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One of the biggest tasks facing the Texan legislature during the 2021 legislature, which begins in January, is drawing up the state budget, which lists government spending for the next two years.
While the tape-like law on general resources can seem overwhelming and often abstract, the expenditures and cuts listed therein can have an immediate and highly consistent impact on the lives of Texans. For example, previous cuts have discouraged children with disabilities from accessing essential therapies through the government’s early childhood intervention program. Increasing the base wage for community workers caring for the elderly and people with disabilities can have a dramatic impact on the daily lives of many Texans.
What is different about the next budget debate?
Loss of income due to the coronavirus pandemic recession will only exacerbate budgetary difficulties. In the second half of the 2020 financial year, sales tax revenues, which make up by far the largest part of the state budget, fell by 4.8% compared to the same period last year. The other sources of income decreased by more than 40%.
In July, Texas Comptroller Glenn Hegar announced that the state was on track to end the biennium in a deficit of nearly $ 4.6 billion. In November, he told lawmakers during a session of the Legislative Budget Board that there would be more money available in the upcoming legislature than he had previously expected, but did not give details.
Where does the money for the budget come from?
Texas earns income from a variety of taxes, licenses, fees, interest and investment income, net lottery proceeds, federal grants, and other minor sources. Together, these can be divided into three different categories.
The general sales-related fund This is where sales and most other government taxes and fees go. The fund accounts for a little more than half of all government spending and consists of earmarked and non-earmarked funds. The unrestricted portion of the General Revenue Fund is the state’s primary operational fund.
Another great source of income in Texas are Federal funds. This money comes from the federal government in the form of grants, allocations, payments, or refunds. Some grants have very few restrictions on how the state can spend them, while others impose restrictive guidelines or require appropriate funding from the state, as is the case with Medicaid.
There are some other funds, both committed and not included in general revenue, such as the State Highway Fund, Property Tax Relief Fund, and Economic Stabilization Fund or the “Rainy Day” Fund.
When will Texans know how much money lawmakers have to work with?
Prior to each legislative term, the Auditor’s Office publishes a biennial revenue estimate that provides a careful estimate of the funds expected to be available from taxes and other sources of revenue over the next two years. This becomes the budget cap for the next biennium, which allows lawmakers to know how much to spend if they don’t levy taxes or fees. The auditor is expected to release the latest estimates by January 11, before the new legislative term begins.
How can Texas make up the budget deficit?
Early forecasted revenue shortfalls prompted Governor Greg Abbott, Lt. Governor Dan Patrick and outgoing House Speaker Dennis Bonnen to instruct certain government agencies to prepare for a 5% cut in spending for the current fiscal cycle. The agencies and programs excluded from these budget cuts account for a large part of the general state revenue, according to the Legislative Budget Board.
While the proposed cuts are not as drastic as those passed in 2011, some proponents are concerned. In its revised 5% reduction plan, the Texas Health and Human Services Commission proposed cutting more than 700 full-time employees from “advancement operations.” These workers determine an applicant’s eligibility for services such as Medicaid, the Supplemental Nutrition Assistance Program, and the Children’s Health Insurance Program.
“It’s important to emphasize that there are many everyday Texans in need of Medicaid or CHIP,” said Anne Dunkelberg, assistant director of Every Texan, a progressive public policy think tank. “We know that the uptake of things like grocery stamps, SNAP, is increasing significantly due to the pandemic and the job loss that goes with it. So the concern is that while we are not reducing the real benefits of this line item, you may fall behind and people may not get the food aid they need right away. “
Many school principals and advocates of education fear that in a tight fiscal year like 2011, lawmakers will get funding from schools to pay for other things. They are particularly concerned about the laws passed in the last session that increase funding per student in public schools while reducing property taxes across the state. That legislation was House Bill 3 in the 2019 legislature.
The law provided funding for teachers’ salary increases, a free all-day preschool for eligible students, and early intervention programs designed to help grade K-3 students who are economically disadvantaged or who do not yet have English proficiency. Many similar programs were funded before the massive budget cuts in 2011 after the Great Recession, according to Bob Popinski, director of policy at Raise Your Hand Texas, an education advocacy group.
“All of these programs, which were cut in 2011, will see an upswing after the 2019 legislative period,” said Popinski. “Our greatest concern, and this is what you hear from most organizations, is to keep House Bill 3 in full and fund every last penny of House Bill 3 so that districts understand what their budgets will be like in the future. They can make progress continue. “
The legislature could also balance the budget from the Economic Stabilization Fund, but was not prepared to use this option in the past.
How does the legislature actually decide on the budget?
Much of the budget is already in place when the legislature meets in January. State law and the Texas Constitution place many restrictions on the use of income. This also applies to the corresponding requirements for some federal funds. Ultimately, less than a fifth of government revenue is left for “discretionary” spending in any biennium, according to the auditor’s office who oversees the treasury.
The state budget must also not exceed the revenue that the auditor estimates will be available in a given biennium. This means that the legislature cannot pass a budget with a deficit, except in “emergency and imperative public need” and with four-fifths of the vote of each chamber of the Texan legislature.
Work on the budget begins in the year before the legislature meeting, when the Legislative Budget Board and the Governor’s Budget Planning and Preparation Bureau set guidelines for the next budget. Every government agency uses these to prepare a detailed application for legislative funding. These applications indicate the funding each agency will need for the next biennium. LBB and the Governor’s Budget Office are holding public hearings in the fall to analyze these requests and ultimately use them to work out a first draft of the General Funds Act.
Once the legislature meets, both the Texas House Committee on Appropriations and Senate Finance Committee hold hearings and make changes to the General Appropriations Act based on their priorities. Each committee’s version of the bill is then submitted to the entire House or Senate for approval. Once approved, these two bills will be sent to a conference committee made up of members of the House and Senate. The committee resolves the differences between the chambers and creates a single bill that reflects the wishes of both bodies. This new bill will then be submitted to both the House and Senate for final approval.
Once approved by the House and Senate, the new General Funds Act will go to the Auditor’s Office for final “certification” confirming that the bill does not spend more than the biennial revenue estimate allows. Finally the bill goes to the governor.
In Texas, the governor has the discretion to veto individual items of expense. The veto can be overridden in any chamber by a two-thirds majority, but in practice few decisions by the governor are challenged. Once signed, the bill becomes law and determines the finances of the state for the next two years.
Disclosure: Every Texan, Raise Your Hand Texas, and the Texas Comptroller of Public Accounts have been financial supporters of The Texas Tribune, a nonprofit, impartial news organization funded in part by donations from members, foundations, and corporate sponsors. Financial supporters play no role in the journalism of the Tribune. A full list can be found here.