87th LegislatureState HouseState SenateTaxes & Spending$251 Billion State Budget Proposed by Texas Legislature

This week, Texas' House and Senate unveiled their baseline budgets for this session. Both are remarkably similar as the budget debate begins.
January 22, 2021
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Every biennium, the Texas legislature faces one constitutionally mandated responsibility: pass a balanced budget. This week the parameters of each chamber’s 2022-2023 budget were released, both with a $251 billion fiscal tag.

The general revenue fund, the discretionary aspect of the budget, proposals are virtually the same, too, at $119.7 billion — a roughly $1 billion increase from the current biennium. Back in December, citing the pandemic’s fiscal strains on the state’s purse, the Legislative Budget Board set the spending increase cap at 7 percent — a slight decrease from the previous interim.

Those general fund outlines are roughly $7 billion over Comptroller Glenn Hegar’s estimate for 2022-2023 earlier this month.

Education agencies and Health and Human Services account for the two largest sections of the proposed budget at $94 billion and $92 billion, respectively.

This comes on the heels of a $15 billion spending increase from the 86th Legislative Session, largely from the state’s school finance injection and property tax buydown. Oddly enough, due largely to unexpected costs incurred from the pandemic, the estimated spending overrun for the 2020-2021 biennium is about $15 billion.

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The recommended appropriation by the House is $13.3 billion less than the 2020-2021 actual spending level — a 5 percent decrease.

Texas Speaker Dade Phelan said, “The Texas House’s base budget prioritizes the needs of Texans during this consequential moment in our state’s history and advances the Legislature’s commitment to the historic public education and school finance and property tax reforms passed last session.”

On his chamber’s proposal, Lt. Governor Dan Patrick stated, “SB 1 reflects our commitment to those conservative budgeting principles that have kept our state resilient and economically sound. This is within the increase in Texas population growth times the rate of inflation and represents a 4 [percent] growth in General Revenue. The 5 [percent] reduction in spending cuts that I asked state agencies to make is included.”

Last year, state leaders ordered agencies to cut their budgets by 5 percent to cope with the pandemic and its financial strains. But based on its original exemptions, that cut would apply to only 40 percent of the state’s total spending.

Some particular line items in the Senate proposal include $3.1 billion to fund public education enrollment growth, a $493 million increase in contributions to the Teacher Retirement System, $8.1 billion in higher education outlays, a newly-appropriated $39.1 million to buttress Texas capitol security, and $30 billion for the Texas Department of Transportation.

Within the House budget includes $74.2 billion for Medicaid outlays. New Speaker Dade Phelan will face a renewed and at this point biennial push for Medicaid expansion. Phelan, however, threw water on that fire, saying, “We can have a robust discussion on a Texas solution that is revenue neutral and doesn’t tie us to billions of dollars in future expenditures.”

The state expects $28.6 billion in federal stimulus grant dollars to be distributed for coronavirus-related costs. But that could fluctuate depending on what the federal government is willing to pass out.

No appropriation to the Economic Stabilization Fund (ESF), colloquially known as the “Rainy Day Fund,” is planned within the House’s outline, and a balance of $11.6 billion is estimated. Due to the economic hit absorbed by the oil and gas industry, this year’s contribution to the ESF was far lower than the previous year.

The ESF is financed largely by severance tax collections and with less production and revenue, the fund enjoys much less fortune. Last session, a chunk was pulled from it to partially finance the public school and property tax expenditure, but any withdrawal from it next biennium, let alone to the same level as 2019, is unlikely.

A minor but notable absence in the budgets is the Texas Emissions Reduction Plan (TERP), basically a part-cash-for-clunkers program by the state, part-broader alternative fuels program. The fund has been reduced for multiple consecutive sessions, but appears to have been written out entirely this time around. About $154 million was appropriated to TERP within the 2020-2021 biennium budget.

Sen. Jane Nelson (R-Flower Mound), chair of the Senate Finance Committee and author of the Senate Bill (SB) 1, said in a release, “Texas’ economic strength — and the work we did to scrutinize agency budgets — puts us in a better than anticipated position to keep our commitment to education, defeat the coronavirus and invest in our economic recovery.”

“SB 1 funds essential services, keeps up with growth and meets our obligations to vulnerable citizens. It is a starting point. We have many tools available to balance this budget, which will require us to re-establish our priorities, stretch every dollar and find more efficient ways to deliver services,” she concluded.

Vance Ginn, chief economist with the Texas Public Policy Foundation and author of the annual “Conservative Texas Budget,” was pleased with the initial parameters. He said, “At a time when many Texas families and employers are struggling financially across the state, we are glad to see the Texas Legislature come together to introduce a state budget that protects taxpayers.”

“The state budget is a responsible approach that puts Texans in a better position to recover their lives and livelihoods as soon as the economy is fully open,” he added.

Texans for Fiscal Responsibility approved of the budget’s tax increase abstention, but further added, “As proposed, the budget fails to adequately prioritize tax relief for overburdened Texans struggling in the face of high taxes, government mandates, and shutdowns. Texas lawmakers should prioritize a full reopening of the economy and further regulatory and tax relief for hardworking taxpayers.”

With the outlines of their one main requisite set, the legislature can now jump headfirst into the pool of budgetary jockeying to come. 

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Brad Johnson

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.