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At a time when legislators are vowing to spend more money on public schools and slow the growth of Texans’ property tax bills, the state should have enough money at its disposal to do just that.

That is, if its newest predictions hold true.

Texas Comptroller Glenn Hegar on Monday offered a cautiously optimistic outlook for the Texas economy, telling lawmakers they will have about 8.1 percent more state funds available to budget for public programs — primarily schools, highways and health care — in 2020 and 2021. Hegar projected there would be about $119.1 billion in state funds available for the next two-year budget, up from $110.2 in the last two-year budget.

But falling oil prices in the last month, along with heightened uncertainty in the U.S. economy and international financial markets, led Hegar to deliver a “cloudy” forecast with some trepidation.

“We remain cautiously optimistic but recognize we’re unlikely to see continued revenue growth at the unusually strong rates we’ve seen in recent months,” he said.

In the odd-numbered years when the legislative branch of Texas’ state government convenes in Austin, the comptroller traditionally kicks things off by gazing into a crystal ball of financial modeling. The result is the biennial revenue estimate, delivered as a Powerpoint presentation in an underground Capitol auditorium, which guides lawmakers as they decide what to spend on public programs or tax cuts in the coming years. The amount of money available can vary greatly, depending on how the state’s economy performs.

Meanwhile, the state’s savings account, known as the rainy day fund, is projected to reach a record high balance of $15 billion. Lawmakers will debate whether to dip into that Economic Stabilization Fund to pay for bills coming due from the last two-year budget period, including Hurricane Harvey recovery, and in the upcoming two-year budget.

Advocates for greater investment in public schools reacted positively to the revenue estimate, saying lawmakers now have no excuse not to increase spending, given a growing budget and unprecedentedly large savings account balance.

“This is good news,” said Eva DeLuna Castro, a state budget analyst at the left-leaning Center for Public Policy Priorities. “This is enough to not cut state services.”

One note of fiscal underperformance was slower growth in motor vehicle tax collections. Hegar noted that car and truck sales did not yield enough tax revenue to reach $5 billion per year, which will result in slightly less funding available for the state highway fund than lawmakers had planned for.

Two years ago, Hegar offered a more gloomy revenue estimate, citing low oil prices and other fiscal issues. But the Texas economy outperformed those expectations, and Hegar revised his estimate in July 2018 to announce that the state was on track to bring in $2.8 billion more than what his office had originally predicted for 2018-19.

That was thanks to rising oil prices and production, and to a thriving economy in which Texans displayed a ravenous appetite for spending. Sales tax dollars are the largest source of funding for the state treasury, making up about 60 percent of its income.

“Not only is our economy producing jobs and opportunities, it is generating the revenue we need to meet our growing needs and make historic investments in education, which is key to the future of Texas,” Jane Nelson, the chair of the Senate Finance Committee.

The July announcement had little to do with the upcoming two-year budget cycle that lawmakers will plan for in the legislative session beginning Tuesday. Instead, the extra $2.8 billion will help lawmakers plug some holes in the current two-year budget cycle, for bills the state racked up starting in 2018. Lawmakers this year will pass a backward-looking “supplemental” budget to pay for those bills coming due, which include some costs of Hurricane Harvey recovery and a roughly $2 billion underfunding of the Medicaid program for the poor and disabled.

In July, Hegar said Texas was in the midst of an “economic expansion exceeding our expectations.”

Disclosure: The Center for Public Policy Priorities has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

Author:  EDGAR WALTERS –  The Texas Tribune

As Texas’ savings account swelled to a record high of $12.5 billion this week, a group of state lawmakers on Friday unanimously agreed that the state should leave more than half of it untouched over the next three years.

The joint Economic Stabilization Fund Balance Select Committee voted to keep the Rainy Day Fund’s minimum balance unchanged at $7.5 billion — the same figure they chose in 2016, ahead of their last legislative session.

The unanimous decision by the panel means that stewards of the fund can invest more money in higher-return investments, as they hope to keep it growing at a rate that is at least equal to inflation. If lawmakers had chosen to raise the account’s minimum balance, it would have required more money to remain available for emergency spending, thus limiting investment potential.

The question on lawmakers’ minds Friday was whether leaving the minimum balance unchanged could affect the state’s credit rating; State officials told them that ratings agencies like to see states have a healthy amount of cash on-hand for emergencies.

“This sufficient balance will ensure the maximum transfer of resources to transportation and allow a greater return on our investment for a significant portion of the Rainy Day Fund,” state Sen. Jane Nelson, a Flower Mound Republican who co-chairs the committee, said in a statement. “It also protects our credit rating by demonstrating Texas’ commitment to keeping sufficient reserves on hand to address financial challenges.

Lawmakers are preparing for a legislative session that begins in January in which the billions in the Rainy Day Fund could potentially play a role in discussions on two major issues – overhauling the way the state and local governments fund public education, and putting together a state aid package for coastal communities still recovering from Hurricane Harvey.

Another effect of Friday’s decision is that lawmakers in 2019 can withdraw a larger amount from the fund without jeopardizing revenue for state highways.

Before 2014, most of the state’s taxes on oil and gas production went into the Rainy Day Fund. Then Texas voters approved a plan to divert some of that tax revenue to the State Highway Fund. Friday’s vote maintains the status quo, in which those automatic transfers would stop going to the state highway fund if the savings account dips below the established minimum balance ($7.5 billion). So long as there is more money in the account than that, oil and gas revenue will be split between highways and the state’s savings account.

Earlier this week, Texas Comptroller Glenn Hegar announced he had transferred $1.4 billion into the Rainy Day Fund, raising its current balance to $12.5 billion, a record high. (Phillip Ashley, an associate deputy comptroller, told lawmakers on Friday that the fund balance will fall to $11.8 billion next year as state agencies spend money on projects the Texas Legislature approved in 2017.)

Hegar has said that credit ratings agencies would like to see Texas invest more of the fund — the largest of its kind in the country — to improve the state’s long-term fiscal health, rather than letting the money depreciate.

“It is crucial that Texas use this amazing asset to maintain our strong fiscal position and our state’s AAA credit rating,” Hegar said in a Thursday statement. “That’s why I have asked the Legislature to authorize me to invest a portion of the fund in a more prudent and responsible manner and use the returns to address the types of long-term liabilities that have crippled the finances of states such as Illinois and New Jersey.”

In the past, lawmakers have made hefty withdrawals from the Rainy Day Fund, which was created in the 1980s during an oil downturn, without affecting the state’s credit rating. A representative of the Comptroller’s office told lawmakers Friday that the fund’s balance is only one of many indicators credit agencies use to determine their ratings. Texas currently has a AAA rating, the highest possible.

A proposal to allow the comptroller to invest a larger portion of the fund failed during the 2017 legislative session. Backed by Hegar, the bill would have created an endowment within the Rainy Day Fund that supporters said could boost the state’s savings by billions in coming decades.

Nelson said Friday she would pursue legislation in 2019 that would increase the fund’s investment potential and end the role of the joint committee she co-chairs.

Author: EDGAR WALTERS – The Texas Tribune

Some of the state’s political leaders, including House Speaker Joe Straus and Lt. Gov. Dan Patrick, took the unusual step Friday afternoon of declining to set the state’s spending cap after calling a meeting to do just that.

Straus and Patrick met Friday meeting in their role as part of the 10-member Legislative Budget Board, a group whose responsibilities include setting a limit each session for how large the next two-year budget can be based on projections of Texans’ personal income growth.

Typically, the board of state lawmakers sets the spending cap late in November before an upcoming legislative session. Friday’s meeting was scheduled with that action in mind. But Straus, who is retiring in January, said the board would instead vote on a spending cap at an unspecified later date, saying there was no reason to rush into a decision that lawmakers might come to “regret.”

Straus told reporters he wanted to give the next speaker more time to consider his options, noting that the board had similarly postponed a spending cap decision in 2006. State Rep. Dennis Bonnen, who has drawn the support of most of the state House to become the next speaker, was also at the meeting as another member of the Legislative Budget Board, but did not comment on Straus’ decision.

The Texas Constitution requires that certain spending in the budget can’t grow faster than the state’s economy, but doesn’t specify how to measure that growth. State lawmakers have long used projections of personal income growth as a proxy. The 10-member budget board fielded growth estimates from the Comptroller’s office and four other financial forecasters, all of whom projected a growth rate for the state between 8 and 11 percent.

The spending cap only covers nondedicated revenue, those parts of the budget that are funded by taxes but are not required by law to go to specific programs. While the legislature can vote to break the cap, it’s a politically dicey move that lawmakers have worked to avoid in recent years.

In 2016, facing a sluggish economy, the budget board adopted a spending cap of 8 percent, limiting the state’s spending covered under the cap at about $100 billion. But actual state spending for that budget cycle, which is ongoing through most of next year, is expected to be well below that amount. Lawmakers will pass a supplemental budget when they meet in 2019, to plug leftover holes in state spending in the current budget cycle and to address additional costs from Hurricane Harvey.

Tom Currah, the chief revenue estimator for the Texas Comptroller, told the board that the state’s unemployment rate of 3.7 percent was “the lowest it’s been” and that lawmakers should “expect continued economic growth.” In January, the comptroller will issue an estimate for how much tax revenue the state expects to collect over the next budget cycle.

Author: EDGAR WALTERS – The Texas Tribune

Texas Gov. Greg Abbott signed the state’s two-year budget Monday, giving his approval to the $217 billion document crafted by the Legislature.

But the governor did cut about $120 million from various programs through a mechanism known as a line-item veto — including measures meant to improve the region’s air quality and assist the colonias, impoverished areas on the Texas-Mexico border.

The budget, the product of a compromise agreed to by state lawmakers last month, “addresses the most pressing challenges faced by our state,” Abbott said in a prepared statement.

“This budget funds a life-saving overhaul of Child Protection Services, continues to fund the state’s role in securing our border, and ensures that the workforce of today and tomorrow have the resources they need to keep Texas’ economy growing and thriving,” Abbott said.

Abbott vetoed about $860,000 for an initiative to help Texans living in colonias, impoverished areas on the Texas-Mexico border. He said the state budget already included other sources of funding for Texans living in colonias.

Environmental programs suffered some of the heftiest cuts.

For example, Abbott cut about $87 million for the state’s Low-Income Vehicle Repair Assistance Program, saying it had done little to improve air quality in Texas. That program helps low-income Texans in some urban counties get funding to help repair or replace their cars if they fail emissions tests.

Abbott compared it to the Cash for Clunkers program, established under former President Barack Obama, which he called an “ill-conceived and dubious” program.

“That’s disappointing,” said Cyrus Reed, conservation director for the Texas chapter of the Sierra Club. “He’s actually taking the money away that [Texans] paid for a specific purpose and not allowing it to go to that purpose.”

Abbott also cut $6 million for air quality planning at the Texas Commission on Environmental Quality. The governor said he opposed the program because it would pay for bicycle use programs, carpooling awareness campaigns and other environmental items that “can be funded at the local government level.”

About $2 million intended for a study on brackish groundwater was also defunded.

Other items vetoed by the governor include $150,000 for a Legislative Law Clinic at the University of Texas, funding for state education employees who study dual-credit programs and about $4.7 million for “safety education” at the Texas Department of Public Safety.

Abbott’s veto of the environmental programs was made possible by a nonbinding opinion from Texas Attorney General Ken Paxton that expanded the governor’s veto authority. The opinion held that Abbott could defund budget riders — directives to state agencies that are included in the budget but do not actually make any appropriations. The debate over Abbott’s veto power was a point of contention after the 2015 legislative session.

Kiah Collier contributed to this report.

This is a developing story that will be updated.

Texas’ 85th legislative session has come to an uncertain, rancorous end after a 140-day period that saw the state extend its rightward march and tensions between the two chambers reach new heights — largely because of disagreements within the ruling Republican Party.

Lawmakers gaveled out Monday afternoon — first the House, then the Senate — under a cloud of uncertainty over whether Gov. Greg Abbott would call a special session, which Lt. Gov. Dan Patrick has been pushing for to deal with a number of incomplete priorities. Abbott was coy Monday morning, saying he would announce his decision “later in the week” — and making clear that he would be in charge in the event of an overtime round.

“I would normally say, ‘I’ll see you in 18 months,’ God willing,” Patrick told senators as the chamber prepared to adjourn for the last time in the regular session. “But we’ll see you a little sooner than that.”

The final day was also consumed by a scuffle on the House floor that seemed to embody some of the sharpest tensions of the session: State Rep. Matt Rinaldi, R-Irving, traded accusations with House Democrats after Rinaldi said he called immigration authorities on people in the gallery protesting the state’s new “sanctuary cities” law. The dustup punctuated a session in which Democrats and Republicans alike waged fierce battles over illegal immigration, abortion and LGBT rights.

“This session has been very, very difficult and emotional in many different ways, in many layers, over contentious issues, and there are enough of us here to remember a time in Texas when respect and decorum ruled the day,” state Rep. Celia Israel, D-Austin, said Monday at a news conference held by House Democrats. “It’s just ironic — my senior members that have been here dozens of years have told me this is the worst session they’ve ever seen.”

Even after both chambers gaveled out Monday afternoon, the fault lines were clearer than ever. Patrick issued a statement that accused the House of killing several of his priorities, including those related to property taxes and bathrooms, which the lieutenant governor said remain “must-pass legislation.” Straus, for his part, issued a statement saying his chamber “feels very good about where we ended up, and now we look forward to returning home.”

The session got underway on Jan. 10 in the shadow of Comptroller Glenn Hegar‘s dour revenue estimate, in part due to the downturn in oil prices, ensuring budget writers had their work cut out for them. For weeks, the two chambers sparred over the best way to balance the budget, with the Senate using an accounting trick to free up $2.5 billion — Straus called it “cooking the books” — and the House turning to the state’s savings account, colloquially known as the Rainy Day Fund.

Budget writers ultimately struck a deal that relied on a bit of both methods.

The session also opened against the backdrop of a new Republican administration in Washington led by President Donald Trump. Texas Republicans were hopeful Trump would provide some relief for a state that spent the last eight years at war with a Democrat-led federal government, but the benefits ultimately appeared to be limited.

On one of the items where Texas Republicans have long sought assistance from the federal government — border security — budget writers maintained the current spending level of $800 million.

That did not mean Trump’s influence was not felt under the pink dome. His hardline stance against illegal immigration dovetailed with Abbott’s push for a ban on “sanctuary cities,” arguably the most rancorous proposal of the session. After the Senate passed the legislation, Senate Bill 4, House leadership sought to water it down, an ultimately unsuccessful endeavor thanks to a polarizing amendment by state Rep. Matt Schaefer, R-Tyler.

The amendment allows law enforcement officials to ask the immigration status of anyone they detain — not just those they arrest. Its passage, mainly along party lines, marked something of a coming-out party for the newly formed House Freedom Caucus, a group of 12 conservative lawmakers who spent the session working to advance their priorities through their knowledge of the rules and procedure.

“Our fingerprints are on many pieces of policy,” Schaefer said in an interview earlier this month, “and that’s not by accident.”

The sanctuary cities ban was one of four emergency items Abbott declared in his State of the State address, and he signed it into law weeks before the session concluded. He did so without advance notice on a Sunday evening on Facebook Live, spawning another round of protests against the bill.

While Abbott, Patrick and Straus were generally on the same page regarding SB 4, they were far more splintered on a “bathroom bill” that would require transgender people to use the restroom that matches their birth gender. Patrick charged into the session vowing to fight for it, while Abbott kept his distance and Straus made clear he viewed it as potentially bad for the state’s economy.

There were few big surprises regarding the issue during the first half of session. The Senate approved its bathroom bill, Senate Bill 6, early on and sent it to the House, where it languished amid continued resistance from House leadership. But in April, the House debuted what some had hoped would be an alternative to SB 6, House Bill 2899, and got the governor to break his silence — Abbott called it a “thoughtful proposal.”

Still, HB 2899, which would have invalidated local trans-inclusive policies and school accommodations for transgender students, remained stuck in a House committee — even as it accrued a total of 80 co-authors. The issue wouldn’t show signs of life again until after a remarkable turn of events that began May 11, when the Freedom Caucus, at a boiling point with House leadership, went on a bill-killing spree that claimed what is known as the sunset safety net bill. In the House, the failure of the measure, which keeps some state agencies from shuttering, meant the Senate would have to pass it to avoid a likely special session.

Patrick seized the opportunity, vowing to hold the bill hostage until the House acted on a bathroom bill and property tax reform. Abbott aligned himself with Patrick, calling them priorities in the home stretch — but stopped short of threatening a special session over them.

 Author:  PATRICK SVITEK – The Texas Tribune

Both chambers of the Texas Legislature voted Saturday evening to approve a $217 billion, two-year budget that would boost funding for the state’s beleaguered child welfare agency, increase the number of state troopers on the Texas-Mexico border and avoid serious reforms to the state’s much-criticized school finance system.

The final vote in the House was 135-14. The vote in the Senate was 30-1.

Scrounging for cash in a tight-fisted legislative session, budget leaders from both chambers agreed to a compromise that settled a bitter debate over how to finance the state budget. The two-year budget is shored up by both $1 billion taken from the state’s savings account, often referred to as the Rainy Day Fund, and an accounting trick that would use nearly $2 billion from a pot of funding intended for highway projects. The House had favored tapping the Rainy Day Fund and leaving the transportation funding alone. The Senate had taken the opposite position.

“The budget today is a product of what is a true compromise” between the Texas House and Senate, said state Rep. John Zerwas, R-Richmond, the lower chamber’s lead budget writer. The two legislative chambers originally unveiled budgets that were nearly $8 billion apart.

Across the Capitol, Senate Finance Chairwoman Jane Nelson, R-Flower Mound, laid out the budget compromise to the upper chamber at the same time.

“This budget is smart. This budget is compassionate. It makes huge advances in several of our priority areas,” Nelson said.

Added Lt. Gov. Dan Patrick, who presides over the Senate, after the vote, “The budget has settled where the Senate wanted it to settle.”

The compromise proposal was skimpier than the original budget draft that the House voted out in April. In the House, the final version won the approval of Tea Party Republicans who had originally opposed the House version, while losing the support of almost one-third of the chamber’s Democrats.

State Sen. Sylvia Garcia, D-Houston, was the lone no vote in the upper chamber.

“This budget is more of the same and fails Texas families,” Garcia said in a statement. “There’s no new money for pre-k, there’s continued spending on more border militarization, and it continues to shortchange education and healthcare.”

The budget includes funding to cover growing enrollment at public schools, but it reduces state funding for schools by about $1.1 billion. That funding is offset primarily by growth in local property taxes.

Zerwas said state officials anticipated there would be a shortfall of around $1 billion that lawmakers will need to address when they return to the Capitol for the next regular session in 2019. The budget does not fully fund expected cost growth in certain programs, most notably Medicaid, the federal-state health insurance program for the poor and disabled.

Lawmakers set aside more than $500 million in additional funds for the state’s child welfare system, which has lately faced a shortage of foster homes and front-line Child Protective Services workers. In addition, lawmakers used funding from the Rainy Day Fund to make repairs to various state buildings including mental hospitals, state-supported living centers for people with disabilities, and the historic Alamo.

State lawmakers had less money at their discretion this year in crafting the next two-year budget. By cutting taxes in 2015, the Legislature reduced state revenue available to them for this session by about $4 billion. Lawmakers also dedicated nearly $5 billion that year to highways — a move that voters later approved in a statewide election — which left fewer dollars for priorities like health care and education.

In addition, a moderately sluggish economy slowed revenue growth, leaving the state’s coffers emptier than state officials had projected.

“We started with a sizable shortfall, but we are ending this session with a balanced budget that invests in some very important priorities,” House Speaker Joe Straus said in a prepared statement. “We’re keeping overall spending low while improving child protection and mental health care.”

One point of contention that riled House Democrats was the budget’s treatment of pre-Kindergarten funding. Lawmakers directed $236 million to go to a “high-quality” program for youngsters, but state Rep. Eric Johnson, D-Dallas, criticized that proposal because it would divert existing school funds, rather than adding new ones. Johnson said he worried that Texas was asking school districts to raise their standards for pre-Kindergarten programs, “but we’re not giving them the resources to do it.” Johnson voted against the budget.

For more on the final days of session, watch our live coverage »

Author:  EDGAR WALTERS –  The Texas Tribune

Austin – The Texas Legislature today voted on the state budget in both the House and Senate. Sen. Rodríguez joined the House members of the El Paso delegation in voting for the budget.

“This was a tough vote,” Sen. Rodríguez said. “There are missed opportunities in the budget that will hurt the state’s ability to continue competing in the future.”

In a news release, Senator Rodriguez pointed out a particular gap, saying “while the state added enough money to account for overall growth in the number of students, maintaining a per-student funding level of $5,140, it did not account for inflation, which means the dollar per student doesn’t go as far. It also undercounted our Medicaid obligations over the next two years; this means that it projects a lower number than we’ll actually have, something that has become routine and that ensures each session begins with an “iou” of between $1 billion and $2 billion.”

“Instead of prioritizing these needs, the state instead put nearly $1 billion into ‘border security,’ a phrase that inaccurately frames our communities as threats, instead of as the opportunities that we are. El Paso and other border communities are important to the state and nation for trade, cultural exchange, and great places to live and work,” Sen. Rodríguez added.

On her vote, Representative Mary E. González said, “I’m proud to have helped secure funding for Texas Tech Health Science Center- El Paso’s future dental school, to continue funding crucial special items for UTEP like their pharmacy school, to maintain funding the state’s Rio Grande Compact lawsuit so that our farmers receive their fair share of water, and to support an additional $32 million for an intelligent transportation system at two El Paso ports of entry in order to increase security measures and expedite trade.”

“Even in a tough budget session, we were able to protect key El Paso interests,” added González.

The Health and Human Services budget includes $500 million in increased funding to Child Protective Services, which will pay for nearly 600 new caseworkers. It provides additional funding for mental health services, including a total of $160.5 million to address community mental health services added capacity, waitlists, collaborative grants for jail diversion, and psychiatric hospital beds.

Other budget highlights include an additional $350 million for the Teacher Retirement System, $71 million to the TEXAS Grant Program, and $44 million for Graduate Medical Education (GME).

“It is said that a budget is an expression of priorities. If so, much in this budget, like border security funding, represents misplaced priorities,” Rodríguez said. “But it also attempts a careful balance of interests, based on hard numbers and factual data. We’ve made the mistake of constraining ourselves to the point where we struggle to meet our needs, even though we have the means to do so. Without doing something extraordinary, this budget reflects the best effort this body is able to make.

“It is in that spirit that I vote for this budget, ” Senator Rodriguez said.

Some El Paso area highlights:

• Texas Tech University Health Sciences Center-El Paso received $142 million for the biennium, including a rider to establish the dental school.
• UTEP received $229.2 million for the biennium, including continued support for the pharmacy school.
• EPCC received $63.6 million for the biennium.
• Intelligent Transportation System: Authorization for $32 million for a system to streamline commercial traffic at the Zaragoza Bridge and Bridge of the Americas.
• McDonald Observatory: $5.2 million for the biennium.
• Rio Grande Compact / Texas-New Mexico Water Lawsuit: $500,000, and allowance for increments of $1 million.
• 8th Court of Appeals District, El Paso: $3.374 million for the biennium.

The Senate doesn’t like the House’s hit on the Rainy Day Fund. The House doesn’t like the Senate’s delay of a deposit into the state’s highway fund. Neither wants to raise taxes. But all is not yet lost — unless they want to fight about it.

While the Texas House and Senate are reconciling the differences in their proposed state budgets, they’re still wrestling over which money to spend — a debate that imperils the only legislation they must pass to avoid going into overtime this summer.

The House’s dependence on tapping the state’s swollen savings account is a no-no in the Senate. That’s a $2.5 billion difference.

The Senate wants to delay a newly established deposit into the state’s highway fund, a bit of magic that would fill a $2.5 billion hole in their proposed budget. The House has questioned its constitutionality and, perhaps more importantly, has said it would violate the House’s official rules.

It’s a classic end-of-session legislative standoff, fueling speculation of extra legislative sessions after the current session’s Memorial Day finish, of government shutdowns and political posturing. The two budgets are always different; the end of every legislative session features a committee of 10 members — five from the Senate, five from the House — who iron out the differences and then take a negotiated settlement back to their chambers for final approval.

Their differences over spending are significant this year — they usually are. But their squabble over what money to spend is a new wrinkle.

Neither side has endorsed a full-tilt raid on the state’s $10.2 billion economic stabilization fund, better known as the Rainy Day Fund. But the House would hit that savings account for $2.5 billion. Senators have talked about using the fund for one-time expenses — long overdue repairs to state hospitals for Texans with mental illness, for example — but not for ongoing operations.

The Senate wants to balance its budget with an untested accounting trick that delays, from one budget cycle to the next, a transfer from the state’s general fund to its dedicated highway fund. Such bookkeeping dodges are commonplace in Texas state government; delaying an expense avoids red ink in one period and pushes it to the next, for a future Legislature to remedy.

This one is different because the transfer itself — using sales tax windfalls for highway spending — was only added to the state Constitution in November 2015. This is the first time it’s been available for financial chicanery.

The regularly used bag of tricks involves normal and large payments the state makes to local school districts, to retirement funds for state employees and teachers. Pushing one or more of those from one period to another pushes the red ink along and helps balance a current, tight budget.

In fact, the House is using its own delay of payment to local schools to balance its budget — a $1.9 billion shift. That one is time-tested — proven to be beyond the interest of voters or anyone else who’s not an accountant or a bond dealer.

Texas Attorney General Ken Paxton tried to clear up the legality of the Senate ploy, saying last week in a nonbinding opinion that he believes a judge would side with the Senate. That’s important, but it doesn’t answer the violation of the House rules cited in a letter to the AG from an attorney for House Speaker Joe Straus — a foul that would allow any member to raise a state budget-killing objection.

On the Senate’s end of the building, Lt. Gov. Dan Patrick has objected, a little more strongly each time, to using the Rainy Day Fund to get through a tight budget year. He’s not creating a rule, but in the Senate, what this lieutenant governor says amounts to the same thing.

As a practical matter, Texas lawmakers have plenty of options even if they stay out of savings, leave the transportation money alone, don’t raise taxes and don’t cut the spending they’ve planned. They have plenty of other tricks in their bags — tricks that have been used before and that have not been challenged on either end of the Capitol.

It’s not a matter of finding a way to fix this — there are plenty of ways. It’s a question of whether fixing this is what Texas legislators — and their leaders — want to do.

More columns from Ross Ramsey:

• Some Texas lawmakers want to kill the franchise tax that so many businesses hate. So far, so good. But it might leave a hole in the state’s pocket when it inevitably comes time to rebalance the state’s financing for public schools.
• The state of Texas has been on a losing streak when it comes to redistricting and voter ID laws, with federal judges repeatedly finding that the state intentionally discriminated against minorities. Whose legal advice were they following?
• If you’re in favor, Texas lawmakers will meet with you and put your legislation on the fast track. Others have to wait, sometimes for weeks, for a chance to talk for a few minutes in a committee hearing room in the middle of the night.

Author: ROSS RAMSEY –  The Texas Tribune

The House and Senate have passed their own versions of a budget, but crucial differences remain.

Now the two chambers must reconcile their funding priorities before they can agree on a final draft and send it to the governor.

At first glance, the House’s $218.1 billion budget and the Senate’s $217.7 billion budget do not seem far off.

But on some of the most hot-button issues, including public education and health care, the chambers took markedly different approaches about what to fund, how to fund it, and what to cut.

Here’s a look at how the two budget proposals compare, using information from the Legislative Budget Board.

Border security funding

Despite a Republican president in the White House who has vowed to dramatically boost federal border security efforts, both chambers are largely committed to the surge in border funding they approved in 2015, which pays mostly for the stationing of state troopers in counties near the Texas-Mexico border.

But where the House and Senate disagree is whether to maintain the current surge or boost it even further. The House approved $653.1 million, which would maintain the current level of trooper deployment, while the Senate approved $800 million, which includes a plan to hire 250 new troopers and 126 additional support staff.

Related story: Texas poised to maintain most of its border funding for Trump’s first years

Tapping the Rainy Day Fund

 

Another touchy subject this year is whether lawmakers are willing to use their savings account to help weather tough times. The House proposal would use $2.5 billion from the Rainy Day Fund, which currently has a balance of more than $10 billion fed largely by state taxes on oil and gas production.

The Senate’s budget does not touch the fund, instead relying on an accounting trick involving transportation funds that has drawn sharp criticism from House leaders. Abbott has recently declined to take a firm position on the Rainy Day Fund, though he told lawmakers earlier this year he was confident they could balance the budget without “looting” their savings account.

Authors: Chris Essig and Edgar Walters – The Texas Tribune

Austin – State Sen. José Rodríguez released the following statement on S.B. 1, the Senate’s version of the state budget, which passed the Senate unanimously Tuesday:

Passing a budget is our basic responsibility, one that none of us take lightly. It is for this reason that I vote now in favor of it, although I do have some serious concerns. This is a start, and that’s what I’m voting for, so that we may move the process forward and make it better. 

Three cycles after the draconian cuts of the 82nd Legislature, we have made incremental progress. However, we have the ability to do much more. 

This session, as last session and the session before, we have the means to make up lost ground. 

 Unfortunately, it seems that the majority of this body prioritizes tax cuts over education and other essential government functions.

That is why I voted against SB 17, and against SB 2, just to give two examples of bills that will 1) limit the funds available for future school funding, and 2) limit local government’s ability to set priorities and respond to emergencies – especially so for rural counties, as we heard repeatedly. I plan to vote against SB 9, which would set a new, even more stringent limit on spending. Given how tight we’ve been, I’m not sure what policy purpose is served by tying the hands of future legislatures.

The state’s “Rainy Day Fund” continues to grow.  We now have more than $10 billion and are estimated to have almost $12 billion by the end of the 2018-19 biennium.  We should be using the Rainy Day Fund to ensure that we’re adequately funding our schools and health and human services.  

The basic allotment provides for per-student funding of $5,140 in the 2018-19 biennium. This is the same amount as the last biennium, so we’re falling behind. 

We also are cutting our higher education institutions – $332 million from universities, state colleges, and technical schools.  

Further, the federal budget proposal from the White House has major cuts in financial aid and research. So Texas higher education may take a double hit. 

In both cases, quality educational development is economic development, a proven way for nations – and states – to prosper. 

We are not spending enough on health care, and it’s unclear how we will pay for the Medicaid shortfall left by last session’s underfunding of almost $2.6 billion. 

For DPS “border security,” the agency is allocated almost $500 million under the Secure Texas heading. Adding up other funds, we’re looking at another $800 million for the biennium. 

Members should remember, and the public should be aware, that what happened during the “border security” vote in 2015 was that we took DPS out of the Highway Fund, and placed it in General Revenue. 

The majority voted to do that despite a lack of data then, and now. There are as many drugs, gangs and guns in Texas communities as there were before this started, because it never was a border issue.  If that had been the choice, without the rhetoric of “border security,” I don’t think members would have been as willing to set DPS against education, which is what we now face. 

I will continue advocating for education funding, for health care, for higher education, and for other special programs that make a difference in Texans’ lives, from the relatively small amount of $5 million for Relocation Services Contractors who play such an important role for people with disabilities to funding for the Adult Career Education grant program that is so important to my community to fully funding the critical Texas-New Mexico water lawsuit, as we did last session. 

With all that, this budget has some good things. CPS is funded at $430 million, which includes $300 mil for $1,000 raises for 828 additional caseworkers. That is not enough, according to experts and the agency itself, but it’s a huge step forward. It’s not a huge line item, but $25 million for school broadband access, which will help draw down hundreds of millions in federal funds, is a great investment. This budget provides $244 million for mental health care, which includes $64 to eliminate wait lists for community mental health services. 

All of these items are critical needs, but not all critical needs are addressed by SB 1.

I am voting for this budget with the understanding that it is a start. We have the resources to build upon this start.

AUSTIN, Texas – Children’s advocates are aiming to convince the Texas Legislature to fund all-day pre-kindergarten classes in the 2018-2019 budget and beyond.

The Children’s Defense Fund-Texas and others hold a roundtable discussion in Austin Friday, to share reasons to permanently fund what is now a temporary, grant-based program.

Patrick Bresette, the fund’s executive director, says expanding pre-K will bring major benefits to some of the state’s neediest children.

“When you enter a session with some concerns about the overall revenue available, there are competing priorities,” he states. “But it’s hard to argue that putting some money at the front end of these early childhood programs shouldn’t be one of the highest priorities. The return on investment, the return on human capital and development, are just enormous.”

House Bill 4, which created the program, was a top priority of Gov. Greg Abbott in the 2015 session, but lawmakers only approved enough funding to support half-day classes.

Bresette says the goal this time around is legislative approval of the entire $236 million requested to fully fund the program.

He says research shows that pre-K classes are having the most impact on children in high poverty districts, such as those in inner cities and the Rio Grande Valley.

“Particularly in the areas of the state with a significant number of low-income families, and those who are English language learners, we know two things: Pre-K can be one of the most important tools to getting those kids jump-started, and that we’re only meeting a fraction of the demand,” he stresses.

Bresette adds that school districts say they need pre-K funding to be both reliable and sustained as part of the state’s overall education budget, in order to meet families’ needs.

“The districts are really looking for a more stable source of funding, as opposed to year-by-year,” he states. “I think that if we were to step up and really put the funding that was there to provide a full-day pre-K, you would see an enormous number of families taking advantage of that program.”

The Children’s Defense Fund is partnering with Texans Care for Children and the Texas Education Grantmakers Advocacy Consortium in backing the Pre-K program.

Author: Mark Richardson – Public News Service

Texas’ top elected officials are asking state agencies to scale back their budget requests by 4 percent, seeking to further rein in state spending for the 2018-2019 cycle.

In a letter dated Thursday, Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Joe Straus said agencies should propose the 4 percent reduction as a “starting point for budget deliberations.”

“Limited government, pro-growth economic policies and sound financial planning are the key budget principles responsible for Texas’ economic success,” the three wrote. “It is imperative that every state agency engage in a thorough review of each program and budget strategy and determine the value of each dollar spent.”

The letter hints at some priorities for lawmakers heading into next session, making several exceptions to the 4 percent cut. They include funds for public schools, border security, Child Protective Services and mental health resources. The exemptions also include public-employee pensions, Medicaid and dollars needed to meet debt service requirements for bond authorizations. Agencies are also being asked to submit information about zero-based budgeting, a practice in which all expenses must be justified in a new cycle. Patrick and state Sen. Jane Nelson, a Flower Mound Republican who chairs the Finance Committee, have been proponents of zero-based budgeting.

Overall, the letter makes a plea for holding back the growth of state government as Texas continues to deal with a downturn in the oil and gas industry.

“Due to the slowdown in parts of our economy, some difficult decisions will be required to balance the next state budget, and the process of making those decisions begins now,” Straus said in a separate statement.

The directive to agencies is the first step in the process of coming up with a spending plan for the next two years. Later this summer, agencies will send their requests to the Legislative Budget Board, which will review the proposals ahead of the 2017 session.

Author:  Patrick Svitek – The Texas Tribune

The message coming out of the state comptroller and various budget wonks in Texas is that a mess of lawsuits could put a serious dent in the state’s tax revenues.

That’s not as important as the message they’re sending to state lawmakers and political candidates who might be in the Legislature next year: Don’t get too spendy.

It’s hard to hold the line — even for conservative Republicans — if there is a lot of money available. One of the remarkable things about the current batch of officeholders is that they met last year and wrote a state budget that didn’t spend all of the money they had available.

That’s especially lucky because the oil and gas boom ran out of fuel and the state isn’t bringing in as much money as expected. The revenue shortfall has gobbled up some of that “available” money that didn’t get spent. But — here’s the important part — the economic stumble hasn’t forced the state to cut any programs or services.

Last year’s spending restraint looks pretty smart.

Next year’s legislative session won’t be so easy. Start with the end of that oil and gas boom. Mix in pending tax litigation on piping and equipment and on intangible property in movie theaters that together could lop $2 billion per year off of the state’s revenue in addition to one-time costs of up to $10.5 billion, according to the comptroller’s estimates. Litigation over the state’s busted foster care program could cost the state up to $100 million annually.

Adverse rulings in any or all of those lawsuits could put the state in a real pickle.

Then there is the school finance lawsuit that alleges the kinds of large disparities between the state’s school districts that cost billions to fix. If the Texas Supreme Court sticks with a lower court ruling, lawmakers will have a choice between raising state spending, lowering the quality of public schools or forcing increases in local property taxes.

Great choices, right?

The odds are against all of that litigation going fully and completely against the state, and even if it did, the consequences might not match the dire predictions. Those are worst-case forecasts, after all.

It’s also possible that even adverse rulings won’t happen early enough to require attention in the legislative session that starts next January.

Keep an eye on the spending half of the board while you’re worrying about those lawsuits.

Surpluses give lawmakers the option of cutting revenue or expanding or creating programs and services. The potential drops in state income might be good news for anyone who wants to retard government growth. But some of those same people would love to cut taxes, and that’s a lot easier to do when the state is flush.

Cutting taxes without surpluses means cutting programs and services, each of which has its own constituencies.

A proposal to cut business franchise taxes would cost the state an estimated $3.5 billion annually. With a surplus in place, that would require the promoters to win support for a tax cut. Without one, they have to win support not just for the tax cut but also for the program or service cuts that would make it possible. That’s doable, but it’s more difficult.

Bigger ideas, like paying off highway debts to get rid of toll roads, are even more expensive: $30 billion to $40 billion, the Texas Department of Transportation told lawmakers last week.

Legislative efforts to cut or limit property taxes face similar hurdles: The taxes are unpopular, while the public schools they support have widespread bipartisan support.

The warning lights come from what might be called a case of cautious pessimism: The state economy remains relatively robust even with the slump in the energy sector, and the state’s lawyers might pull out wins in all of those lawsuits.

The finance folk say otherwise, for now — “Don’t get spendy” is the order of the day.

Author: Ross Ramsey – The Texas Tribune

The Texas Tribune is a nonpartisan, nonprofit media organization that informs Texans — and engages with them – about public policy, politics, government and statewide issues

If you want to make big changes without raising too much attention, make them boring.

For an example, look at how some serious power over the state budget shifted from the Legislature to the governor. Taking his veto powers where previous governors have feared to go, Gov. Greg Abbott knocked out several spending items that state lawmakers had composed not as “appropriations,” but as “informational items.”

The lawmakers’ idea, a common tactic in Texas state budgets, was that the spending part of a budget — the part where the governor’s veto pen is a threat — is where the money is set aside. Everything else, as practice has it, is for informational purposes only.

Abbott challenged that after the 2015 legislative session, vetoing some of the Legislature’s spending plans by dipping into the fine print and saying the finance people couldn’t block him with its use of “magic words.” Lt. Gov. Dan Patrick unexpectedly sided with the governor instead of with his own senators. Comptroller Glenn Hegar was confounded enough to ask the attorney general for a legal opinion. And Ken Paxton, the AG, opined that the governor is right.

Paxton’s opinion isn’t a legal ruling; push can still come to shove. But for now, the governor is enjoying power over the budget that his predecessors never asserted.

Boring, isn’t it?

It turns out that we are collectively dumb in ways that can be useful to people in positions of power. Go see or read “The Big Short,” the Michael Lewis book and movie about the collapse of the financial markets and the housing industry. People who commit simple crimes get punished. People who commit complicated crimes get bonuses.

Why? Because holding up a convenience store is dramatic. Guns are involved. The whole thing can be played back on grainy security footage.

Stealing with a fountain pen is unremarkable to watch, even if the numbers involved have lots of commas in them.

But enough about crime. Let’s get back to the Texas Legislature.

You’re supposed to think that legislators write the budgets and then control them. That’s true, to a point. Some legislators write budgets, and everybody else goes along with the judgments of those budgeteers.

Most of them find budgets as boring as you probably do.

And most of them find enough to like in the state budget to ignore the parts that they don’t like. Lawmakers from across the political spectrum vote in favor of things they oppose every time they vote on legislation as complex as a state budget. Each, for his or her own reasons, has to be at least 51 percent satisfied. Truth be told, most of them are more approving than that, but it’s also true that almost all lawmakers can find millions of dollars in the budget that they’d rather not spend.

The trick is that it’s a different item of spending for each group of lawmakers.

A governor has a much freer hand — especially if Abbott’s interpretation, bolstered by Paxton, survives any challenges.

Abbott has a line-item veto, meaning he can strike any single item from a budget that he doesn’t like. This legislative trick of using line items is designed to thwart governors. If you put all of the funding for a university in one line and then list the services the school should provide without numbers, the governor can either keep the whole school or lose the whole school.

So far, no governor has been so bold.

But lawmakers also want to hold the agencies of government accountable. They like to make sure money is spent the way they want it spent. It forces them to be specific, even in their so-called informational items, and the more specific they get, the more they expose themselves to vetoes.

Several targets of Abbott’s vetoes had dollar amounts attached to them, and have helped him make the case that those were, as the lawyers put it, “Items of Appropriation.”

Eyes glazing over a bit? That could be a sign that something momentous is going on. Instead of talking about how many people get what kind of nursing home care or whether police officers have solid pensions or whether the schools are great or good or fair or poor, they can talk about numbers, items of appropriation, informational items and whether the governor can or cannot have a meaningful say in how the state operates.

Budgets are not just piles of boring numbers. If you pay attention, they are the government’s operating instructions. This is an argument about who gets to write them.

Author: by Ross Ramsey – The Texas Tribune

The Texas Tribune is a nonpartisan, nonprofit media organization that informs Texans — and engages with them – about public policy, pol itics, government and statewide issues.