to pass in Texas, where such a proposal would require a supermajority of the Texas legislature and a statewide vote. The comptroller was also skeptical of the idea of legalizing and taxing marijuana, which polling shows is supported by most Texans. Hegar instead pointed to budget measures taken during the 2011 legislative session, which saw large budget cuts (including $5.4 billion from public education) as a result of a projected budget shortfall. The comptroller also mentioned deferring public education payments and looking at funding for Medicaid.

When the 87th Texas Legislature convenes in January 2021, shoring up the current budget will be the first task legislators face. Their next task will be to set the budget for the 2022-2023 biennium, which Hegar warned is likely to be a much bigger issue — although it’s too early to forecast the scope of the challenge. That will be the focus of the comptroller’s biennial revenue estimate (BRE), which is usually released right before the new legislative session begins.

State comptroller says Texas is in a recession

In an interview Tuesday morning, April 7, 2020, with Texas Tribune Executive Editor Ross Ramsey, Texas Comptroller Glenn Hegar repeated a statement he had already made to legislators in private last month regarding the combined economic impact of the COVID-19 pandemic and plummeting oil prices.

“I know that we are unfortunately in a recession,” said Hegar, whose office oversees the state’s finances. “I just don’t know how deep or how wide it’s going to be.”

The comptroller’s certification revenue estimate in October 2019 projected that the state would end the current budget cycle with a balance of $2.9 billion in general revenue and $9.3 billion in the state’s economic stabilization fund (ESF), which is often referred to as the “rainy day fund.” Hegar said he plans to release a revised revenue estimate in July, which he predicts will be several billions dollars less. Many are questioning just how much of a toll the double-whammy of a pandemic and an oil price war will take on the state’s budget — especially after legislators significantly increased public education funding under House Bill (HB) 3 in 2019.

Hegar said Tuesday the state is expected to have enough cash flow to meet its obligations through the end of the current budget, which runs through August 31, 2021. While contributions to the ESF are expected to decrease as a result of declining oil and gas revenues, the comptroller’s office is still projecting a balance of $8.5 billion in the fund by the end of the current budget cycle.

Altogether, Hegar said he does not believe legislators will need to be called into a special session this year to shore up the current budget, but he added that the start of the next legislative session in January 2021 will be quickly upon us. Next session, legislators anticipate facing the daunting task of funding state priorities over the next budget cycle with significantly less money available.

The reason less money will be available has to do with how Texas government is funded. Since Texas does not have an income tax, sales and use taxes account for 57% of state revenue. Local governments are funded by a combination of sales and property taxes. When places like bars, restaurants, and stores make less money, they send in less sales tax revenue. Surging unemployment has the same effect on sales taxes by depressing consumer spending, as well as inhibiting people’s ability to keep up with their property taxes.

All this is happening at the same time the demand for government services such as unemployment, healthcare, and food assistance is increasing. The result is an unprecedented strain on government at every level, yet Hegar noted that state agencies should look for ways to cut spending.

The comptroller’s office is currently working off of sales tax revenue reports released in March detailing economic activity that happened in February, which was before social distancing was enforced. April sales tax numbers will provide a better look at the economic impact of business closures and downsizing, but that report won’t be available until the end of May. Hegar is waiting on those numbers to give a better estimate of the impact on the state budget in the planned revised revenue estimate this summer.

So what does this all mean for public education? It’s still unclear. Hegar noted Tuesday that  education and health and human services make up the two largest components of the state budget. Hegar noted that state leaders will likely begin discussing ways to cut agency spending during the current budget cycle, but he suggested that areas like the Foundation School Program (FSP) and Medicaid should be exempted from cuts this year. The FSP is the finance formula that flows funding for public education to local schools.

The state is also awaiting federal coronavirus aid recently passed by Congress, which will send billions of dollars to schools across the nation. Future federal aid packages are likely to have an additional impact on the state budget going into next session. There are already talks coming out of Washington about a fourth coronavirus stimulus bill that could provide as much as one trillion dollars in additional aid.

The one phrase Hegar repeated multiple times throughout this morning’s 45-minute interview was “managing expectations.” The comptroller was clear that the state is in the midst of a recession driven largely by the COVID-19 outbreak and aggravated by the oil price war. We still don’t know how many billions of dollars this will drain from the state’s budget going forward, but it will be significant. We’ll have a better look when the comptroller releases his revised estimate in July.

You can watch the full Texas Tribune interview with Texas Comptroller Glenn Hegar here.

From The Texas Tribune: Texas House approves 2020-21 budget plan, with extra $9 billion for school finance, property tax relief

By Edgar Walters, Cassandra Pollock and Alex Samuels, The Texas Tribune
March 27, 2019

Texas House Appropriations Chairman John Zerwas, R-Richmond, talks with House Speaker Dennis Bonnen on March 27, 2019, as the House took up the budget debate. Photo by Emree Weaver / The Texas Tribune

Texas House approves 2020-21 budget plan, with extra $9 billion for school finance, property tax relief” was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.

Editor’s note: This story has been updated throughout.

In Dennis Bonnen’s first major test as speaker of the Texas House, the chamber he oversees resoundingly passed a $251 billion budget Wednesday after a long but largely civil debate — a departure from the dramatics that have typically defined such an affair.

Though lawmakers proposed more than 300 amendments to the spending plan, Bonnen, an Angleton Republican, and his chief budget writer, state Rep. John Zerwas, R-Richmond, finished the night with their budget plan largely intact. After 11 hours of relatively cordial discussion, lawmakers agreed to withdraw the vast majority of their amendments or move them to a wish list portion of the budget, where they are highly unlikely to become law.

The budget passed unanimously on the final vote. The legislation, House Bill 1, now heads to the Senate, whose Finance Committee was set to discuss its budget plan Thursday.

“I’m proud of where we are in the bill that we are sending to the Senate,” Zerwas said at the end of the marathon debate. “Each and every one of you should be incredibly proud of the work that you’ve put in here.”

The two-year spending plan’s highlight — a $9 billion boost in state funding for the public education portion of the budget — remained unchanged. Of that, $6 billion would go to school districts, and the remaining $3 billion would pay for property tax relief, contingent on lawmakers passing a school finance reform package.

The budget plan would spend $2 billion from the state’s savings account, commonly known as the rainy day fund, which holds more than $11 billion.

“I’m not here to compare it to previous sessions,” Bonnen told reporters after the House budget vote. “But I’m here to tell you we had a great tone and tenor tonight, and I’m very proud of the business that we did.”

Some of the more contentious budget proposals floated by lawmakers never reached the floor. An amendment from state Rep. Richard Peña Raymond, D-Laredo, for example, would have asked members to vote on the issue of across-the-board pay raises for public school teachers. Such a proposal has divided the Legislature this session, with Lt. Gov. Dan Patrick’s Senate in favor and much of the House opposed. Raymond withdrew his amendment Wednesday evening, saying he planned to bring up the issue again when the House debates its school finance bill.

Debate on HB1, the House state budget bill, continues into its 12th hour as State Rep. Chris Turner, D-Dallas, shows the strain of a long night. March 27, 2019.
Debate on HB1, the House state budget bill, continues into its 12th hour as State Rep. Chris Turner, D-Dallas, shows the strain of a long night. March 27, 2019. Photo by Bob Daemmrich for the Texas Tribune. 

 

A proposal from state Rep. Mayes Middleton, R-Wallisville, to prohibit disaster recovery dollars from benefiting noncitizens and “illegal aliens” was quietly withdrawn after sparking controversy earlier this week. Across the aisle, state Rep. Jessica González, D-Dallas, withdrew her amendment that would have required Gov. Greg Abbott’s office to prepare a report on domestic terrorist threats posed by white supremacists.

Bonnen worked behind the scenes in the days preceding the vote, House lawmakers said, in the hopes of avoiding the discord that has erupted during the chamber’s marathon budget debates in past sessions. On Tuesday, top lieutenants for Bonnen met for a handful of informal gatherings to offer concessions in exchange for lawmakers dropping some of their more controversial amendments, according to people familiar with the meetings.

The result was one of the shortest budget debates in recent memory. Lawmakers gave preliminary approval to the two-year spending plan minutes after the clock struck midnight. Under former House Speaker Joe Straus, lawmakers in 2017 and 2015 went home well into the morning, after several explosive exchanges between Straus’ allies and the chamber’s hardline GOP membership.

“This budget night is unlike any other I have experienced in my time in the House — both in it’s shorter duration and civil tone,” said state Rep. Matt Krause, a Fort Worth Republican and Freedom Caucus member, in a text message after the debate concluded. “I think Speaker Bonnen deserves the bulk of the credit for creating an environment of civility and decorum. This is how the Texas House should operate when debating the big issues for the state of Texas.”

Rep. Matt Krause, R-Fort Worth, addresses the house floor during budget night at the State Capitol on March 27, 2019
Rep. Matt Krause, R-Fort Worth, addresses the house floor during budget night at the State Capitol on March 27, 2019. Photo by Miguel Gutierrez Jr./The Texas Tribune 

 

So while Bonnen’s first budget night as speaker was hardly free of controversy — an argument over the effectiveness of the state’s “Alternatives to Abortion” program, for example, derailed movement on amendments for nearly an hour — the occasional spats paled in comparison with those of years past. There were no discussions at the back microphone of lawmakers’ sexual histories, as happened in 2015, and no one had to physically restrain House members to prevent a fistfight over the fate of a feral hog abatement program, as happened in 2017.

Still, state Rep. Jonathan Stickland, R-Bedford, continued his long-running campaign against the feral hog program. And though the exchange ranked among the evening’s rowdiest, it was more than tame by last session’s standards.

State Rep. Drew Springer, R-Muenster, again opposed Stickland’s amendment to defund the program, which reimburses local initiatives to eradicate wild hogs. Stickland responded, “Members, although I respect the thoughtful words of Rep. Springer … let’s end this program right here, right now.”

Stickland’s amendment failed, with just four votes in favor.

In an earlier dustup just before 2 p.m., state Rep. Sarah Davis, R-West University Place, who led the House budget negotiations over health and human services programs, was seen in a heated exchange with state Rep. Jeff Leach, R-Plano.

A few minutes later, Leach proposed an amendment that would allow Texas to expand Medicaid coverage for women up to a year after they give birth. To cover some of the costs, Leach’s amendment recommended cutting $15 million from a program in Abbott’s office that reimburses film and video game makers who work in Texas.

Extending postpartum Medicaid coverage “is simply more important and should be a higher priority” than the film incentives program, Leach said.

Democrats gathered at the back microphone to oppose the motion, saying the funding should come from elsewhere.

“I appreciate that you’re trying to help women’s health,” said state Rep. Donna Howard, D-Austin, who said she supported the film incentives as a job-creation program. “If we found another source, would you create another amendment?”

“I’m not going to agree to hypotheticals,” Leach replied. The amendment subsequently passed without a recorded vote after putting Democrats in the awkward position of voicing opposition to a Medicaid coverage expansion they otherwise supported.

A more ambitious Medicaid coverage expansion, which would have provided publicly funded health insurance to low-income Texans under the Affordable Care Act, failed for a fourth legislative session. The Medicaid expansion amendment brought by state Rep. John Bucy III, D-Austin, was rejected with 66 votes in favor and 80 opposed.

Still, Democrats saw some wins Wednesday. For example, an amendment by state Rep. Michelle Beckley, D-Carrollton, that would require the Department of State Health Services to conduct a study on vaccination rates among children at licensed child care facilities was approved in a 79-67 vote. Another successful amendment by state Rep. Chris Turner, D-Grand Prairie, directs the state to come up with a transition plan for when a pot of federal health care safety-net funding, known as the 1115 waiver, dries up in 2021 and 2022.

Complicating budget negotiations was news of an updated property tax reform proposal, which was expected to be laid out in committee before the House convened but was instead postponed until after the budget debate. Debate over that updated proposal, which drew opposition from Democrats and hardline Republicans, carried over onto the floor as its author, state Rep. Dustin Burrows, R-Lubbock, met with committee members to discuss the high-priority legislation.

The debate on the HB 1 ended with a procedural move spearheaded by Turner and Burrows to wrap up the remaining amendments and send them to the wish list portion of the wish list portion of the budget. That section of the budget, known as Article XI, is considered a graveyard for most line items.

Passing an amendment to the wish list is “just a way to get you off the main,” state Rep. Yvonne Davis, D-Dallas, said in protest earlier in the evening, shortly before one of her proposals was shot down.

State Rep. John Zerwas, R-Richmond (right), speaks with Rep. Dennis Paul, R-Houston (left), in the House Chamber on March 27, 2019, the day the House will take up HB1, the 2020-21 budget plan.
State Rep. John Zerwas, R-Richmond (right), speaks with Rep. Dennis Paul, R-Houston (left), in the House Chamber on March 27, 2019, the day the House will take up HB1, the 2020-21 budget plan. Photo by Emree Weaver / The Texas Tribune 

 

The two-year budget wasn’t the only spending plan advanced by the House on Wednesday.

Lawmakers also approved a $9 billion supplemental spending plan to pay for leftover expenses that aren’t covered in the state’s current two-year budget, mostly for Hurricane Harvey recovery and health and human services programs.

A $4.3 billion withdrawal from the state savings account covers the largest share of expenses in the supplemental bill. Another $2.7 billion comes from the state’s general revenue, and $2.3 billion are federal funds.

The legislation, Senate Bill 500, returns to the Senate, whose stopgap spending plan approved earlier this month carried a $6 billion price tag.

Lawmakers in 2017 underfunded Medicaid, the federal-state health insurance program for the poor and disabled, requiring a $4.4 billion infusion of state and federal funds. The Legislature must pass the stopgap funding bill before the end of May if the Texas Health and Human Services Commission is to be able to pay health care providers on time.

The supplemental bill also includes:

  • Nearly $2 billion to reimburse school districts, state agencies and universities for costs they took on after Hurricane Harvey
  • About $1.3 billion to shore up a system that pays out teacher pensions, contingent on the passage of a pension reform bill, which includes $658 million from the state savings account to provide a one-time “13th check” made out to retired teachers
  • Nearly $11 million for the Santa Fe Independent School District, which experienced a mass shooting last year that left 10 dead and 13 wounded
  • $2 million for state mental hospital improvements, which includes funding to plan the construction of new hospitals in the Panhandle and the Dallas area.

This article originally appeared in The Texas Tribune at https://www.texastribune.org/2019/03/27/texas-budget-house-2019/.

 

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Governor Abbott declares emergency items, includes teacher pay

Texas Governor Greg Abbott announced a total of six emergency items in Tuesday’s State of the State address to a joint session of the 86th Texas Legislature. The State of the State is traditionally delivered by the governor at the beginning of each legislative session, and is the state equivalent to the national State of the Union address delivered by the president.

The governor often uses the State of the State as an opportunity to announce emergency items for the current legislature. The first 60 days of the legislative session are meant for organization and bill filing, and legislators cannot vote on bills until after 60 days have passed. Emergency items declared by the governor are the only exception.

Standing ovation for teacher pay announcement during State of the State address, Feb. 5, 2019.

Governor Abbott listed six emergency items on Tuesday: School finance reform, teacher pay, school safety, mental health, property tax relief, and disaster response.

What does this mean functionally? The legislature may vote on bills under these emergency headings immediately instead of waiting for the March 8 deadline, theoretically granting them a one-month head start ahead of other bills. Yet few of these bills have been filed, and none have begun the committee process that marks the first major step in a bill’s journey to becoming a law. For this reason, the practical impact of designation as emergency items has more to do with sending a signal to legislators and the public that these are the governor’s top priorities.

In addition, each of these items is expected to require a significant amount of state funding. The budget offered by the Texas House would provide $7.1 billion in new revenue for public education, contingent upon spending a significant portion of that money on providing property tax relief, ostensibly by rebalancing the state and local share of education funding. Increasing the state’s share will ease the burden on local property taxpayers, but will not increase overall public school funding. To increase overall school funding will require spending additional money on top of what is required to ease local tax pressure.

Increasing teacher pay will require another tranche of state funds. The Texas Senate has proposed Senate Bill (SB) 3, which would grant teachers a $5,000 annual raise. The bill’s cost is tagged at $3.7 billion for the first biennium. Gov. Abbott’s comments today on teacher pay implied that he prefers a plan under development by House leaders to provide a differentiated pay program that could create a path for select teachers to earn as much as $100,000. This would apply to far fewer teachers than the Senate’s plan and consequently carry a much smaller price tag.

School safety, mental health, and disaster response will each require further funding. Fortunately, the biennial revenue estimate delivered by Texas Comptroller Glenn Hegar in January projects legislators will have roughly $12 billion more than they budgeted the previous two years. It’s important to note that some of that money will be taken up by inflation and population growth. Some of the emergency items, such as disaster response, are prime targets for one-time spending from the Economic Stabilization Fund. The state’s “rainy day fund,” as it is often called, is projected to total $15.4 billion by the end of 2021.

Teach the Vote’s Week in Review: Jan. 11, 2019

Happy New Year! Here’s your first weekly wrap-up of education news from the ATPE Governmental Relations team:


Tuesday, January 8, kicked off the 86th Texas Legislative Session amid great fanfare at the State Capitol.

Representative Dennis Bonnen (R-Angleton) was unanimously elected and sworn in as the new Speaker of the House on Tuesday afternoon. For the past 10 years, the House has been under the leadership of Rep. Joe Straus (R-San Antonio) who retired from the position and the legislature at the end of his term this month. Bonnen announced in November 2018 that he had amassed the requisite number of pledged votes to render the speaker’s race not much of a race at all. After that there was only the vote and ceremonial swearing in, which took place on Tuesday. Read more about Bonnen’s ascent to speaker in this post shared from The Texas Tribune.

On the Senate side, Lt. Gov. Dan Patrick (R) was missing from Tuesday’s proceedings while visiting with President Donald Trump in Washington, DC, that day on the subject of border security. Sen. Jane Nelson (R-Flower Mound) presided over the upper chamber’s opening ceremonies in his place. The Senate swore in its new members and also elected Sen. Kirk Watson (D-Austin) to serve as President Pro Tempore this session.

Gov. Greg Abbott spoke briefly to welcome the members of each chamber, signaling his intent for the legislature to tackle school finance reform and property tax relief this session. Bonnen and Watson also highlighted the prominence of the school funding issue this session, with new House Speaker going as far as announcing that he had stocked the members’ lounge with special styrofoam cups to remind them of their top priority: school finance reform. Improving the state’s school finance system is also a top legislative priority for ATPE this year.

ATPE Lobbyists Mark Wiggins and Monty Exter snapped a selfie with Humble ATPE’s Gayle Sampley and her husband at the Capitol on opening day.

ATPE’s lobbyists were at the Capitol on opening day and will be there for all of the action this legislative session. Be sure to follow @TeachtheVote and our individual lobbyists on Twitter for the latest updates from the Capitol.

ATPE members are also encouraged to sign up for free to attend our upcoming lobby day and political involvement training event known as ATPE at the Capitol on Feb. 24-25, 2019. Find complete details here.

 


While the legislative session officially began on Tuesday, Texas Comptroller Glenn Hegar made news the day before with his release of the state’s Biennial Revenue Estimate (BRE). The BRE details how much money the state plans to receive and how much of it can be spent in any given legislative session.

Monday’s BRE announcement predicted revenue of $119.12 billion for the 2020-21 biennium. This biennium’s BRE comes with tempered expectations, which Hegar attributed to a drop in oil prices, market volatility, and rising interest rates. “Looking ahead to the 2020-21 biennium, we remain cautiously optimistic but recognize we are unlikely to see continued revenue growth at the unusually strong rates we have seen in recent months.” Hegar said in the report.

Once the comptroller has released the BRE for each legislature, the Legislative Budget Board (LBB) meets to set the session’s constitutionally-required spending limit. ATPE Senior Lobbyist Monty Exter reports that the LBB met today and set a limit of $100.2 billion for spending this session. The constitutional spending limit is set by applying the percentage of growth, which is determined by many factors, to the previous biennium’s spending limit. The constitutional limit applies only to expenditures of general revenue that is not constitutionally-dedicated. By comparison, the non-dedicated-revenue spending limit for the 85th session in 2017 was roughly $91 billion, whereas the total general revenue appropriated by the legislature that year was $106.6 Billion. As Exter explains, neither withdrawals from the Economic Stabilization Fund (the state’s so-called “Rainy Day Fund”) nor supplemental appropriations for the current biennium will count toward the constitutional limit that was announced today.

The Legislature must now decide what to do with its available revenue. Rest assured, they haven’t been given a blank check to do as they please. According to reporting by the Center For Public Policy Priorities the legislature must immediately spend $563 million as back pay for Medicaid funding that was deferred until this session. The legislature will also have to determine where $2.7 billion for Hurricane Harvey recovery costs will come from.

For more detailed reporting on the BRE as well as link to the full report, check out this blog post by ATPE Lobbyist Mark Wiggins.

 


Late last week, the House Committee on Public Education released its interim report covering the committee’s work over the past year on interim charges assigned to it by the House Speaker. The report, which spans 88 pages, includes recommendations on how to approach a variety of education-related issues this session, such as Hurricane Harvey relief, teacher compensation, and school safety.

Rep. Dan Huberty (R-Kingwood) chairs the committee that produced its interim report. Among the suggestions were recommendations to consider possible legislation to help schools quickly replace instructional materials due to Harvey; creating paths to career growth for educators that would allow them to stay in the classroom, such as a “Master Teacher” certification; and making Individual Graduation Committees (IGCs) permanently available for students who have difficulty with STAAR testing.

You can read more about the committee’s interim charge recommendations in this blog post by ATPE Lobbyist Mark Wiggins. Read the interim report here.

 


In a statement released to the press on Monday, Governor Greg Abbott announced his appointment of Edward Hill, Jr., Ed.D., John P. Kelly, Ph.D., Courtney Boswell MacDonald, and Jose M. Rodriguez to the State Board for Educator Certification (SBEC). The new appointees are replacing retiring SBEC members Suzanne McCall of Lubbock; Dr. Susan Hull of Grand Prairie; and Leon Leal of Grapevine.

ATPE thanks the members rolling off the SBEC board for their years of service and welcomes the new members. We look forward to working together with them to continue to improve the education profession for the betterment of Texas students.

 


Comptroller announces $119.12B available for legislators to spend

Texas Comptroller Glenn Hegar announced Monday that the 86th Texas Legislature is forecast to have $119.12 billion available for general-purpose spending when the regular session begins tomorrow, Jan. 8, 2019.

Click the image to view a larger version. Credit: Office of Texas Comptroller Glenn Hegar

The announcement came today as part of the comptroller’s biennial revenue estimate, which is delivered to legislators before each session begins and consists of a forecast of how much revenue the state expects to receive and how much of it can be spent.

The state is projected to take in $107.32 billion in general revenue-related tax collections in the 2020-2021 fiscal biennium, which is up from $99.27 billion collected in 2018-2019. The next biennium begins with a balance of $4.18 billion carried over from 2018-2019, along with $14.16 billion in additional general revenue-related collections. A total of $6.34 billion of available revenue is reserved for transfers to the economic stabilization fund (ESF), also known more commonly as the state’s “rainy day fund,” as well as highway funds.

Legislators began 2017 with a $104.9 billion BRE, and the 85th Texas Legislature ultimately passed a $107.2 billion budget. The 2018-2019 revenue estimate was revised upward several times as economic conditions improved. In the 2020-2021 revenue estimate, Hegar noted increased economic growth in 2018 fueled by oil production in the Permian Basin, but urged caution looking beyond the 2019 horizon.

“Looking ahead to the 2020-21 biennium, we remain cautiously optimistic but recognize we are unlikely to see continued revenue growth at the unusually strong rates we have seen in recent months,” Hegar wrote in the official report. “Oil prices have dropped sharply since October, financial markets have demonstrated increased volatility, interest rates have been rising and U.S. trade policy remains uncertain. As the nation’s leading export state, the Texas economy in particular is exposed to potential reductions in international trade.”

“Because of this heightened uncertainty, this revenue estimate is based on a projection of continued but slowing expansion of the Texas economy,” Hegar concluded.

Much of the $119.12 billion legislators will be have for budgeting the next two years is already spoken for. The Center for Public Policy Priorities (CPPP) correctly points out in its BRE analysis that legislators will have to immediately make a $563 million back payment to Medicaid, funding that was deferred last session in order to fund public education.

CPPP predicts it will cost roughly $112 million for the state to maintain the current level of services, based upon factors including inflation and school enrollment growth. Legislators will also have to decide where to find $2.7 billion of supplemental funding for Hurricane Harvey recovery costs. That could come out of general revenue or the rainy day fund.

You can read the comptroller’s full report here.

Finance commission group finalizes recommendations

The Texas Commission on Public School Finance working group on revenue met Tuesday at the Texas Capitol to discuss recommendations to deliver to the full commission. State Sen. Paul Bettencourt (R-Houston), who leads the working group, indicated he is open to using the economic stabilization fund (ESF), which is commonly referred to as the “Rainy Day Fund,” to help fund public education.

School finance commission working group meeting November 27, 2018.

Bettencourt opened the meeting suggesting that state revenues are looking bullish heading into the next budget biennium. Again, Sen. Bettencourt emphasized his priority is phasing out the “Robin Hood” system of wealth equalization through recapture. According to Bettencourt, freezing recapture would cost approximately $2.3 billion.

Before Bettencourt began his presentation, commission member and Austin ISD Chief Financial Officer Nicole Conley Johnson told the group she had identified $14 billion in new programs to propose to the commission.

According to figures Bettencourt provided to the group, the state comptroller increased the revenue estimate for the next biennium to $110.2 billion in July 2018 from $104.9 billion in 2017, a $5.3 billion increase. During the first two months of fiscal year (FY) 2019, sales tax revenues, which represent 58 percent of all state tax collections, are expected to be up ten percent compared to FY 2018.

Bettencourt asserted two point upon which most agree: Without school finance reform, the state’s share of public education funding will continue to shrink, and the amount of funding districts pay into recapture for wealth equalization will continue to increase. Bettencourt emphasized his prediction that increased revenue in FY 2019 will provide additional general revenue (GR) which will be available to help fund schools.

State Rep. Diego Bernal (D-San Antonio), who is vice-chair of the House Public Education Committee, raised a question over how equity would be preserved if legislators make changes to or eliminate the recapture system. State Rep. Ken King (R-Canadian), who is also a member of the House Public Education Committee, also raised a concern that any increase in school funding will need to be sustainable.

Bettencourt presented the governor’s tax cap plan as the solution. The plan would increase funding for districts that increase teacher pay and improve student outcomes, however Rep. Bernal noted that outcomes-based funding threatens to reward districts that already have the resources necessary to improve while neglecting districts that have failed to improve precisely because they lack the necessary resources. The plan would also limit property tax revenue growth to 2.5 percent per year, which the plan promises to make up for with state funding.

Another proposal discussed by Bettencourt is one presented by the Texas Public Policy Foundation (TPPF), a far-right pro-voucher organization, which would aim to eliminate all school district maintenance and operations (M&O) property taxes. This would cost roughly $51.3 billion for the 2018-19 biennium. The TPPF proposal claims to be able to pay for itself by dedicating future increases in state revenues to public education, but Bettencourt conceded that this is an optimistic view.

Bettencourt also briefly discussed the idea of “sharing” recapture. In this plan, property value growth would be divided by thirds, and the benefits from the growth in property values would ostensibly be shared. Additionally, Bettencourt suggested using the increase in production severance taxes – largely due to oil and gas activity in the Permian Basin – to help fund public education. This funding stream currently already flows to public education and general revenue, with an overflow stream that is bifurcated between highway funding and the ESF. Despite the Senate’s opposition to spending ESF dollars in previous legislative sessions, Bettencourt indicated he’s now open to spending ESF money to help fund public education. Johnson argued that this represents a redirection of existing revenues and does not represent the new revenue necessary to improve school performance.

The working group voted to advance each of the proposals except the plan offered by TPPF to be considered by the full commission. Rep. King made the motion to table the TPPF plan, which he declared nonsensical. Several members expressed similar concerns. Closing the meeting, commission chair Scott Brister suggested that legislators should feel less constrained by court rulings enforcing equity. As a justice, Brister was a dissenting voice in the West Orange-Cove school finance ruling.

The full commission will meet Friday, again on December 5, and at least once more during the third week of December. The commission will get a chance to react to Tuesday’s recommendations and will arrive at a decision by the December 5 meeting on what the final report should look like. The following meeting will focus on what the report should say. The commission is required to submit its report to the legislature by December 31.

Brister asked commission members to do their best to reach a unanimous consensus on recommendations, and said that in lieu of a minority report, individual members will be allowed to place letters in an appendix to the final report.

 

Teach the Vote’s Week in Review: April 20, 2018

Here’s your weekly wrap-up of education news from the ATPE Governmental Relations team:

 


The Teacher Retirement System (TRS) of Texas board of trustees held multiple meetings this week in Austin.

Highlights of the quarterly meetings included discussions of new rates and policy designs for TRS-ActiveCare for the 2019/2020 school year; the need for increased authorization to hire additional full time employees (FTEs) at the agency; the introduction of the new TRS Communications Director; and a discussion of and failed vote on lowering the TRS pension fund’s expected rate of return.

ATPE Lobbyist Monty Exter attended both the committee and board meetings and penned this wrap-up for our Teach the Vote blog earlier today.

 


The House Public Education Committee held an interim hearing on Wednesday. Topics discussed included the continuing impact of Hurricane Harvey on the state’s public schools, plus implementation of recent education-related bills dealing with school finance, the accountability, system, and student bullying.

Commissioner of Education Mike Morath updated the committee on the state and federal governments’ response to Hurricane Harvey and the 1.5 million students in its affected school districts. Morath indicated that he will propose a new commissioner’s rule in June to provide a plan for accountability waivers for school districts that were forced to close facilities and suffered the displacement of students and staff.

The committee also heard testimony about the controversial “A through F” accountability system that is being implemented in Texas. School districts will be assigned A-F ratings in August, while campus A-F ratings will be released the following year. A number of witnesses during Wednesday’s hearing expressed concerns about the new rating system and its heavy emphasis on student test scores.

For more on the hearing, check out this blog post from ATPE Lobbyist Mark Wiggins.

 


With interim committee hearings in full swing this month, paying for Texas public schools and teachers remains a hot topic.

On Wednesday, the House Appropriations Committee heard from Texas Comptroller Glenn Hegar and others about the status of the state’s Economic Stabilization Fund, often referred to as the “Rainy Day Fund.” Read more about recommendations being made for use of the fund to support the state’s funding needs in this blog post from ATPE Lobbyist Monty Exter.

Also this week, our friends at the Texas Tribune shared insights on how Texas teacher pay stacks up against other states. ATPE Lobbyist Monty Exter is quoted in the article republished here on Teach the Vote.

 


The Texas Commission on Public School Finance also convened again this week, with a Thursday meeting focused on tax policy issues and sources of funding for the state’s school finance system. ATPE Lobbyist Kate Kuhlmann has a rundown of that meeting here. She also shared the below update from today’s Expenditures Working Group meeting which covered the cost of education index, compensatory education, and the transportation allotment.

One unsurprising word could be used to summarize testimony from invited panelists at this morning’s Expenditures Working Group meeting: update. On all three topics discussed, expert witnesses pointed to updating both the methodology behind the funding tied to each topic and what each topic intends to address. For the cost of education index, Texas A&M University Bush School Professor Lori Taylor noted that the index is based on teacher salaries and employment patterns from 1990. Taylor is the same expert behind a recent Kansas study on school finance, which determined that state should invest an additional $2 billion in school funding. During this morning’s meeting in Austin, Taylor and the other panelist agreed the cost of living index has value, but needs significant updating; it was suggested that to better account for evolving costs of education, the commissioners should consider recommending a requirement that the state update the index (or even the entire finance system) every 10 years.

Similarly, school districts and other school finance stakeholders pointed to the need for better targeted funding for students supported by a broader category of compensatory education services, and the legislative budget board shared different way to approach funding transportation costs. Watch an archived live stream of the full meeting here for more on the discussions.

 


 

The Rainy Day Fund roadshow makes a stop in the House Appropriations Committee

The House Appropriations Committee, similar to its counterpart in the Senate, heard a number of interim charges Wednesday. Of note for public education, and for educators in particular, was an interim charge to continue to study strategies to use the Economic Stabilization Fund (ESF), also known as the “rainy day fund,” to generate additional revenue for state obligations without compromising the fund’s intended purpose. The charge instructed lawmakers to evaluate the current methodology used to set the ESF cap.

The committee heard testimony on ESF investment history, utilization, and investment practices from the Legislative Budget Board, the state comptroller, and the Texas Taxpayers and Research Association, whose executive director helped draft the legislation that brought the ESF into existence.

Read more about Comptroller Glenn Hegar’s plan to invest ESF dollars to create new revenue stream to fund state priorities and why that revenue is needed, in this previous Teach the Vote blog post.

Making better use of the state’s rainy day fund when it’s not raining

The Senate Finance Committee met today to take up a number of Senate interim charges. Among them, the committee took up the charge to examine options to increase investment earnings of the Economic Stabilization Fund in a manner that minimizes overall risk to the fund balance and to evaluate how the Economic Stabilization Fund constitutional limit is calculated; considering alternative methods to calculate the limit, and alternative uses for funds above the limit.

the Texas Economic Stabilization Fund, often referred to as the state’s rainy day fund, is a mechanism that diverts a part of the severance taxes the state collects on oil and gas production and sets those monies aside to fill budget shortfalls resulting from temporary economic downturns. The fund, which has been used many times since its inception, has in recent years grown to approximately $11 billion, larger than at anytime in its history.

During the last session lawmakers facing stiff budget constraints began to discuss how they could better utilize the rainy day fund, other than continuing to stuff cash into the state’s proverbial mattress. One idea floated by Texas Comptroller Glenn Hegar was to take a portion of the fund and invest it as an endowment such that the investment returns could be used to help pay for state priorities, like shoring up the state’s pension funds. Legislators were not comfortable acting on that idea without more time to vet it.

In today’s hearing Hegar reintroduced the idea of investing the whole of the rainy day fund in very liquid assets that would allow for a return that roughly matches the inflation rate and investing a portion of the fund, in excess of what legislators think they might need quick access to, in less liquid assets that would generate a higher return. The Comptroller’s office predicts that an investment of $3 billion, with additional biennial investments over a certain threshold, would within 10 years accumulate to a fund that generates $1 billion a year in usable revenue. In 20 years, that projection jumps to more than $2 billion a year. The idea was received fairly favorably.

One of the things the state has used the rainy day fund for in recent years is to justify credit rating firms’ assignment of a AAA (the highest) credit rating to the state. Having a AAA rating allows the state and school districts through the Permanent School Fund (PSF) bond guarantee program to pay the lowest possible rate on bond debt. It was pointed out in the hearing however, that the rainy day fund is only one factor those firms look at when assigning a score. Another, more heavily weighed factor is the health/unfunded liabilities of a state’s pension funds. Both TRS and ERS need improvement to ensure the state is able to keep its current rating. A downgraded rating could cost the state billions in additional interest over the life of the state’s and school dostricts’ many bonds.