WEEK IN REVIEW:
Budget Deliberations Highlight Week's Events

(AUSTIN) — The Senate Finance Committee began public hearings on the state budget this week, considering how to pay for services in the face of a national economic crisis. The fiscal picture for Texas isn't as dire as other states, but decreases in state revenue will make the budget tighter this session. Lt. Governor David Dewhurst and Speaker Joe Straus sent a letter to state agencies Monday, requesting a 2.5 percent cut in budgets for this fiscal year. While education, health care, and criminal justice agencies are not part of this request, Dewhurst said other agencies need to find areas where they can save money. "As the agencies come before us in Senate Finance we're going to want to understand what they’ve been able to do, and if they can't come up with savings, explain to us why," he said.

John Helleman, Chief Revenue Estimator for the Comptroller's office, briefed Finance Committee members Monday on the current state of the Texas economy. He said that state revenues have decreased, with sales tax collections slowing and less money coming in from the new franchise tax than expected. The housing market in Texas isn't as bad as elsewhere; home sales are down, but not at the level seen in other states. Texas can expect to lose about 110,000 jobs through the third quarter of the fiscal year, said Helleman, mostly in oil and gas, construction and the retail sector. According to projections, he told Senators, the state can expect slight economic gains in 2010, with a full recovery expected by 2011.

Wednesday, the committee began hearings on Article III of the state budget, which funds public education. The cost to the state for education will be less in the 2010-2011 biennium, according to the Legislative Budget Board, due to higher than expected property value growth, combined with student growth under projected levels. The state will also have to make one less payment to the Permanent School Fund this biennium, to correct for past payments deferred one biennium ahead in past sessions.

Texas Education Agency Commissioner Robert Scott appeared before the committee Wednesday, laying out agency priorities for the biennial budget. At the top of the list is $64 million for training teachers how to administer and teach for the new end of course exams. He also wants more money to improve adult remedial education. Scott told members he would like to use this session to better define the scope and goals of his agency. "I would like to use this session as an opportunity to discuss the role of the agency, its size, its mission, and its duties," he said. "I'd like to have a discussion with everyone of you on what you expect from the agency and how we can better focus our agency resources on improving student performance."

Thursday saw Senators grilling representatives from the University of Texas Investment Management Company (UTIMCO), after the board of directors unanimously approved $2.3 million in bonuses, including a million dollar bonus for UTIMCO CEO Bruce Zimmerman. The controversy arose because the endowment lost 27 percent during the economic downturn. UTIMCO Board Chairman Robert Rowling said the bonuses were paid based on gains made the previous year, when the fund outperformed expectations. Given the current economic situation, some members thought paying Zimmerman the bonus showed a lack of political sensitivity. "It shatters the trust in government. We're in serious times. Most people out there in the street are scared to death, and we just paid you a million dollar bonus, and the fund is down 27 percent. It's not right. It may be technically right by the contract, but it's not right," said Senator Kevin Eltife of Tyler.

Finance Committee Chair Steve Ogden of Bryan told UTIMCO to appear before the committee again in thirty days, and to come with suggestions on how to change the current compensation arrangement, and also ways to ensure the independence of the board. "UTIMCO is a creature of statute, and it can be changed by statute, and it will be changed by statute if there are not changes down there," he said.

Friday, the committee continued deliberations by hearing testimony related to two major state pension funds, the Teachers' Retirement and the Employee Retirement Systems. These funds, which pay for retirement and health care for teachers and state employees, have also posted losses during the fiscal decline.

The Senate will reconvene Monday, February 9, at 1:30 p.m.

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