DALLAS – Two years after increasing funds for public education, transportation and taxpayer relief, the Texas Legislature is beginning the unpopular task of cutting spending for some programs amid weaker revenues.
"At a time when the population continues to grow and there are major issues that need to be dealt with, revenues are falling short," economist Ray Perryman of the Waco-based Perryman Group economic analysis firm noted in a
In the 2017 legislative session's first week, the Texas House and Senate unveiled different starting points for the budget process.
While the Senate's $40.5 billion proposal cuts state spending from current levels and metes out less funding than is projected to be available, the House's $42 billion proposal allocates more state general revenue than is expected.
"This base budget is a starting point, and I look forward to working with my colleagues to develop a balanced budget that addresses our needs and strengthens our economy," Sen. Jane Nelson, R-Flower Mound, chair of the Senate Finance Committee.
House Speaker Joe Straus said the House budget provides funding to pay for expected enrollment growth in public schools of about 165,000 students over the next two years. It also includes an additional $1.5 billion for public education that is contingent upon the passage of changes in the controversial "Robin Hood" funding formula.
"We keep overall spending low while making investments in children and our future," Straus, R-San Antonio, said in a statement. "The Members of the House, beginning with the Appropriations Committee, will now have the chance to shape this budget and decide how best to allocate resources during an economic slowdown."
Although the House budget calls for an increase in spending, it would not require a tax increase, Straus said.
Comptroller Glenn Hegar's biennial revenue estimate projects that revenue available for general purpose spending will only be $104.9 billion for the 2018-2019 biennium, a 2.7% decrease from the $113 billion estimated for the 2016-2017 biennium.
In writing the budget lawmakers can only adjust the portion derived from the state's general fund. The other half of the budget comes from federal funding, which is set by formula.
By adding the beginning balance remaining from the previous biennium to estimated revenues for the upcoming two years, the comptroller derives the amount available for the general fund.
Hegar's lower estimate this year is due in part to a lower beginning balance. Only $1.5 billion was left over from the 2016-2017 biennium, compared to the $7.5 billion lawmakers started with two years ago.
Less revenue was left over because tax collections in 2016 were lower than expected, according to Hegar. Two years ago, the comptroller's office estimated that the Texas economy would grow 3.2% in the 2016 fiscal year, far more than the actual growth of 0.2%.
Texas' primary source of income, sales tax, produced $28.2 billion in fiscal 2016, followed by motor vehicle sales taxes and rental fees that brought in $4.6 billion.
"A clear reason for the lower growth and tax revenue collections in 2016 is oil and the fallout from the recent lower price levels," Perryman wrote. "Oil production taxes were only $1.7 billion of the total tax collections, but direct taxes are only a small part of the influence of the industry on the economy and, therefore, tax collections."
Texas has benefitted from lower interest rates and a flood of bond refundings over the past three years, budget estimates show.
The $4.3 billion set aside for debt service in the upcoming budget is $280 million or 6.1% lower than the previous budget's outlay.
In the 2015 legislative session, Texas revenues were riding high just six months after oil and gas prices began what would turn out to be a 60% plunge.
With plenty of revenue, lawmakers were able to shift $5 billion of sales tax over two years to the Texas Department of Transportation. That followed a $1.2 billion transfer from the Rainy Day fund to transportation projects in the 2013 Legislature.
Higher education also benefitted from the revenue windfall as lawmakers approved more than $3 billion of tuition revenue bonds for the state's colleges and universities. That was the first authorization of the state-supported bonds in nearly a decade.
In the same session, lawmakers approved $3.8 billion of tax breaks for property owners and businesses.
While transportation funding will remain at record levels in the next biennium, public schools, higher education and taxpayers cannot expect a similar bounty. Before the 2017 session began, Gov. Greg Abbot ordered state agencies to plan for a 4% reduction in funding.
The Senate's version of the budget calls for a reduction of $74 million in general funds for higher education. The House version would cut higher education general funds by $33.5 million.
Lt. Gov. Dan Patrick, presiding officer in the Senate, has thrown his support behind two bills by Sen. Kel Seliger, R-Amarillo, that would freeze tuition at state colleges and universities.
Senate Bill 19 would freeze all tuition and fees until 2022, while SB 18 would repeal Texas' tuition set-aside program that requires all public colleges and universities to reserve up to 20% of their tuition revenue to use as financial aid for needy students.
Another bill, SB 543, would require colleges and universities to reach targets in 11 benchmark categories before being able to raise tuition and fees. Patrick has not expressed an opinion on that measure.
"We will have the opportunity to implement a long-term tuition reform solution which holds institutions accountable and ensures they remain accessible and affordable," Seliger said in a statement. "The focus should be on how to make higher education more accessible and affordable, rather than how to get the state, and students, to pay more."
With their party in control of the White House, the Republican-dominated Texas Legislature could be less demonstrative about border security. Amid protests of supposed lax federal security on the border, Texas lawmakers appropriated $800 million in state taxpayer dollars for additional law enforcement along the Rio Grande.
While the Senate version of the budget maintains spending on border security at $800 million, the House version proposes a $137 million reduction. Democrats in the Legislature fought the border security measure, which they considered little more than political grandstanding. Since 2009, more Mexican immigrants have departed the United States than entered, according to the
"We can't afford to waste another $800 million doing the federal government's job when Texans are being left behind," Sen. Jose Menendez, D-San Antonio, told the San Antonio Express-News. "Families with kids stuck in underfunded schools can't wait another two years. If there ever was a rainy day in Texas, it is now, and we must take decisive action to address our challenges."
