WEEK IN REVIEW
SENATE OPENS BUDGET HEARINGS
(AUSTIN) — Senators on the Finance Committee this week heard testimony on how the COVID pandemic, economic downturn and federal aid will affect what they can spend on state services. Committee chair and Flower Mound Senator Jane Nelson said that despite all the challenges the state faced in 2020, Texas is poised to end the current biennium with a positive bank balance. According to testimony from state Comptroller Glenn Hegar on Monday, retail sales tax collections beat projections and a law passed last year allowing the state to collect sales taxes on online purchases buoyed state revenue. Combined with federal aid and a five percent reduction in most state agency budgets implemented last summer, the state's ledgers should be in the black when the current biennium ends in September. "We made wise investments and they are paying dividends as we keep working to defeat this virus and get the economy on track," said Nelson.
The Senate's initial budget draft would allocate $119.7 billion in state revenue for 2022 and 2023, a slight increase over last session. Spending cuts like the state saw during economic downturns in 2003 and 2011 may not be on the horizon, but Hegar cautioned lawmakers Tuesday that unfunded liabilities in the state's pension fund risk the state's perfect credit rating. The Employee Retirement System is projected to run out of money by 2061 and has unfunded liabilities of $14.7 billion. “The rating agencies are consistently and continually giving fair notice that these issues are weighing on Texas’ rating,” he said. Last session, the Senate dealt with similar issues with the much larger Teacher Retirement System, putting the fund on a six-year path towards fiscal soundness. Hegar said lawmakers should look to do the same for ERS this session. “Are we going to solve it all in one swoop? No,” he said. “But just as you did with TRS, it’s on a six-year path. If we don’t, I don’t think Texas wants the black eye of having a warning on our credit when in reality, look at all the good things we have going on in this economy.”
Wednesday, the committee got a detailed breakdown from the Governor's Office on how $11.2 billion in federal aid to Texas allocated through last March's CARES Act was spent. Budget director Sarah Hicks said $3.2 billion went straight to 18 large counties and cities, with the remaining $8 billion going to the Office of the Governor for disbursal. The law appropriating that aid also put conditions on the funds, limiting spending to COVID related expenses incurred after March 1, 2020. The state used that money to pay for $3.5 billion in public health and safety salary expenses, and $4 billion for staffing surges to hospitals, nursing homes and other critical care centers. Millions more went for public education, courts, local governments, and other agencies which had to try and adapt operations in the middle of the worst public health emergency in a century. In all, the state spent more than it received in aid, but Hicks said that a change in federal reimbursement rates from 75 to 100 percent could recoup much of that difference.
Nelson told members that trying to deal with the flood of federal money coming into the state and directing it to where it was needed, while abiding by federal rules, was akin to fumbling for a light switch in a pitch-black room. “This was such uncharted territory, things kept changing, we couldn’t get any answers,” she said. “It was insane.” Nelson said that the state's hard-earned disaster management experience dealing with 2017's Hurricane Harvey helped state officials navigate this unprecedented situation, and that despite the magnitude of the crisis, Texas acquitted itself well. “We were able to do truly good things with this money,” she said. “I think Texas did a marvelous job.”
The Senate will reconvene Tuesday, February 16 at 3 pm.