WEEK IN REVIEW
SENATE UNANIMOUSLY APPROVES SUPPLEMENTAL SPENDING
(AUSTIN) — The Senate approved Wednesday $8.4 billion in additional spending, $6.1 billion of it in state funds, to cover extra costs incurred over the last two years. This happens every session, as budgets are written prospectively based on projections of costs and revenue, and actual income and expenses have to be reconciled with the estimates. What's unusual about this session's supplemental budget bill is that Texas experienced the most costly storm in U.S. history during the interim, and the Senate proposal would spend billions to pay for damage, relief and recovery efforts for Hurricane Harvey. In order to pay for that, among other costs, the bill would use $4.4 billion from the state's Economic Stabilization Fund. "Now I realize those are big numbers," said bill author and Finance Committee chair Senator Jane Nelson of Flower Mound. "But $3 billion of this package is due to Harvey, which we knew was going to have a significant price tag."
Just over $900 million of those rainy day funds would go towards public schools in areas ravaged by Harvey. Schools are entitled to an amount of money based on their student population, and these areas saw those numbers fall as families were displaced and students moved away. Additionally, public education is paid for mostly though local property taxes, and those collections could be down significantly due to storm damage decreasing local property values. The supplemental budget would help those districts maintain services by covering some of the money lost due to fewer students and lower tax collections. $800 million would go to create the Texas Infrastructure Resilience Fund, to pay for a statewide flood plan to mitigate the effects of the next storm, and another $800 million to help cities and counties participate in federal aid programs requiring local fund matches. Other expenses paid out of rainy day funds include $100 million to harden school campuses following the 2018 Santa Fe High School shooting and $542 million to cover shortfalls in the state's teacher pension program.
In committee action this week, the Senate State Affairs Committee approved a proposal Thursday by chair and Houston Senator Joan Huffman, to avoid future shortfalls in the Teacher Retirement System, like the one paid out in this session's supplemental budget. Providing monthly annuity payments to 420,000 retired teachers and public school employees, the fund has about $47 billion in unfunded liabilities. Huffman said that number is projected to grow to $124 billion by 2050 without legislative intervention. "Without a long-term, cost-efficient proposal like this, TRS retirees may never see another COLA [cost-of-living adjustment], as the Legislature cannot grant a benefit enhancement by law unless the fund is actuarially sound," she said. That means the fund must be able to pay off its outstanding obligations within 31 years.
Huffman's plan, SB 12, would gradually increase the contribution rates from employees, districts and the state over the next few years. Contributions from active employees would grow to 8.25 percent, up from 7.7 percent today, and the state would increase its share from 6.8 percent of payroll to 8.25 percent by fiscal year 2024. Most public school employees, 96 percent, don't participate in federal social security, and districts would up contributions for those employees from 1.5 to 2 percent of payroll by fiscal 2025. Under Huffman's bill, retirees would be eligible for a one-time, $500 check payable in the next biennium, and the fund would become actuarially sound. "I understand that this is a significant financial commitment from the state and other contributors, but this plan is far more cost efficient than simply attempting to contribute one time infusions of cash every so often," said Huffman. The bill now heads to the full Senate for consideration.
The Senate will reconvene Monday, March 18 at 3 p.m.