87th LegislatureState HouseState Senate$16 Billion in Federal Coronavirus Aid Must Be Appropriated During Third Special Session

Congress set guidelines for the funding, such as no tax cuts, but the legislature has eyed it anyway hoping courts will rule on their side.
September 17, 2021
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The federal government’s main response to the coronavirus pandemic was to throw the Federal Reserve’s printers into ludicrous speed, and it has resulted in a $16 billion windfall for the State of Texas. One of the tasks before the 87th legislature for the looming third special session is now to disburse that money.

In total, Texas was given $37 billion to spread out across the state government, local governments, and public schools. Nearly a third of that total has already been divvied out to school districts and local governments have access to $10 billion of it. That leaves about $16 billion for the state legislature to spend.

That money can be spent on virtually anything, but with an emphasis on costs incurred from the pandemic. There are two exceptions, however: the funds can neither be used directly to cut taxes nor to shore up underwater pension systems.

Currently in legal dispute, that first stipulation received an initial blow when an Ohio district judge ruled that such a condition could not be issued by Congress. That ruling is currently being appealed in the U.S. Court of Appeals for the Sixth Circuit.

Outside of those stipulations, the legislature may direct that funding wherever it likes. While no concrete roadmap is yet available, those close to the situation believe the first order of business will be to repay the $6.9 billion in federal loans Texas took on to supplement its unemployment insurance system. On top of that, legislators are keen on replenishing the $2.2 billion pre-pandemic balance of that fund.

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Beyond that, allocations are up in the air.

One potential avenue that now appears likely is a property tax buydown. Sen. Paul Bettencourt (R-Houston) unveiled a proposal similar to 2019’s property tax compression that would result in an estimated $100 savings for an average taxpayer.

Functionally, the state would spend money on bringing down school district Maintenance & Operations rates at the local level. Based on Bettencourt’s proposal from the second special session, between $2 billion and $5 billion would be allocated and with no explicit item on the governor’s proclamation naming property taxes, this legislation must fall under the coronavirus aid line item.

But the ability of the state to issue that expenditure likely hinges on the court system ruling invalid Congress’s stipulation.

The bill, however, has the support of the two heaviest hitters in the legislature. Speaker Dade Phelan (R-Beaumont) voiced his support of the legislation last week and Lt. Governor Dan Patrick placed it at the top of his priority list for the special.

Also on Patrick’s agenda is the unemployment insurance replenishment.

Other items the Republican-led legislature may spend the federal windfall is putting any excess amount toward the border wall construction or a mechanism to incentivize the power grid’s development of dispatchable power.

As the session begins and legislation is written, the areas of spending will become clearer. But as it stands, there are already a few tasks legislators have eyed. But federal money goes quickly when all the different interests come calling.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.