The Texas Legislature is 90% about the budget/money and 10% poetry. This week’s legislative update looks at what is being proposed by the Senate and the House.

House and Senate Budgets – On Tuesday night, the Legislative Budget Board released details of the House budget proposal. It has not been officially filed yet, but it will eventually be introduced as HB 1. On Wednesday, Senator Jane Nelson (R-Flower Mound) filed SB 1, the Senate’s budget proposal. Here is a comparison:

All Funds – The House budget has an all funds total of $247.227 billion. SB 1 has an all funds total of $242.867 billion, $4.36 billion less than the House proposal.

General Government – The House budget proposal has a 10.3 percent decrease over the current biennium, or $773.8 million less. SB 1 has a 17.6 percent decrease, or $1.317 billion less.

Health and Human Services – The House budget proposal has a 1.5 percent increase over the current biennium, or $1.242 billion more. SB 1 also has a 1.5 percent increase, but the SB 1 numbers are $1.240 billion more.

Public Education – The House budget proposal has a 16.7 percent increase over the current biennium, or $10.123 billion more. SB 1 has an 11.6 percent increase, or $7.006 billion more.

Higher Education – The House budget proposal has a 1.6 percent increase over the current biennium, or $335.8 million more. SB 1 also has a 1.6 percent increase, but the SB 1 figure is $342.1 million more.

Judiciary – The House budget proposal has a 2.1 percent increase over the current biennium, or $18.4 million more. The Senate proposal has a 2.5 percent decrease, or $21.6 million less.

Public Safety and Criminal Justice – The House budget proposal has a 16.2 percent decrease over the current biennium, or $2.971 billion less. SB 1 has a 15.8 percent decrease, or $2.904 billion less.

Natural Resources – The House budget proposal has a 35.6 percent increase over the current biennium, or, a $2.339 billion increase. SB 1 has 34.5 percent more, or a $2.266 billion increase.

Business and Economic Development – The House budget proposal has a 3.2 percent increase over the current biennium, or a $1.183 billion increase. SB 1 has a 1.4 percent increase, or a $512.1 million increase.

Regulatory – The House budget proposal has a decrease of 5.7 percent, or $38 million less. SB 1 has a 3 percent decrease, or $35.5 million less.

Legislature – The House budget proposal has a decrease of 0.8 percent, or a $0.2 million decrease. SB 1 has a 2.7 percent increase, or a $10.6 million increase.

Specifics of the budget proposals:

Foundation School Program – The House budget has $52.6 billion in All Funds (AF) state aid to school districts and charter schools through the Foundation School Program (FSP). Of that, General Revenue (GR) for the FSP totals $42 billion, which represents an increase of $7.4 billion from the current biennium, an increase of $9 billion over what is estimated to be required to fund the current law FSP entitlement, contingent on enactment of legislation supporting school districts and charter schools by increasing the state share of the FSP, enhancing district entitlement, reducing recapture, and providing local property tax relief.

The AF amount represents a $9.9 billion, or a 23.1 percent, increase over the current biennium, primarily attributable to the additional $9.0 billion in GR above statutorily required amounts. The remaining $0.9 billion AF increase is attributable to a projected increase of $2.4 billion in recapture revenue and a projected $171.7 million increase from the Property Tax Relief Fund, partially offset by a decrease of $1.6 billion in General Revenue Funds required to fund current law entitlement. SB 1 provides funding of $43.6 billion in AF for state aid to school districts and charter schools through the FSP. The AF amount reflects a $0.9 billion, or 2.1 percent, increase from the current biennium.

Enrollment Growth – Both proposals provide funding for current law FSP entitlement including an estimated $2.4 billion for student enrollment growth. These figures are based on an estimated 65,000 additional students per year.

Additional State Aid/Guaranteed Yield – Both proposals provide $2.2 billion in additional state aid greater than the current biennial funding level for the Tier 2 enrichment funding guaranteed yield associated with the Austin Independent School District.

FSP Other Funds – Both proposals provide an increase of FSP Other Funds of $2.5 billion, attributable to a projected $2.4 billion increase in recapture payments and a projected $171.7 million increase from the Property Tax Relief Fund.

Instructional Materials and Technology – Both bills provide instructional materials and technology funding of $1.106 billion in GR based on a distribution rate of 50 percent of the Permanent School Fund to the Available School Fund. The funding level is a $2.6 million increase from current biennial appropriations, but a $166.7 million decrease from 2018-19 biennial budgeted amounts, attributable to $169.6 million in unexpended balances from fiscal year 2017 carried into the 2018-19 biennium.

Pathways in Technology Early College High Schools – The House proposal keeps funding for the Pathways in Technology Early College High School (P-TECH) program at $5 million for the biennium. The SB increases P-TECH funding to $8 million for the biennium.

School Safety – The House proposal includes funding for school safety programs of an additional $109.4 million in AF, including $64.9 million in GR, $43.6 million in Other Funds from the Economic Stabilization Fund, and $0.8 million in Federal Funds at the Health and Human Services Commission and public and higher education agencies and institutions.

Contingencies for Teacher Salary Increase and for Property Tax Relief and Reducing Reliance on Recapture – SB 1 includes funding of $3.7 billion in GR for classroom teacher salary increases, contingent on enactment of legislation providing a classroom teacher salary increase. SB 1 also includes funding of $2.3 billion in GR for property tax relief and reducing reliance on recapture paid by school districts, contingent on enactment of legislation providing property tax relief and reducing reliance on recapture paid by school districts.

Teacher Retirement and Health Benefits – Both the House and Senate proposals include funding of $4.1 billion in AF for the state contribution to retirement benefits of the Teacher Retirement System (TRS), including $4.1 billion in GR, $48.8 million in General Revenue-Dedicated (GR-D), and $9.1 million in Other Funds from the TRS Pension Trust Fund. Funding represents a state contribution rate of 6.8 percent of employee payroll for each year of the 2020-21 biennium.

Retiree health insurance funding totals $1.1 billion in AF. Funding includes $879.4 million in GR to provide a statutorily required state contribution to TRS-Care of 1.25 percent of public education payroll. The House proposal includes funding of $230.8 million greater than statutorily required amounts from the Economic Stabilization Fund to maintain plan year 2019 TRS-Care premiums and benefits for the 2020-21 biennium. SB 1 includes the same amount from GR. In both proposals, the funding for TRS assumes 3.9 percent annual public education payroll growth across retirement and TRS-Care strategies and 5.6 percent annual higher education payroll growth.

Higher Education Formula Funding – In both the House and Senate budget proposals, higher education formulas are supported by $7.3 billion in GR and $1.5 billion in GR-D. Included in this amount are increases of $158.4 million in GR and an increase of $55.9 million in GR-D, which primarily is statutory tuition. For most of the higher education formulas, the 2018-19 biennial rate is maintained.

SB 1 has:

Medicaid – Funding in both the House and Senate proposals includes $67.6 billion in AF, $25.2 billion in GR and $0.1 billion in GR-D, an increase of $2 billion in AF and a decrease of $1.4 billion in GR from the current biennium. Included in these amounts is $62.9 billion for Medicaid client services, $1.7 billion for programs supported by Medicaid funding, and $2.9 billion for administration of the Medicaid program and other programs supported by Medicaid funding.

The net increase in Medicaid funding is due to a $2.0 billion AF increase in Medicaid client services and a $69.2 million AF increase in other programs supported by Medicaid funding offset by a $33.7 million AF decrease in administrative funding. More favorable Federal Medical Assistance Percentages result in a higher proportion of the program being funded with Federal Funds, more than offsetting increased GR demand associated with caseload and costs, resulting in an overall decrease to GR of $1.4 billion.

Child Protective Services – Funding in both the House and Senate proposals include $3.7 billion in AF, including $2.1 billion in GR, provided for all Child Protective Services (CPS) functions at the Department of Family Services (DFPS), an increase of $141.7 million in AF and $45.1 million in GR over the current biennium. CPS funding includes a total of $1.9 billion in AF and $895.6 million in GR for client services programs, including foster care, adoption subsidies, permanency care assistance payments, relative caregiver monetary assistance payments, and daycare.

Behavioral Health – Both the House and Senate funding proposals include $4.0 billion in AF. The House proposal has $3.0 billion in GR and GR-D for non-Medicaid/Children’s Health Insurance Program (CHIP) behavioral health services, while SB 1 has $3.1 billion. The House proposal supports funding for programs at 23 agencies (SB 1 has 21 agencies) across six articles, and includes the following areas: funding for inpatient client services at state hospitals and community hospitals; outpatient services provided through local mental health authorities; substance abuse prevention, intervention, and treatment services for adults and children; mental healthcare and substance abuse treatment for incarcerated offenders; mental healthcare services for veterans; and other services.

Transportation – Recommendations in both the House and Senate proposals provide $31.6 billion in AF for all functions at the Texas Department of Transportation (TxDOT), which includes the following amounts:

Recommendations provide $27.8 billion in AF for highway planning and design, right-of-way acquisition, construction, and maintenance and preservation.

The AF amount includes:

Adult Incarceration – The House proposal includes funding of $6.8 billion in AF, including $6.6 billion in GR and GR-D, for the incarceration, probation, and parole of adult offenders in the Texas Department of Criminal Justice (TDCJ), (SB 1 has $6.6 billion in AF and $6.4 billion in GR and GR-D) which includes housing, security, classification, food and necessities, healthcare, and treatment services.

The House proposal increases AF by $183.8 million for the 2020-21 biennium and includes the following amounts:

Border Security – The House proposal provides funding of $782.8 million in AF to fund border security purposes at nine state agencies across multiple articles of government. The majority of the funding, $675.7 million, is provided to the Department of Public Safety (DPS) to support DPS personnel at fiscal year 2019 full deployment levels, while eliminating funding for one time and transitional expenditures. Significant funding items include the following:

SB 1 provides funding of $803.1 million in AF to fund border security also through nine state agencies. The majority of the funding ($696 million) is provided to the DPS, $435.2 million of which is in the agency’s bill pattern, and other DPS funding for border security related functions and activities ($260.8 million). It maintains support for DPS personnel at fiscal year 2019 full deployment levels while eliminating one time and transitional expenditures. It includes:

Information Technology – Both House and Senate proposals have funding for the Centralized Accounting and Payroll/Personnel System (CAPPS) totaling $150.5 million. Included in this amount is $96.8 million for the Comptroller of Public Accounts (CPA) for ongoing statewide CAPPS operations and agency transitions to the system.

Cybersecurity – House funding for Cybersecurity projects and initiatives totals $42.9 million to decrease the risk of threats to the confidentiality, integrity, and availability of existing data and information systems. SB 1 has $50.1 million.

Legacy Modernization – House funding for Legacy Modernization projects totals $600.3 million to replace systems with obsolete or inefficient hardware or software technology. SB 1 has $609.6 million.

Other IT Projects – Both the House and Senate proposals have funding for other information technology (IT) projects totaling $401.4 million for various IT components, including: updates to existing systems; development projects for process improvement projects, such as transitions to paperless processes, procurement of new systems where none currently exist, computers, or software and hardware updates; VoIP phone systems; network upgrades; and general modifications to IT infrastructure.

State Employee Retirement, Health Benefits, Social Security, and Full-Time-Equivalent Positions – Both the House and Senate proposals provide funding of $1.3 billion in AF, including $943.0 million in GR and GR-D, for the state contribution to the Employees Retirement System of Texas (ERS) retirement program. This amount assumes 0.5 percent annual payroll growth. Funding provides for a 9.5 percent state contribution rate for each fiscal year of the 2020-21 biennium. Recommendations also continue the additional retirement contribution from all general state agencies of 0.5 percent of the total base wages and salaries for each eligible employee for a total combined state contribution rate of 10.0 percent, the maximum pursuant to the Texas Constitution,

Group Insurance Benefits – Both proposals include $2.8 billion in GR and GR-D, for the state contribution for group insurance benefits for general state employees, retirees, and their dependents. The funding is an increase of $176.6 million in AF, including $116.6 million in GR and GR-D, driven by assumed active and retired member growth. Funding does not provide a per-member contribution rate increase and instead relies upon the agency spending down the contingency reserve fund, which has achieved historically high fund balances due to savings in health plan contracts.

Social Security – Both proposals provide funding of $1.8 billion in AF, including $1.4 billion in GR and GR-D, for the state contribution for Social Security payroll taxes for employees of state agencies and institutions of higher education, an increase of $47.6 million. Funding is sufficient to provide the 6.2 percent Social Security employer contribution and the 1.45 percent Medicare employer contribution.

Debt Service – Both proposals provide funding for the 2020-21 biennium that fully funds debt service and totals $4.2 billion in AF. (The House materials say that this amount is a decrease of $60.9 million, and the Senate materials say that this amount is a decrease of $84.7 million.) Both say it is a 2.0 percent change from the 2018-19 biennium. Funding provides for debt service for General Obligation and revenue debt issued, or expected to be issued, by the Texas Public Finance Authority, the Facilities Commission, the Water Development Board, the Department of Transportation, and the Office of the Governor. Funding also provides for reimbursement of debt service payments for tuition revenue bonds issued by various institutions.

Economic Stabilization Fund – The House proposal includes appropriations of $633.0 million from the Economic Stabilization Fund (ESF) for the 2020-21 biennium. The resulting cash balance of the fund plus the total asset value of investments is estimated to be $14.7 billion at the end of fiscal year 2021. SB 1 does not include any appropriations from the ESF. Without an appropriation from the ESF, SB 1 lists the estimated total asset value of investments to be $15.4 billion at the end of fiscal year 2021.

Trusteed Programs Within the Office of the Governor – The House proposal provides funding for the Trusteed Programs within the Office of the Governor totaling $1.278 billion in AF for the 2020-21 biennium, a decrease of $202.2 million, or 13.7 percent, from the current biennium. Funding of $100.0 million from the Economic Stabilization Fund is provided for disaster grants. Funding in the strategy for various economic development programs totals $365.0 million in AF for the 2020-21 biennium. SB 1 provides funding for the Trusteed Programs within the Office of the Governor totaling $1.2 billion in AF for the 2020-21 biennium, a decrease of $320.2 million, or 21.6 percent, from the current biennium. A comparison of the two bills by programs:

Judicial Salary Increase – The House proposal includes funding of $30.2 million for a 10.0 percent increase for judges and those statutorily linked to state district judge pay. The last judicial salary increase was provided during the 2014-15 biennium.

Driver’s License Services – The House recommendations include the transfer of the driver license program, including $135.6 million in General Revenue and 3,198.8 FTE positions, from the Department of Public Safety to the Department of Motor Vehicles for fiscal year 2021, contingent upon the passage of legislation. House recommendations also include an additional $200.0 million in GR and 962 FTE positions to increase staffing and improve service delivery.

Human Trafficking Prevention and Law Enforcement – SB 1 includes an estimated $84.5 million for the prevention, investigation, and prosecution of human trafficking-related activities, an increase of $59.3 million from the current biennium. Funded initiatives include additional law enforcement, inspection and prosecution personnel at the Department of Public Safety, Alcoholic Beverage

Commission, Department of Licensing and Regulation and the Office of the Attorney General, and prevention services at the Department of Family and Protective Services. Additionally, a Human Trafficking Coordinating Council is

established to coordinate statewide anti-human trafficking efforts.

Senate Budget Proposals – On Tuesday, Senator Jane Nelson (R-Flower Mound) filed SB 1, the general appropriations bill (details are included in the budget comparison section above). She also filed SB 500, the supplemental budget, which includes funding for school safety, state hospitals, pensions, Hurricane Harvey expenses and other needs. Senator Nelson said, “Our commitment to fiscal responsibility is paying major dividends, affording us an opportunity to secure the Texas miracle for generations to come. This budget makes targeted investments in education, including a well-deserved pay raise for Texas teachers, and continues our work on transportation, mental health and other key priorities. We also ramp up our efforts to combat human trafficking, help survivors of sexual assault and protect our state against cyber-attacks, which is a clear and present danger.”

SB 500 provides $4.2 billion ($2.5 billion out of the Economic Stabilization Fund) to cover supplemental needs for the current FY 18-19 biennium and fund several priorities, including:

Senator Nelson concluded, “This is just the first step in a long budget process. The Senate Finance Committee will further develop SB 1 and SB 500 and make recommendations to the full Senate.”