Patrick made clear that the Legislature will not spend all of it, choosing to leave some aside for a rainy day.
“I think California had the largest [budget surplus],” he said, comparing Texas to its West Coast rival, “but they weren’t smart, and spent all the money and now have a deficit; you never spend all the money, and we won’t.”
Right before Patrick’s press conference, the Legislative Budget Board (LBB) set the population-times-inflation spending cap for the 2024-2025 biennium General Revenue (GR) fund at 12.33 percent. That means the Legislature may appropriate roughly $12.5 billion in more GR spending than the 2022-2023 biennium without busting the spending cap.
That’s less than half the projected surplus, which may yet grow higher.
There have been many different proposals floated for spending the surplus, including by Gov. Greg Abbott that “at least half” of the total go toward cutting property taxes.
When presenting his priority list, Patrick also floated an unconventional method to avoid exceeding the cap while also directing funds to as many purposes as possible: pass a constitutional amendment with the support of voters.
“Busting the cap sets a dangerous precedent,” Patrick warned when asked why the Legislature doesn’t simply take that route.
The cap leaves the state with an estimated tranche of $14.5 billion that cannot be appropriated under it; the historic surplus is a result of an economy recovering from government-mandated shutdowns and the COVID-19 pandemic slowdown along with rising inflation.
Inflation means higher prices paid for goods, which means higher consumption taxes paid to the state.
Property taxes — how much to spend on reducing those bills, and in what manner — is a premier debate topic within the Capitol. There’s already $5 billion worth of tax rate compression set for the next biennium from the 2019 reforms, and $3 billion in federal coronavirus aid earmarked for additional property tax relief next session.
Property tax relief is atop Patrick’s priority list, he said Wednesday. He laid out a couple items to accomplish that, along with a broader list of priorities. That list includes:
- Raise the standard homestead exemption again, raised last year to $40,000
- Expand the business personal property tax exemption to at least $100,000
- Build more natural gas power plants for the state’s main power grid
- Level the financial playing field between renewable and thermal sources of electricity generation
- Establish a Rural Law Enforcement Fund to buttress local budgets in low-population counties
- Provide a pay enhancement for sheriff’s offices
- Create a 10-year minimum sentence for those who use a firearm in a crime
- Codify a mechanism to recall district attorneys and judges who facilitate the release of a criminal on bond who then goes on to commit another crime
- Add more funding for border security
- Invest more in additional mental health facilities
- Finish restoration of the Alamo
- Trim debt where possible
- Create a university-subsidization fund for institutions other than the University of Texas and Texas A&M University
- Expand scholarship opportunities for teachers and law enforcement
- Increase teacher salaries
- Issue a “13th Check” or a cost-of-living adjustment for retired teachers
- “Empower parents by giving them a voice in their children’s education”
- Add to school safety funding
- Reform tenure in higher education institutions
- Restore the penalty for voter fraud to a felony
- “Ensure timely counting of votes and review of machines”
Patrick stressed that these are all broad items and “it’s up to the members to figure out” the paths they’ll ultimately take. The Texas Senate set aside bill numbers one through 30 for its priority slate, as is customary in each chamber.
Some will of these items naturally have a cost for which dipping into the surplus may be required. Others, like reforming university tenure, likely will not.
Back in February, Patrick called for the phased-out revocation of tenure for professors deemed to have taught critical race theory-inspired ideas.
Asked whether that’s something universities will support, Patrick said, “Look, the chancellors won’t say this publicly, but I’ll tell you what they told me: We’d love to get rid of some of these folks but can’t because of tenure.”
After Patrick floated the idea, House Speaker Dade Phelan objected to it, saying, “I can just tell you, in my time talking to folks at the University of Texas, they’ll tell you it’s hard to recruit conservative professors without tenure.”
In addition to the treasury surplus, the state is likely to have a record balance in the Economic Stabilization Fund (ESF), colloquially known as the “Rainy Day Fund.” In 2019, the Legislature dipped into that in order to pay for portions of its $11 billion school funding injection and property tax buydown.
This week, the Texas Comptroller of Public Accounts Glenn Hegar announced the transfer of $3.64 billion into the ESF; pending disbursements put the fund balance at $13.1 billion. But Patrick said he expects the ESF balance to rise substantially through September 2023, the last year of the current biennium.
The Texas Legislature reconvenes in 41 days.
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Brad Johnson is a senior reporter for The Texan and 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.