Senate Finance completes initial budget testimony

Earlier this week, the Senate Finance Committee completed its multi-week run through every state agency’s budget presentation. As is usually the case, agencies adjusted their presentations from late last summer, when they first presented before the Legislative Budget Board and budget staff, to account for the recommendations in the base budget bills.

After dozens of agencies testified and answered questions from Senators, we observed a few trends to look out for over the next months.

Navigating spending limits

Many Senators, including Finance Chair Sen. Joan Huffman, R-Houston, expressed reluctance to exceed the constitutional tax spending limit, which requires a simple majority vote in each chamber.

This reluctance partially drove discussions among committee members on how certain investments might be better approached by dedicating funds, especially for one-time investments that create future value and savings for the state. As an extra benefit, this approach would remove these investments from applying to this spending cap.

Additionally, lawmakers discussed whether the Economic Stabilization Fund cap should be raised or if there should be additional ways to preserve fiscal sustainability.

Legislators could also ask voters to approve constitutional amendments to fund property tax relief or the contemplated transformational investments .

Texas 2036’s newly released polling shows that the people of Texas are ready to show their support in November.

Staff retention at state agencies

Many agencies expressed gratitude for across-the-board salary increases included in the base HB1/SB1 recommendations — but many agencies expressed urgent need now and into the future to hire for certain positions.

The Public Utility Commission spoke of constantly losing attorneys to the private sector. Nearly three-quarters of PUC attorneys have less than two years of service with the agency, severely hampering the agency’s ability to oversee and implement grid reform.

The Texas Commission on Environmental Quality spoke of losing engineers and scientists for jobs that paid more than $50,000 annually, even though 81% of TCEQ exit survey respondents indicated they would return to the agency.

There were many other stories of increasing turnover in specialized and professional positions, but many agencies also spoke of being unable to keep entry-level and lower-level positions filled because they could not keep up with Buc-ee’s or other corporate franchisees.

Investing in better technology

Most agencies addressed legacy IT systems or cybersecurity issues that were affecting agency effectiveness.

Texas 2036’s Hope Osborn spoke Tuesday on the final day of public testimony — her portion begins at the 22:40 mark of this video — on how the Texas Department of Family and Protective Services still uses  the IMPACT system from the 1990s for case management today. This creates tremendous productivity loss for caseworkers and leads to poor outcomes for children served by the system.

Advocates and childcare providers made a notable push to increase funding to supplement Texas’ child care system.

Texas 2036 will watch this issue closely as this has enormous implications for the ability of the state’s current workforce to return and stay at work, as well as for early childhood development.

Texas 2036 also supports improvements that would provide legislators with accurate and timely data that measure Texas families’ needs for subsidized and unsubsidized child care services, including data on enrollment, child care waiting lists and child care provider capacity.

Budget work begins in House

The House Appropriations Committee began its work this week on individual agency budget presentations. The House budget committee proceeds differently from their Finance counterparts, dividing the labor among four major subcommittees, plus a fifth for the strategic fiscal review process. Appropriations subcommittees should complete this part of the process next week before moving on to formal meetings where members go through their subcommittee’s assigned agencies with LBB to come up with adjusted recommendations to the full committee for adoption.

The Senate Finance Committee will now do something similar, with members breaking off to work in small workgroups on different areas of the budget.

A projected fund balance for the next Legislature

As budget writers on both sides of the Capitol work through this grinding part of the process, it is helpful to keep in mind where we stand with the filed HB1/SB1 recommendations. The LBB estimated that if the Legislature passes the current HB1/SB1 recommendations, including the Article IX, Sec. 17.17 supplemental items, lawmakers would still leave $3.8 billion in general revenue spending authority in the current biennium and $4.0 billion for the next biennium.

  • Passing HB1/SB1 and its contemplated supplemental bill as is, even with its various recommendations that effectively alter methods of finance, would still leave a projected $43.6 billion fund balance for the 89th Legislature.
  • These HB1/SB1 recommendations also do not appear to allocate any dollars from the $5.4 billion in unspent federal American Rescue Plan Act funds or from the state’s Economic Stabilization Fund, which is expected to hit its cap and end the next biennium with a $27.1 billion balance.

Texas 2036 does not advocate spending all of this money. We recommend retaining fiscal stability that would mitigate potential economic volatility. However, this current revenue cycle allows a unique opportunity for the Legislature to do both: make transformational investments while retaining long-term fiscal stability.