87th LegislatureState SenateTaxes & SpendingTexas Senate Committee Approves Its Preliminary Budget, Setting the Stage for Fiscal Debate

The Texas legislature has one constitutional mandate every session: to pass a balanced budget.
March 31, 2021
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As sure as the sun rises in the east, budget day comes amidst each Texas legislative session. And with the approval of Senate Bill (SB) 1, the upper chamber’s roadmap to the 2022-2023 biennium, the state’s budget is on the horizon.

This session, it’s the Senate’s turn to lead the two-chamber financial tango.

After its initial budget proposal back in January, the Senate Finance Committee shaved off a few million dollars from the overall price tag, now at $250.7 billion.

Senate Finance Committee Chair Jane Nelson (R-Flower Mound) said of the proposal, “This budget maintains the historic commitment we made last session to education, protects our most vulnerable citizens, keeps our communities safe and invests in our economic recovery.”

“Because of our commitment to fiscal discipline over the years, Texas is better equipped than other states to meet the challenges ahead. This budget will keep Texans safe, healthy and prosperous.”

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The model is a 2.6 percent increase, under the population plus inflation growth used as a measuring stick by budget hawks. The hard spending increase cap set by the Legislative Budget Board in December, which the final budget cannot surpass without a majority in both chambers, is 7 percent.

For General Revenue (GR) expenditures, essentially the state’s version of discretionary spending, the latest version provides $1.8 billion less in that category than the original proposal.

The GR price tag is something to watch as back in January, the state’s comptroller projected $112.5 billion in available GR funds for the 2022-2023 biennium. That was a drastically improved outlook compared to the same analysis six months earlier but was still $7 billion shy of the initial proposal.

That gap has shrunk slightly but remains a long way off. However, the comptroller is expected to provide a mid-session update on that fiscal outlook and it may be an improvement from January.

A representative with the comptroller’s office told The Texan the update is likely to come toward the end of April or first week of May.

Some notable aspects of the Senate’s committee version are $3.1 billion for growth in school enrollment and an additional $1 billion for continued property tax compression.

Those are both continuations of the commitments made during the 2019 session to increase the state’s share of school finance while lowering local property tax rates.

The proposal will come to the Senate floor for debate next week providing members their opportunity to amend its current form.

Agencies have already submitted their own funding requests with each respective chambers’ committee and are accepted or adjusted by legislators during the process. Budget riders — essentially notes attached to line items dictating their purpose — will be part of each respective committee report as well.

In the House, meanwhile, the Appropriations Committee has been embroiled in its own budget discussions during the last three weeks. Its final version is not out yet, but the recommendations are forming. A final product should come out at some point in the next couple of weeks.

Constitutionally, the Senate budget must be distributed to the House by the 90th day of the session, or this year, April 11. And the House cannot take up any appropriation bills on the floor until May 9 unless the budget bill has already been approved and certified.

But from there, the Senate’s version will serve as the basis and the House will have its opportunity to tack on changes. Eventually, the two chambers will have to reconcile the differences in conference committee, after which a final version must be approved by each body.

The conference committee may add, with permission from both chambers, items not within either approved version of the budget.

After final legislative approval, the comptroller must certify the budget before sending it onto the governor who has line-item veto power.

While the budget focus is mostly prospective, occasionally, the state must confront current-biennium spending differences from that which it originally planned two years prior.

For the 2020-2021 biennium, the state will, as of the January estimate, face a $950 million budget shortfall — caused by the pandemic’s unforeseen financial strictures on commerce and state tax collections.

That shortfall should be taken care of by the limited 5 percent budget cut to some agencies ordered by the state during the interim. That cut’s price tag was estimated to be $1 billion, and if fulfilled will take care of the shortfall with some room to spare.

With another step down, the state legislature is methodically trotting along the path toward a budget to govern its next biennium until the body sunsets into the interim.

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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.