In pre-corona times, the Texas Capitol would be buzzing with activity during this time of year with lobbyists peddling bills (including myself), various committees of the House and Senate discussing issues likely to come up during the 2021 Legislative Session, and the beginning of budget hearings, when different agencies begin to lay out their proposed two-year budgets for Fiscal Years 2022 and 2023.
But it is different in 2020. While a few committees met earlier this year ( and last year), 2020 has been... well... largely the sound of crickets. Capitol offices are not even open, as staffers work from home.
At long last, however, there’s finally some news, but a lot of it is challenging.
Budget woes
First, the Legislative Budget Board (LBB) has yet to announce a schedule for state agencies to begin presenting their base budget and “Legislative Appropriations Requests” that normally start in late summer. The LBB did however hold a virtual meeting, and the news was rather stark: there will be less money this year, meaning that when the legislature comes back in January there will also be less money to write those budgets. At least that is the official prediction of Glenn Hegar, the Texas Comptroller of Public Accounts. As per his statutory obligation, Hegar presented updated numbers for the years 2020 and 2021 in terms of expected revenues, as well as our starting place for 2022-2023.
Hegar’s summary is pretty illuminating (a lot more details can be found here if you want to dive deep). He writes, “The economic contraction associated with the spread of COVID-19 and recent volatility in oil markets warrants an update to the Certification Revenue Estimate (CRE) we published in October 2019. We now estimate the state will have $110.19 billion in General Revenue-related (GR-R) funds available for general-purpose spending for the 2020-21 biennium, down $11.57 billion, or 9.5 percent, from our October estimate. This results in a projected fiscal 2021 ending deficit of $4.58 billion, a substantial downward revision from our previously projected surplus of $2.89 billion.”
There are a few points to make. Back in May, Governor Greg Abbott, Speaker Dennis Bonnen and Lt. Governor Dan Patrick had ordered state agencies to cut the last three months of the 2020 budget as well as the 12 months of fiscal year 2021 budgets by 5 percent for non-essential services as a result of the pandemic and economic downturn, and Hegar’s numbers do not reflect those projected cuts (which are still being implemented), meaning the “deficit” of $4.58 billion should be smaller.
Hegar also made clear there is a lot of uncertainty in the projections. Will the federal government provide any direct support to state and local governments for lost revenues due to the coronavirus? Will there be an increase in sales and business taxes as the economic recession improves from a decrease in COVID-19 cases? We don’t know.
Still, the Comptroller emphasized that the amount of money in our “Economic Stabilization Fund” (aka, the Rainy Day Fund) will be less cushiony than expected. He writes:
“In fiscal 2021, the Economic Stabilization Fund (ESF) and State Highway Fund (SHF) each will receive $1.1 billion in transfers from the General Revenue Fund for severance taxes collected in fiscal 2020. After accounting for appropriations and investment and interest earnings, we project an ESF fiscal 2021 ending balance of $8.79 billion.”
That is several billion dollars less than Hegar has previously predicted.
So what does this mean?
It means that passing legislation with significant fiscal impacts will be difficult, and it means that there will likely be some larger budget cuts in 2022 and 2023 unless there are specific revenues coming from the federal government. Traditionally, when times are tough, the agencies that get cut the most are regulatory and natural resource agencies.
A number of our colleagues again have made several critical points about how the state could be doing things differently to increase revenues, and avoid making draconian budget cuts.
First, use the Rainy Day Fund. As our friends at Every Texan noted,
The Economic Stabilization Fund, created after the energy-crash budget woes that Texas experienced in the late 1980s, was designed to replace a significant drop in state General Revenue. The 2011 Legislature was willing to use $3.2 billion from the ESF to help close the 2011 revenue shortfall, but chose to not use the fund in the 2012-13 budget, instead cutting more than $5 billion from public schools and almost $6 billion from other state services. Repeating this mistake in 2021 could mean retreating from the 2019 Legislature’s new promise to improve PreK-12 education. No state leader has proposed reducing the commitments to schools that were made in HB 3, but if the revenue situation worsens, the inevitable calls for cuts that provide critical services to Texans should be rejected. Using the ESF will ensure that, rather than taking away the much-needed revenue dedicated to our public education system, our state makes necessary strides towards equitable education for every Texan.
Second, political leaders in Texas have continued to resist taking additional federal monies for Medicaid available under Obamacare, even though there are estimated to be $2.5 billion to help working Texans. Even as other states led by Republican governors have changed their tune and begun accepting Obamacare monies to help the working poor, Texas leaders have refused to accept support.
As our friends at the Texas Hospital Association note,
“Despite having the highest rate of uninsured in the nation at more than 25 percent, the state has rejected the law’s provision that would provide new federal funds to cover adults with incomes up to 133 percent of the federal poverty level in the state’s Medicaid program. These one million uninsured residents will continue to rely on hospital emergency departments and clinics for their health care needs -- from primary care to critical care. Texas hospitals’ uncompensated care load – currently $5.5 billion annually – will remain a financial burden. Likewise, taxpayers and the privately insured will continue to pay more to offset uncompensated care costs.”
Third, some political leaders are saying what many have known for decades: there are significant loopholes in our fee and tax system that must be examined. As an example, Texas’ major corporate tax known as the Franchise Tax, which was meant to lessen our reliance on property taxes to fund education has not kept up with growth, and does not cover many corporations and businesses. The property tax system is still littered with many loopholes for parts of our economy. In the environmental world, flared gas is not properly accounted for nor taxed, meaning there is actually an incentive to pollute. The fines and fees charged by the Texas Railroad Commission are minuscule, meaning that it is easy for industry to get flaring permits and to pay fines when they do violate those permits.
Public input: Committees relying on the written word
Times are different. The Texas Sunset Advisory Commission is analyzing state agencies and making recommendations on how to improve them, but the role of the public is unclear. They have canceled their in-person August meeting, and instead will be making announcements next week on their schedule for taking input. We are still waiting for word when the public process for input on the Texas Parks and Wildlife Commission will be scheduled.
In addition, at least in the Texas House of Representatives, leadership has decided for the moment to forego public meetings with public input. Instead, the House is asking stakeholders to submit comments on interim issues. Speaker Dennis Bonnen (who is not seeking reelection) announced that earlier this month, giving committee chairs three options to conduct hearings and seek public input:
Option 1 – Post Committee Chair Updates to Committee Members/Public on the House Website
Option 2 – Issue a Formal Request for Information through the public websites Texas Legislature Online and the Texas House Website.
Option 3 – Online Events Conducted by Committee Chair.
Recently, two committees went ahead and announced plans to take Option 2: ask for written input. First, the House Committee on Land and Resource Management, led by Rep. Tom Craddick (R-Midland) announced plans to take up issues related to annexation and eminent domain, asking the public for input on the issues by August 14.
Specifically, Craddick’s committee is seeking input on four different issues, two of which involve property owner’s rights when a company seeks to condemn their land through eminent domain. Specifically, the committee seeks input on:
“The efficacy of the Landowner's Bill of Rights (LBoR) in explaining to landowners the eminent domain condemnation process and their rights and responsibilities under Chapter 21 of the Property Code. Identify any omitted information which can enhance the landowner's understanding of the condemnation process and determine whether any other changes should be made to the document to make it more user friendly. Determine whether it would be beneficial for the legislature to be more prescriptive in statute with the mandatory contents of the LBoR.
3. Study property owner's rights in eminent domain to examine and make recommendations on what should and should not constitute an actual progress to ensure the right of property owners to repurchase property seized through eminent domain by a condemning entity.”
Similarly, the House Committee on Culture, Recreation and Tourism also announced an August 14 deadline to receive input on a variety of issues, including issues related to Texas Parks and Wildlife, and the transfer of some properties to the Texas Historical Commission.
The request for information from the public through the written word will tend to favor certain types of Texans, who closely monitor the House and Senate websites, and are equipped to respond swiftly through the written word. The Sierra Club will do our best to be involved and to encourage our members and allied organizations to participate, but it won’t be easy.
Keep an eye out for more information about our legislative priorities in 2021 and our interim plans in the coming months!
To get legislative updates in your inbox, sign up here!