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Budget ballyhoo

No-nuke version of SB2 passes the Senate

Dan Patrick gets his bill, without having to do any nasty partisan maneuvering.

The Texas Senate broke a logjam Monday that had paralyzed a piece of priority legislation for weeks — blunting a controversial provision in its property tax reform package and then advancing the bill, without having to deploy a procedural “nuclear option” to move it.

A vote on Senate Bill 2, a top imperative for state leaders, had been expected last week. But an apparent lack of support stalled the vote in the upper chamber, where the backing of 19 senators is generally required to bring a bill up for debate. After Republican Lt. Gov. Dan Patrick threatened to blow past decades of tradition and bring the measure to a vote with a simple majority, state Sen. Kel Seliger, a vocal dissenter, relented Monday, allowing the bill onto the floor. He did not support its passage.

Seliger’s announcement came alongside a reworked bill with a handful of technical changes and one notable concession. As updated, SB 2 will force cities, counties and other taxing entities to receive voter approval before raising 3.5% more property tax revenue than the previous year — a change from the 2.5% trigger originally proposed. School districts would still face the 2.5% threshold under the version of the bill approved Monday.

Revenue generated on new construction does not count toward the threshold. And small taxing units, with sales and property tax levies under $15 million annually, will need to opt into some of SB 2’s provisions in an election.

[…]

After three hours of debate, SB 2 passed on an 18-13 vote, with Seliger joining the upper chamber’s Democrats in opposition. It was then given final approval on an 18-12 vote — with Sen. Eddie Lucio, Jr., D-Brownsville, voting present — and will be sent to the House for further debate.

The lower chamber, meanwhile, has postponed discussion of its property tax reform legislation until April 24. Unlike the Senate’s version, the House has exempted hospital districts, community colleges, emergency service districts and school districts from abiding by a 2.5% election trigger — a move that has enflamed far-right lawmakers and activists, who say homeowners will feel scant relief if those entities are exempted.

See here for the background. One way or another, this was going to pass. Sen. Seliger made a point about comity and tradition, for whatever those things are worth to Dan Patrick, and he voted according to his conscience, which is a good thing as long as one has a good conscience. Which Sen. Seliger has, and I appreciate his effort. Now it’s just a matter of what the conference committee bill looks like, since the House version will be different. Figure this one will more or less go down to the wire, but it will pass in some form similar to this. It’s a lousy bill and lousy policy, but (say it with me one more time), nothing will change until we change who we elect. Texas Monthly has more.

House approves budget, and other news

Always a major milestone.

In Dennis Bonnen’s first major test as speaker of the Texas House, the chamber he oversees resoundingly passed a $251 billion budget Wednesday after a long but largely civil debate — a departure from the dramatics that have typically defined such an affair.

Though lawmakers proposed more than 300 amendments to the spending plan, Bonnen, an Angleton Republican, and his chief budget writer, state Rep. John Zerwas, R-Richmond, finished the night with their budget plan largely intact. After 11 hours of relatively cordial discussion, lawmakers agreed to withdraw the vast majority of their amendments or move them to a wish list portion of the budget, where they are highly unlikely to become law.

The budget passed unanimously on the final vote. The legislation, House Bill 1, now heads to the Senate, whose Finance Committee was set to discuss its budget plan Thursday.

“I’m proud of where we are in the bill that we are sending to the Senate,” Zerwas said at the end of the marathon debate. “Each and every one of you should be incredibly proud of the work that you’ve put in here.”

The two-year spending plan’s highlight — a $9 billion boost in state funding for the public education portion of the budget — remained unchanged. Of that, $6 billion would go to school districts, and the remaining $3 billion would pay for property tax relief, contingent on lawmakers passing a school finance reform package.

The budget plan would spend $2 billion from the state’s savings account, commonly known as the rainy day fund, which holds more than $11 billion.

“I’m not here to compare it to previous sessions,” Bonnen told reporters after the House budget vote. “But I’m here to tell you we had a great tone and tenor tonight, and I’m very proud of the business that we did.”

[…]

So while Bonnen’s first budget night as speaker was hardly free of controversy — an argument over the effectiveness of the state’s “Alternatives to Abortion” program, for example, derailed movement on amendments for nearly an hour — the occasional spats paled in comparison with those of years past. There were no discussions at the back microphone of lawmakers’ sexual histories, as happened in 2015, and no one had to physically restrain House members to prevent a fistfight over the fate of a feral hog abatement program, as happened in 2017.

Still, state Rep. Jonathan Stickland, R-Bedford, continued his long-running campaign against the feral hog program. And though the exchange ranked among the evening’s rowdiest, it was more than tame by last session’s standards.

State Rep. Drew Springer, R-Muenster, again opposed Stickland’s amendment to defund the program, which reimburses local initiatives to eradicate wild hogs. Stickland responded, “Members, although I respect the thoughtful words of Rep. Springer … let’s end this program right here, right now.”

Stickland’s amendment failed, with just four votes in favor.

See here for more on last session’s House budget debate. One should never miss an opportunity to illustrate Jonathan Stickland’s failures. The House also approved a supplementary budget for the previous biennium, to cover expenditures that were not previously appropriated, such as the traditional underestimating of Medicaid’s costs and all of the Harvey recovery funding.

Speaking of revenues:

House Republicans muscled a heavily altered version of their property tax reform bill through a committee early Thursday, notching a single Democratic vote and swiftly shooting down attempts to further modify the draft.

A top priority for state leaders, House Bill 2 would require cities, counties and other taxing units to receive voter approval before levying 2.5 percent more property tax revenue than the previous year. A vote was expected to come Wednesday morning on a new draft of the legislation, which contains changes likely to appease small and special taxing units but leave big municipal leaders staunchly opposed.

But the hearing on the new version was postponed until past midnight. The 16-hour delay gave an unusual cluster of critics time to trumpet their concerns with the measure — and then for top House leaders to respond in an informal late-night news conference.

“Sometimes when everyone’s a little bit upset with you, maybe you have a good balance — that’s probably a good sign,” said House Ways and Means Committee Chair Dustin Burrows, the author of the legislation and a Lubbock Republican. “We worked really hard; we talked to a lot of different constituencies” and a lot of members. “I think you’ll see in the committee substitute, the work product and a lot of collaboration.”

As amended, HB 2 now exempts community colleges, emergency service districts and hospital districts from abiding by the 2.5 percent election trigger. Another provision lets certain districts, including cities and counties, bank unused revenue growth, so long as they average below 2.5 percent over five years. And new “revenue enrichment” language could cushion some taxing units by letting them raise $250,000 in new property taxes a year, even if it exceeded the growth rate. The threshold, set at $250,000 for 2020, would be adjusted by the state comptroller annually, based on inflation.

[…]

Currently, voters can petition for an election if property tax revenue growth exceeds 8 percent, a rate set during a period of high inflation in the 1980s. State leaders have touted the lower chamber’s proposal and a Senate companion as an overdue correction and as a needed check on spiraling property tax bills. But critics say the reform efforts would not reduce tax bills, just slow the rate at which they grow — and, in the process, hamper local officials’ ability to provide public services for growing populations.

As you know, I oppose revenue caps, no matter how well intentioned. The reason the Lege ties itself into knots every two years in a vain attempt to limit property tax growth is that a taxing system that so heavily relies on property taxes fundamentally relies on a system that is divorced from people’s ability to afford their taxes. As I muse every two years, if only there were some system of taxation that was proportional to how much money people made in a given year, that would solve so many of these problems. Too bad no such system exists anywhere in the world.

Of course, another way to limit property tax growth for homeowners would be to ensure that everyone is paying their fair share of property taxes.

As state leaders promote their property tax reform package as needed relief for everyday Texans, some Democrats and county appraisers suggest a provision in the tax code has stacked the system in favor of corporations that can appeal their valuations with a combativeness most homeowners can’t muster.

At issue: a 1997 amendment, drafted by a prominent tax attorney, that critics say has allowed business and industry to lower their property tax burden at the expense of other taxpayers. The provision offers all Texans a way to fight their appraisals by arguing they were treated unfairly compared to other properties. But critics say large property owners have capitalized on it to drive down their costs, while residences and small businesses can’t afford to do the same.

“If you have a whole category of property that is nonresidential systematically paying less, well who do you think is paying more?” said Bexar County chief appraiser Michael Amezquita.

Amezquita is one of several officials who say their districts have been inundated by appeals and lawsuits from commercial owners trying to lower their appraisals, which determine what taxes are owed on a property. Supporters of the “equity” provision say it’s a critical tool for all property owners, and that commercial properties aren’t afforded the tax exemptions many home and agricultural land owners receive. Critics counter only well-funded property owners can afford to sue — and when they do, there’s often little an appraisal district can do to fight back.

“The deck is stacked against us,” said Amezquita, who has been sued by a J.W. Marriott resort seeking to have its taxable value reduced. A spokeswoman for the hotel declined comment.

I’ve written about this before. This issue of equity appeals was a cornerstone of Mike Collier’s campaign for Lt. Governor. We’d be having a much broader conversation about fairness and equity in taxation if he had won that race, but he didn’t and so we aren’t. Better luck next time, I guess.

Anyway. The Senate still has to approve its budget, and school finance reform remains a work in progress. There’s a decent amount of harmony now, but plenty of opportunities for tension, drama, and good old fashioned nastiness remain. Which is as it should be.

Inevitably, we come back to a sales tax/property tax swap

It’s an idea we just can’t seem to quit.

Texas lawmakers are considering an infusion of $9 billion to improve public schools and lower property taxes over the next two years. The additional $6.3 billion in the classroom is being billed as a transformational effort to better educate the state’s 5.4 million students, while another $2.7 billion would stem the tide of escalating property taxes for homeowners.

“If we’re going to make some strides on these really big items, it really has to happen this session,” said Rep. John Zerwas, R-Richmond, chairman of the influential Appropriations Committee.

While lawmakers are confident the state’s booming economy will provide big bucks to spend on public schools, they are also pitching a number of plans to increase the state sales tax in the future. The proposals include hiking taxes on items such as sweet snacks, gasoline, e-cigarette fluid and heavy machinery rentals. But the proposal with the most apparent momentum is a tax swap that would allow local governments to charge a higher sales tax in exchange for reducing property tax levies.

Even raising the sales tax by one percent “contributes a lot of money” that school districts, cities and counties could use to offset reductions in property tax revenue, Zerwas said. Some estimates predict such an increase would raise more than $5 billion a year. The statewide sales tax rate is now 6.25 percent a year. Local governments can add up to two percent.

Although Republicans are leading the charge with major tax swap proposals, it’s unclear how they will fare in the GOP-led House and Senate, particularly among lawmakers who narrowly won their reelections as Texas Democrats gain ground.

Financial implications of the bills are shaky. Several tax bills were filed a week ago, just under a deadline, and have yet to be analyzed by the Legislative Budget Board which predicts financial effects.

Increasing reliance on the sales tax troubles Eva DeLuna Castro, a budget and policy expert with the left-leaning Center for Public Policy Priorities. Not only is a sales tax considered regressive for taking more money from low-income people than the rich, but its collections are more susceptible to the ups and downs of the economy, she said.

“You need to find a revenue source that doesn’t all the sudden tank on you. Or if you know that it is going to do that, you need to put most of it away for a rainy day and use it when that rainy day comes,” she said.

[…]

Rep. Drew Springer, R-Muenster, is proposing Texas increase taxes on gasoline and close tax exemptions on items like ice cream, certain baked goods, e-cigarette vapor fluid and over-the-counter medicine.

“I don’t think people realize their ibuprofen is tax-free,” said Springer. In exchange, House Bill 2915 would allow the state to lower the maintenance and operations property tax that funds schools. His bill would also increase the homestead exemption to 50 percent of a home’s value. Texans in a home valued at $274,000 would average $1,400 a year in property tax relief, he said, amounting to $6.2 billion less in property tax collections statewide.

Another bill, House Joint Resolution 3, proposes inching up the sales tax and using money from that increase exclusively for public schools. The resolution is proposed by Rep. Dan Huberty, R-Houston, the architect of the House’s $9 billion school finance plan. The measure would require a vote in November to change the state Constitution and increase the statewide sales tax, which is now 6.25 percent. Huberty emphasized that raising the sales tax is just one measure under consideration, and that it’s still too early to pencil in numbers.

“We have to put more money into the system. It’s our responsibility,” Huberty said Thursday at an event hosted by the Texas Tribune.

Rep. Chris Turner, D-Grand Prairie is proposing the state systematically examine each tax exemption every six years to decide whether it is needed. House Bill 3968 will raise revenue by expiring out-of-date tax “loopholes” over time, he said, and is a good alternative to raising sales taxes.

“It is important to note that Texas already has a high sales tax — 8.25 percent in most areas,” said Turner, who chairs the House Democratic Caucus. “The lower someone’s income, the more it hurts, so an increase in the sales tax will hurt a lot of Texas families.”

This comes up every few years – in 2005, in 2007, in the 2012 and 2014 elections – and each time we confront the fact that swapping property taxes for sales taxes greatly benefits property owners while burdening lower income folks the most. That’s a feature and not a bug, as far as its Republican advocates are concerned. I appreciate that at least this time it’s being proposed in the context of putting more money into schools, which would then have the effect of easing the pressure on local property taxes, but the same problem remains. Rep. Turner’s proposal to evaluate tax breaks also comes up whenever sales-tax-increase bills are filed, and it usually gets quietly ignored as the higher-profile swap bills eventually die. It’s still a good idea, it just never gets any momentum behind it. Rep. Springer’s idea to expand the sales tax to more things also comes up in conjunction with swap bills, and there is merit to this approach as well, though the real money is in taxing services, which is pretty much as big a taboo as an income tax is.

To review: I support requiring a process to scrutinize and sunset every tax break we have on the books, and I support at least exploring the imposition of a sales tax on selected goods and services where it is not currently imposed. If the goal of that is to put more state money into public education, and one result is that it allows local governments to ease up on property tax collections because they are no longer trying to make up for the state’s inadequacies, I would consider that a good outcome. The Trib has more.

House passes its budget out of committee

On to the full House, then the real fight occurs.

A panel of House budget writers gave initial approval Monday to a budget that would spend $115 billion in state funds, including a $9 billion infusion of new funds for Texas public schools and property tax relief.

Now that the House Appropriations Committee has approved the 2020-21 spending plan, House Bill 1, the legislation moves to the floor of the 150-member House.

[…]

Among the highlights of the House’s spending plan are:

$9 billion in new state funding for K-12 education and property tax relief, contingent on lawmakers passing reforms to the way the state funds public schools. The budget does not dictate the breakdown of those funds, but a bill backed by Speaker Dennis Bonnen would give about $6 billion to school districts and use the remaining $3 billion to pay for a reduction in local school district property taxes.

A $2.8 billion increase in state and federal funds for health and human services above what the House proposed in January. That includes a $25 million increase for early childhood intervention services, $6.7 million to reduce caseloads for Adult Protective Services workers, $31 million to expand capacity at local mental health clinics for low-income Texans and $87 million to raise the pay of personal attendants, who care for the elderly and disabled, by about 10 cents an hour.

A $168 million expenditure to give some Texas prison guards and parole officers a pay raise.

Rep. Matt Schaefer was the lone No vote in committee, so presume that this will get some pushback from the wingnuts. The story notes that the House budget draws $2 billion from the Rainy Day Fund, but it doesn’t specify what it’s used for. There’s more here on the House school finance proposal. The budget is the one thing the Lege absolutely has to do. With some cracks beneath the surface on other “priority” items, it’s nice to see this get a head start.

What’s wrong with the Permanent School Fund?

For starters, it should have more money in it.

It was a grand promise, one our forefathers made 165 years ago to all Texas children, to theirs and ours and those not yet born.

With $2 million and the state’s most abundant and precious resource — its land — they created the Texas Permanent School Fund to forever support public education. It was called a “sacred trust.”

That trust, dedicated to K-12 schools, is now valued at $44 billion, bigger than even Harvard University’s endowment.

It is also broken.

The Permanent School Fund has failed to match the performance of peer endowments, missing out on as much as $12 billion in growth and amassing a risky asset allocation, a yearlong Houston Chronicle investigation reveals.

Outside fund managers have charged the endowment at least a billion dollars in fees during the past decade, records show. Some of them have had professional or personal relationships with Texas School Land Board members, who govern a portion of the fund.

And, critically, the fund is sending less money to schools than it did decades ago, in real dollars. The amount dropped to an average of $986 million annually over the past decade from an average of $1.14 billion in the previous 20 years, in inflation-adjusted dollars. Last year, the fund distributed only 2.8 percent of its value — roughly half the share paid out by many endowments.

That decline, coupled with a 2 million increase in the number of students over 30 years, has slashed the fund’s per-student distribution.

Per student, the fund has paid an average of $207 annually over the past decade compared with $322, adjusted for inflation, over the prior two decades, a drop of more than one-third.

According to the Congressional Research Service, between 1998 and 2017, the average payout from higher education endowments has ranged between 4.2 percent and 5.1 percent. If the Texas fund paid out 5 percent of a four-year average market value, as many endowments try to, Texas schools would have received $720 million more in 2018.

That’s the opening of part one of a promised four-part series. Here’s part two, in which we find that however the fund is doing, the fund managers are doing great.

Since the land board started investing with outside fund managers on behalf of the state’s K-12 endowment in 2006, it has committed or invested nearly $3.7 billion with companies run by friends, business associates or campaign donors.

Those donors together have given more than $1.4 million since 2006 to board members or elected officials with the power to appoint them, a Houston Chronicle investigation reveals.

And they’ve since charged the fund more than $218 million in fees, records show.

While the fees climbed during the past decade, the amount of money the $44 billion Texas Permanent School Fund sends to schools has declined, in real dollars, compared with the two decades prior.

Rep. Donna Howard, a Democrat from Austin, said it’s time to reassess how the school fund is managed.

“Without the right oversight, the PSF is ripe for conflicts of interest,” she said. “We have a responsibility for due diligence here.”

Read the rest, and come back for parts three and four. A better-managed PSF would not solve school finance by itself, but it sure would help. Seems like this is a prime opportunity for some high-profile legislation to improve how this works.

Always beware revenue caps

They’re always a bad idea.

Flanked by the state’s top legislative leaders, Gov. Greg Abbott announced Thursday that both chambers of the Texas Legislature will push to curb property tax growth by limiting how much money local governments collect without voter approval.

Fellow Republicans Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, as well as the heads of both chambers’ tax-writing committees, joined Abbott in making the announcement. Their news conference followed the filing of identical bills in both chambers, Senate Bill 2 and House Bill 2.

Abbott said it was “completely unprecedented” for lawmakers to be so closely aligned on such an important issue this early in the session.

“Most importantly, it’s a testament to the voters in this state,” he said. “The voters demanded this, and this demonstrates that the Texas Legislature is responsive to the needs of our voters.”

But two Democrats who sit on the House Ways and Means Committee said the proposed legislation is far from being a done deal. And an advocate for city governments said there are plenty of unintended consequences that need to be worked out. Chief among them is ensuring that cities aren’t suddenly unable to afford police officers and firefighters.

Thursday’s bills seek to require voters to approve tax rates that allow government entities like cities, counties and school districts to collect an additional 2.5 percent in revenues from existing property compared with a previous year. The threshold would not apply to small taxing units — those with potential property and sales tax collections of $15 million or less.

Currently, cities and counties can collect an additional 8 percent in revenues without involving voters. But even then, residents must collect enough signatures to force an election. The new pair of bills would automatically trigger what’s called a rollback election. If voters shoot down the measure, the government entity would have to set a tax rate that allows it only to collect revenues from existing properties that are less than 2.5 percent more than the previous year.

The rollback rate is also based on the appraised value of properties within a taxing unit’s borders. That means a city or county could hit the rollback election threshold without changing its tax rate — or even if it lowers the tax rate — if there is a significant increase in local property values.

The legislation does not apply a cap to individual property tax bills. Because it would limit only how much government entities can collect in property tax revenues before getting voter approval, an agency could stay below the rollback election rate, and that portion of a property owner’s tax bill could still increase.

Local officials are almost certain to to push back. Bennett Sandlin is the executive director of the Texas Municipal League, which advocates for city governments. His organization estimates that about 150 of the state’s largest cities would be affected if the legislation passes. He said that the rollback threshold is lower than inflation and could prevent cities from paying for first responders’ raises, filling potholes, and keeping recreation centers or libraries open.

As the story notes, this is more ambitious than what Abbott and Patrick pushed for in 2017, and they’re doing it with smaller majorities. On the other hand, these are the highest-priority bills they have (hence the HB2 and SB2 designations), and they’re no doubt going to go all out. It’s very possible they could succeed.

But here’s the thing. This is what they rolled out after making big promises about reforming school finance and giving more money to schools. Did you notice what was missing in this rollowt?

They were so tuned in to their harmonic convergence, they didn’t talk much about what their legislation would actually do, leaving the details to the bill sponsors to explain later.

They did say they were going for a 2.5-percent growth limit on property taxes in local school districts, cities, counties and other government bodies. It’s aimed at overall taxes, a leash on the overall mix of property values and tax rates that determine what happens to the average taxpayer’s bill. Anything that increases a local government’s property tax revenues by more than that would trigger an automatic November election asking voters for permission.

You might wonder how public education is going to get more financial help, as proposed by this same group of elected officials, if the state is going to limit school districts’ ability to levy taxes.

The short answer is that the state’s going to pay for it. The House’s proposed budget for the next two years adds billions to what the state is spending on schools. The Senate’s plan doesn’t spend as much, but the increases are significant (and in one case, more specific: Patrick has proposed $3.7 billion in teacher pay raises). Abbott floated the idea of holding down local taxes and tax increases — an answer to loud and persistent complaints about property taxes — and increasing state spending to fill the gap. And Comptroller Glenn Hegar, the fourth official at those weekly breakfasts, has proposed requiring the state to pay at least 40 percent of the cost of public education, along with any increases due to inflation.

But they haven’t said where the state money will come from. Nobody in the state government’s high places has proposed raising a tax, cutting other state spending to produce money for education, or weeding through the state’s tax exemptions and loopholes to shore up the state’s share of the public education load.

In other words, right now it’s all underpants gnomes. I don’t know about you, but I’m not expecting much more in the way of details about how this is supposed to do all the things they say it will do.

State House mulls big increase in school funding

That’s a good start.

As Texas’ Republican leadership calls for property tax cuts and a school finance overhaul, the Texas House on Monday pitched a bold proposal: Pump roughly $7 billion more state funds into public schools — but only if lawmakers can satisfactorily overhaul the school finance system to slow the growth of property taxes.

Budget documents published Monday evening show the House has offered up a whopping 17 percent increase in K-12 public education funding so long as lawmakers achieve a few lofty goals in reforming how the state pays for public schools: Reduce the state’s reliance on property taxes, decrease the need for the unpopular Robin Hood system that requires property-wealthy school districts to subsidize poorer ones, and maintain an equitable system of school finance, as required by the state Constitution.

Counting all sources of funding — including local property taxes, state revenue and federal dollars — the state’s public education budget would grow to about $70.6 billion in the two-year cycle from 2020 to 2021, according to a Legislative Budget Board summary of the proposed House budget. That’s an increase of 16.7 percent from the previous two-year budget cycle, when the state spent about $60.5 billion on public schools.

[…]

The state is forecasted to have about 8.1 percent more funding available to spend over the next, two-year budget cycle. The House’s proposed budget would also withdraw $633 million out of the state savings account, called the Economic Stabilization Fund, to pay for retired teachers’ pensions, school safety improvements and disaster-relief programs.

That account, also known as the rainy day fund, has grown to a record level thanks to booming oil and gas production. Even after the House’s proposed $633 million withdrawal, the fund’s balance is projected to reach $14.7 billion in 2021.

The budget recommends spending $109 million on school safety, which lawmakers have discussed as a priority item since the 2018 Santa Fe High School shooting near Houston left 10 dead. Included in school safety funding would be about $12 million for children’s mental health programs.

Notably, the House budget decreases state funding for health care and human services by about 3.2 percent. Education and health care make up the vast majority of state spending.

Medicaid, the federal-state insurance program for the poor and disabled, would see a decrease of $1.4 billion in state funds, for example.

There are a lot of details to be filled in here. Making this contingent on property tax reform can be dicey, as the last time the Lege “fixed” school finance by way of tax reform they screwed over the revenue stream for years to come. Cutting Medicaid payments is a serious no-go. All of this has to actually be written into the budget and then approved by both chambers and not line-item-vetoed by Abbott. Lots of things can go wrong or turn out bad. But all that said, this is a great starting point, and hugely refreshing after too many sessions of cuts.

Meanwhile, in the Senate:

Leaders of the Texas Senate are proposing giving schools $3.7 billion to provide $5,000 pay raises to all full-time classroom teachers — on the heels of a House budget proposal that includes $7 billion more for public education.

Sen. Jane Nelson, R-Flower Mound, filed Senate Bill 3 Tuesday morning, which would mandate that schools use the billions in additional funding specifically for teacher pay raises. Speaking at his inauguration Tuesday morning, Lt. Gov. Dan Patrick, who presides over the Senate, lauded the proposal as one of his main priorities this legislative session and said the funding would be permanent.

[…]

Nelson’s proposal appears to build a new formula into the school finance system that would distribute state funding to schools based on the number of full-time classroom teachers they employ, and require they use that money for raises over the previous year.

Here’s SB3. We now know that while the Senate is also proposing more money overall for school finance, it’s not as much as what the House is proposing. This is what I mean when I say there’s a long way to go to get to a finished product. Be that as it may, this too is a good start.

Our pretty decent revenue estimate

We’ve seen much worse.

At a time when legislators are vowing to spend more money on public schools and slow the growth of Texans’ property tax bills, the state should have enough money at its disposal to do just that.

That is, if its newest predictions hold true.

Texas Comptroller Glenn Hegar on Monday offered a cautiously optimistic outlook for the Texas economy, telling lawmakers they will have about 8.1 percent more state funds available to budget for public programs — primarily schools, highways and health care — in 2020 and 2021. Hegar projected there would be about $119.1 billion in state funds available for the next two-year budget, up from $110.2 in the last two-year budget.

But falling oil prices in the last month, along with heightened uncertainty in the U.S. economy and international financial markets, led Hegar to deliver a “cloudy” forecast with some trepidation.

“We remain cautiously optimistic but recognize we’re unlikely to see continued revenue growth at the unusually strong rates we’ve seen in recent months,” he said.

[…]

Meanwhile, the state’s savings account, known as the rainy day fund, is projected to reach a record high balance of $15 billion. Lawmakers will debate whether to dip into that Economic Stabilization Fund to pay for bills coming due from the last two-year budget period, including Hurricane Harvey recovery, and in the upcoming two-year budget.

Advocates for greater investment in public schools reacted positively to the revenue estimate, saying lawmakers now have no excuse not to increase spending, given a growing budget and unprecedentedly large savings account balance.

“This is good news,” said Eva DeLuna Castro, a state budget analyst at the left-leaning Center for Public Policy Priorities. “This is enough to not cut state services.”

It is good news, but as always it comes with a warning label.

[T]he Republican-controlled Legislature has excelled at finding new ways to squander available funds on everything from inefficient property tax relief, piecemeal school finance fixes and heaps of corporate subsidies and tax cuts. Dan Patrick and the tea party faction are also intent on keeping the overflowing Rainy Day Fund under lock and key, despite the continued urgency of Hurricane Harvey relief. That could be a big wild card — given that Governor Greg Abbott never called a special session after Harvey, the Legislature has yet to allocate any state relief money. Leaders in the affected Gulf Coast region, from Rockport to Port Arthur, are sure to call on legislators to step up.

Of course, the devil will be in the details — GOP lawmakers are experienced at promising to tackle weighty, complicated issues like property tax relief and school finance reform while pushing policy that doesn’t really fix anything, or makes things worse. Abbott is intent on settling the property tax dilemma by handcuffing local governments’ ability to levy property tax increases, all while ignoring the larger problem at hand: the state needs to dedicate a lot more money for schools.

The state school finance system is in desperate need of an overhaul. Texas’ spending per student is around $10,000 a year, about $2,300 below the national average. Funding has remained relatively stagnant over the past decade and the state has plummeted to 36th in the nation in terms of per pupil spending. Meanwhile, as the state’s population has grown rapidly, the Legislature has forced local governments to pick up a larger share of the education tab through property tax revenues (thus fueling the current property tax crisis). In 2008, the state and local funding shares were split evenly, but the state’s contribution has since fallen to its current rate of 38 percent, according to the Center for Public Policy Priorities. Without a fix, that number is projected to fall even further. This has created a perpetual underfunding of the school system and has worsened the inequities between rich and poor districts.

But Hegar’s estimate is a heartening sign for advocates hoping for a substantial injection of state funding for public education — as much as $5 billion, which is what [outgoing Speaker Joe] Straus has said the state can afford. Perhaps an emboldened caucus of House and Senate Democrats, in tandem with Republicans who saw the writing on the wall in November, will be able to succeed in pushing for a more comprehensive solution.

The need is great, but the temptation to splurge on wasteful tax cuts that they call “school finance reform” is greater still. Even if there’s a zombie bathroom bill, that’s going to be the fight of the session. Texas Monthly has more.

Here comes the latest school finance report

I figure the smart money is always on efforts like this to fail, but you never know.

After hours of discussion Wednesday, a state panel studying school finance stripped its final report of language that blamed the state for inadequate education spending — and that added urgency to a need for more money to improve student performance.

The original version of the report, unveiled last Tuesday, included stronger language that held the state accountable for the lack of education funding and urged lawmakers to immediately inject more than a billion dollars of new funding into public schools. Scott Brister, the panel’s chairman and a former Texas Supreme Court justice, led the charge to make those changes, which he said would be more palatable to lawmakers and keep Texas from being sued in the future.

“I do have a problem several places where it says our school system has failed. I do think that’s asking for trouble,” he said.

Some lawmakers and educators on the panel pushed back before agreeing to compromise.

“I think we have failed our schools and we haven’t funded them, in my view, adequately or equitably,” responded state Rep. Dan Huberty, R-Houston, who chairs the House Public Education Committee.

Despite the conflict, the 13-member commission unanimously approved more than 30 recommendations on Wednesday aimed at boosting public education funding, improving student performance, cleaning up a messy funding distribution system — and providing property tax relief for Texans.

A final report will be sent to lawmakers, who are convening next month amid calls from state leadership to overhaul a long-embattled school finance system. Gov. Greg Abbott supported the panel’s vote in a statement Wednesday afternoon: “Today’s school finance commission report made clear that the state must reform the broken Robin Hood system and allocate more state funding to education. This session, we will do just that.”

[…]

Among the recommendations the commission plans to send to lawmakers are:

  • $100 million a year to school districts that want to develop their own teacher evaluation metrics and tie pay to performance. The total amount available should increase $100 million each year until it reaches $1 billion.
  • Up to $150 million to incentivize school districts to offer dual language programs, which instruct students in both English and Spanish, and to improve their dyslexia programs.
  • $800 million to incentivize school districts to improve students’ reading level in early grades and to succeed in college or a career after graduating high school.
  • $1.1 billion to improve education for low-income students, with school districts that have a higher share of needy students getting more money.
  • Create a new goal of having 60 percent of third-grade students reading on or above grade level and 60 percent of high school seniors graduating with a technical certificate, military inscription, or college enrollment without the need for remedial classes.
  • Cap local school district tax rates in order to offer property tax relief and a small amount of funding for schools — a proposal from Abbott.
  • No extra funding for special education programs until the state has completed overhauling those programs in line with a federal mandate.

The report hasn’t been published yet, so this is all we know. I don’t see any reason to trust Greg Abbott, who is more interested in cutting property taxes than in providing schools with the resources they need, and of course Dan Patrick will be heavily involved in whatever happens. I think the commission has generally good motives and for the most part the ideas are fine, but we could do a lot more, and that’s before we address the huge need for special ed funding. It’s all a matter of our priorities, and of our view of what “fixing” school finance looks like. The Chron has more.

Property tax revenue up, school funding down

Welcome to Texas.

An early projection has Texas decreasing state funding to public education, and largely using local taxes to fill the gap.

In its preliminary budget request ahead of next year’s legislative session, the Texas Education Agency projected a drop in the state’s general revenue for public education by more than $3.5 billion over the next couple of years, in part because the revenue from local property taxes is expected to skyrocket. General revenue only makes up part of the state’s education funding.

Texas Education Commissioner Mike Morath confirmed this projection in front of a state budget panel Wednesday morning as he laid out the state agency’s budget request through 2021.

The Foundation School Program, the main way of distributing state funds to Texas public schools, includes both state general revenue and local property tax revenue. Local property values are expected to grow by about 6.8 percent each year, and existing statute requires the state to use that money first before factoring in state funding.

Just a reminder, it doesn’t have to be this way. There are lots of things that could be done differently, but they all require legislative action, not to mention state leadership. There is one thing we can all do to facilitate this kind of necessary change, and that’s to vote for candidates who want to make that happen. Start with Mike Collier, who has plenty of ideas for how to fix this mess, but don’t stop there. We have a years-long record to tell us what we’re going to get if we have the same old same old in government next year. Vote to do something different or quit complaining when you don’t get it. The Chron editorial board has more.

Many more school districts are feeling the pinch

Not just HISD. Not by a long shot.

For eight-straight years, Cypress-Fairbanks and Conroe ISDs earned the Texas Smart Schools Award, bestowed on school districts with prudent financial practices and high academic achievement.

Now, Cypress-Fairbanks faces a $50 million deficit next school year, and Conroe is projected to face its first deficit in nearly a decade in the next two to four years.

They are not alone.

As the Texas Legislature studies potential changes to the state’s school funding mechanisms, the majority of large Houston-area school districts are facing budget shortfalls they say stem from a lack of state aid. Of the 10 largest Houston-area school districts, all but three approved budgets last summer that included deficits of more than $1 million, according to a Chronicle review. At least nine say they may have to dip into reserve funds within the next three to five years if revenues do not increase.

For some, it is more dire. If nothing changes at the state or local level, district officials say Spring Branch ISD in west Houston will be financially insolvent in three years. Cypress-Fairbanks ISD will use up all its reserve funds in four or five years. Pasadena ISD only avoided a $20 million shortfall for the next school year by passing a tax hike referendum, and multiple districts are considering similar measures to keep their schools afloat.

That pain is felt in large and small districts across the state. North East ISD in San Antonio expects to cut $12 million from its budget next year, likely leading to teacher layoffs, according to the San Antonio Express-News. By 2020, budget documents in Ysleta ISD near El Paso show the district likely will draw down its reserve funds by $12 million. Friendswood ISD, which educates roughly 6,000 students in a sliver of southeast Greater Houston, is facing a $1.9 million budget shortfall next year.

“If we’ve been one of the most efficient districts in the state, and we’re facing this crisis, imagine what other districts are dealing with,” Cy-Fair ISD Chief Financial Officer Stuart Snow said.

[…]

Sen. Paul Bettencourt, R-Houston, who sits on the Commission of Public Education Funding, said districts should expand their revenue streams to include sources other than local property taxes and the state. He pointed to Dallas ISD, which pulls in about $10 million annually from philanthropy. United Airlines also staffed one of DISD’s schools with 25 full-time employees, a partnership Bettencourt said should inspire districts elsewhere.

“It’s not going to be one-size fits all — there are many, many ways to do it right,” Bettencourt said. “At end of the day, we want the education system to get students the best educations they can get for best deals taxpayers can support. But we need to look for all the ways we can do it right.”

First of all, to Paul Bettencourt: You cannot be serious. Philanthropy? Are you kidding me? Dallas ISD’s 2017-2018 general revenue expenditures were over $1.4 billion. That $10 million represents 0.7% of the total. You gonna suggest everyone search their couch cushions, too? Oh, and I don’t know about you, but I’m old enough to remember when two of the biggest philanthropic entities in Houston were Enron and Continental Airlines. Good thing HISD didn’t make itself dependent on them, you know?

This is entirely the Legislature’s responsibility. We are here because they refuse to adequately fund schools, and because they use the increases in property valuations to fund the rest of the budget, while blaming local officials for their shortfalls and tax hikes. As with everything else in this state, nothing will change until the people we elect change. If you live in one of these districts, don’t take your frustrations out on your school board trustees. Take it out on the State Reps and State Senators who skimp on school finance, and the Governor and Lt. Governor who push them to keep doing it.

From the “Grab that cash with both hands and make a stash” files

Same song, second verse.

If budget writers don’t come up with money to address a state employee pension shortfall and mounting needs for public schools, health care and transportation, credit agencies are likely to downgrade Texas’ AAA rating in the near future.

That was the warning Comptroller Glenn Hegar gave lawmakers at a Tuesday hearing of the Senate Finance Committee in Austin. Though the Texas economy is growing at a healthy pace, Hegar said, the state’s budget is riddled with enough unfunded liabilities to worry credit rating agencies such as Moody’s and Standard and Poor’s.

“We’re not at a crisis,” Hegar said, but “we’re going in the wrong direction.”

A downgrading of Texas’ credit rating would make it more expensive for the state to borrow money — and perhaps damage state leaders’ credibility when advertising Texas as “open for business.”

“I want to avoid that, because I think that’s a black eye on the state of Texas,” Hegar said.

Rebounding oil prices, natural growth and migration to Texas have led to an increase in tax collections, according to the comptroller’s office. But much of that new revenue is already dedicated to historically underfunded programs such as the state highway fund, meaning that Texas lawmakers likely won’t have more money at their disposal in 2019 when crafting the next two-year budget.

At the same time, lawmakers will need to plug holes in the pension system for state employees, and they’ll face pressure to make solvent a health insurance program for retired teachers. On top of that, big bills coming due for Medicaid, the federal-state health insurance program for the poor and disabled that is perennially underfunded by the Legislature, could put the state budget $2.5 billion in the red before lawmakers even convene in 2019. (The state’s current two-year budget is about $217 billion.)

In addition, state leaders will have to tackle the bills from Hurricane Harvey recovery.

I’ll just say again here what I said in January: The vast majority of these issues are the result of deliberate choices made by our Governor, our Lieutenant Governor, and our Republican-controlled Legislature. Instead of seriously addressing the needs of the state, current and future, our Republican leaders have been obsessed with trivia, from bathrooms to plastic bags to trees. We have gotten by and done all right because times have been good, but we are in a far more precarious position for when the economy goes south than we should be. In the meantime, we are squandering this opportunity to ensure a better future for all of us by making such cavalier and ill-advised fiscal choices. Every Democratic candidate running for state office needs to internalize and articulate that message going forward.

From the “Nothin’ but good times ahead” department

Given the good economic conditions in Texas right now, you’d think the budget outlook would be better than it is.

The Texas economy is growing healthily, but that doesn’t mean state budget writers will have more money at their disposal next year, state officials said Tuesday.

In fact, though unemployment is low and tax revenue is on the rise, big bills coming due for the state’s highways and health care programs are giving Texas lawmakers reason for concern.

“I would like to offer a few words of caution for reading too much into the positive recent economic numbers,” Texas Comptroller Glenn Hegar told lawmakers at a Senate Finance Committee hearing.

As they often do, state budget writers last year underfunded Medicaid, the federal-state insurance program for the poor and disabled, which, alongside public education, makes up one of the largest shares of the state’s $217 billion two-year budget.

Then, during a special session called by Gov. Greg Abbott over the summer, state lawmakers shifted another $500 million away from the Texas Health and Human Services Commission to pay for public education programs.

As a result, lawmakers could face a $2.5 billion Medicaid bill shortly after they reconvene in Austin in 2019. Then there are the additional drains on Texas coffers from Hurricane Harvey recovery efforts, Hegar said.

That’s bad news for lawmakers given the comptroller’s prediction that the state will only have a $94 million “beginning balance” when lawmakers convene in 2019. By comparison, lawmakers had an $880 million beginning balance in 2017, which was ultimately a tight year for the state budget. Two years before that, lawmakers enjoyed a $7.3 billion beginning balance.

[…]

Another source of heartburn for budget writers is the ravenous state highway fund. In 2015, amid complaints of a highway system in disrepair, Texans voted to amend the state Constitution to require that up to $2.5 billion in sales tax revenue be dedicated to the highway fund.

That means that even as Texas collects more money from sales taxes — Hegar testified that sales tax revenue grew by an average of 10.3 percent over the last three months — the rest of the state budget will not benefit from that revenue since it is earmarked for the highway fund.

That was also an issue for budget writers in 2017. Last year, in order to free up some of that money for other purposes, Senate lawmakers pushed for an accounting trick that delayed a payment to the state highway fund into the next two-year budget cycle. That freed up about $1.6 billion for lawmakers last year, but it means there will be another bill to pay in 2019.

“In short, despite a strong economy and positive outlook for revenue growth in this biennium, it seems likely the next budget will be much like the one crafted in 2017, having to contend with restricted revenue relative to the spending trends of the state,” Hegar said.

Just a reminder: Underfunding Medicaid was a choice. Shifting money away from HHSC was a choice. The amendment to require all that highway spending was ratified by the voters, but it was there to be ratified because the Lege chose to put it there. Deferring that payment to the highway fund was a choice. And though the story doesn’t include it in its litany, spending nearly a billion dollars on boondoggle “border security” stunts was a choice, too.

We’ll probably be fine in the 2019 session, though the potential for shenanigans is always high. But remember, winter is coming, because it always does. When it does, we’re going to have a mess to clean up, one that was caused by the Republicans in charge of our state, one that could have been mitigated in many ways. I hope we’re ready for it.

(Note: This is the inspiration for the post title.)

The Harvey effect on the state budget

You know what the solution to this is, right?

Senate leaders warned Tuesday that Hurricane Harvey could put a billion-dollar hole in Texas’ budget, an ever-growing number that could affect how much money is available for other state programs.

Only $20 million remains in the state disaster-assistance fund, Senate Finance Committee Chair Jane Nelson said at a public hearing Tuesday on the status of hurricane recovery efforts.

“Our state costs are escalating,” said Nelson, R-Flower Mound. “We need to be judicious. … If we, God forbid, had another disaster in the next 18 months, where would we get the money?”

The Legislature will not convene in a regular session until January 2019.

The state has spent more than $1.7 billion so far in state funds, along with billions in federal assistance, according to updated numbers provided to the committee on Tuesday. Legislative Budget Board officials said as much as $2 billion in additional state funds may be needed in 2019 to cover hurricane-related school costs.

[…]

[Land Commissioner George P.] Bush said that $1 billion in immediate state funding would allow temporary housing assistance to be speeded up. Those funds could be fully reimbursed later by the federal government, he said.

State Sen. Royce West, D-Dallas, suggested those funds could be borrowed quickly from the state’s Rainy Day Fund – a savings account – to expedite the housing recovery for thousands of Texans, some of whom are living in tents.

“We’d need to have a special session” to approve that borrowing, West said, drawing silence from other committee members.

Yes, that is what the Rainy Day fund is for. Not specifically for disaster recovery – that was the bogus justification invented by Rick Perry in 2011 as an excuse for not alleviating cuts to the public education budget – but to help cover budget shortfalls in bad times. The choice is pretty simple, either we draw money from the Rainy Day fund to help the thousands of people who remain displaced by Harvey, or we decide they’re not worth our time and compassion. No wonder Sen. West got no response when he brought it up.

No special session needed to address Harvey flooding

So says Greg Abbott.

Gov. Greg Abbott said Friday another special session of the Texas Legislature won’t be necessary to deal with the response to Hurricane Harvey.

“We won’t need a special session for this,” Abbott told reporters, noting that the state has enough resources to “address the needs between now and the next session.”

[…]

In recent days, some members of the Texas Legislature have speculated that a special session to address the recovery seemed likely. They included state Sen. Paul Bettencourt, R-Houston, an ally of Lt. Gov. Dan Patrick and the chairman of the Senate GOP caucus.

“My personal assumption right now is that we will probably be back in Austin at work no later than January,” Bettencourt told the Houston Chronicle on Thursday.

Here’s that Chron story. A few details from it to help clarify:

“My personal assumption right now is that we will probably be back in Austin at work no later than January,” said Senate Republican Caucus Chair Paul Bettencourt, R-Houston, echoing the sentiments of other House and Senate members.

“The governor and the Legislative Budget Board have the ability to move around quite a bit of money in current appropriations, but it probably won’t be enough when all the bills come in. This storm is going to cost more than (hurricanes) Katrina and Sandy put together, and I’m thinking we’ll be breaking the $200 billion mark before this over.”

While the state would be liable for only a fraction of that amount, after insurance and federal payments come in, but whatever that (remaining) amount is will be something the Legislature will probably have to address.”

That, say other lawmakers, will most likely involve a politically charged debate over tapping the state’s so-called Rainy Day Fund — a $10 billion account officially known as the Economic Stabilization Fund — to pay for some of the storm-damage tab.

[…]

In a Thursday letter to House members, House Speaker Joe Straus said he will be issuing selective interim charges — directives for legislative recommendations — “in the near future to address these challenges” resulting from the massive destruction caused by Harvey, especially to schools.

“The House Appropriations Committee will identify state resources that can be applied toward the recovery and relief efforts being incurred today, as well as long-term investments the state can make to minimize future storms,” the San Antonio Republican said in his letter. “When the appropriate time comes, other committees will review the state’s response and delivery of services.”

The Legislative Budget Board, jointly headed by Lt. Gov. Dan Patrick and Straus, can make key decisions on reallocating state funds to meet emergency needs — up to a point, officials said. Half of its members — three senators and two House members — represent areas devastated by Harvey.

My guess is that Abbott is probably right and the LBB can cover this for now. Tapping the Rainy Day Fund, which I will point out again was created for the purpose of helping to cover budget shortfalls in times of economic downturn before being bizarrely recast as in-case-of-disaster savings by Rick Perry in 2011, may require the Lege, but that may be done in a way as to defer that action until 2019. My wonk skillz are limited in this particular area. Point being, if Congress can manage to allocate relief funding without tripping over their ideologies, there shouldn’t be that much for the state to have to pick up. We’ll see.

Budget passes

The Legislature’s one mandated duty has been completed.

Both chambers of the Texas Legislature voted Saturday evening to approve a $217 billion, two-year budget that would boost funding for the state’s beleaguered child welfare agency, increase the number of state troopers on the Texas-Mexico border and avoid serious reforms to the state’s much-criticized school finance system.

The final vote in the House was 135-14. The vote in the Senate was 30-1.

Scrounging for cash in a tight-fisted legislative session, budget leaders from both chambers agreed to a compromise that settled a bitter debate over how to finance the state budget. The two-year budget is shored up by both $1 billion taken from the state’s savings account, often referred to as the Rainy Day Fund, and an accounting trick that would use nearly $2 billion from a pot of funding intended for highway projects. The House had favored tapping the Rainy Day Fund and leaving the transportation funding alone. The Senate had taken the opposite position.

[…]

The compromise proposal was skimpier than the original budget draft that the House voted out in April. In the House, the final version won the approval of Tea Party Republicans who had originally opposed the House version, while losing the support of almost one-third of the chamber’s Democrats.

State Sen. Sylvia Garcia, D-Houston, was the lone no vote in the upper chamber.

“This budget is more of the same and fails Texas families,” Garcia said in a statement. “There’s no new money for pre-k, there’s continued spending on more border militarization, and it continues to shortchange education and healthcare.”

The budget includes funding to cover growing enrollment at public schools, but it reduces state funding for schools by about $1.1 billion. That funding is offset primarily by growth in local property taxes.

See here for some background, and read the rest for the details if you want. The thing I want to focus on is in that last paragraph, and for that let me quote from a post Deece Eckstein wrote on Facebook:

The state budget adopted today relies on school property taxes increasing by 7% annually to balance the State budget. In other words, the Legislature is reducing its aid to schools because it assumes your taxes will increase by at least 7% a year.

So, when you’re frustrated by rising property taxes and someone tells you to blame your local school board, just read them the language below. School property taxes now exceed 55% of the average person’s property tax bill. We will not get property tax relief until the Legislature fixes school finance!

Kudos to Kirk Watson and Donna Howard, who have been calling out their colleagues on this hypocrisy. Jeers to Dan Patrick and Paul Bettencourt, who insist on manufacturing villains at the local level to blame for rising property taxes.

It’s an effective con, you have to admit. But if you’ve paying attention, now you know the real story. Don’t be a sucker.

So the big remaining question is whether this will herald the end of the legislative season, as it normally does, or whether Dan Patrick will succeed in strong-arming Greg Abbott into calling a special session to try and force through a bathroom bill. Patrick’s gonna do what Patrick’s gonna do, so do what you can do and call Abbott’s office at 512 463 2000 and tell him no special session. There’s no reason to go down without a fight. RG Ratcliffe has more.

Budget deal reached

The one bill that must get passed is on its way.

After months of private squabbling and public threats of a legislative overtime session, the Texas House and Senate finally compromised to unveil a joint budget late Saturday.

Lawmakers, scrounging for cash in a tight-fisted legislative session, agreed to dip into the state’s savings account and to make use of an accounting trick using funds set aside last session for highway projects.

“We have reached a consensus on what I believe is a responsible, compassionate and smart budget for the people of Texas,” said state Sen. Jane Nelson, R-Flower Mound and the upper chamber’s top budget writer, at a committee hearing that lasted late into Saturday night.

“This has been a laborious process, I have to say,” said state Rep. John Zerwas, a Republican from Richmond and Nelson’s counterpart on the House Appropriations Committee. He called the budget “fiscally conservative” during “a time when it’s a little bit more lean.”

Budget documents indicated around $1 billion would come from the state’s Rainy Day Fund, a $10 billion savings account available to shore up the budget in difficult years. That money would pay for priorities such as repairs to the state’s aging mental health hospitals and bulletproof vests for police officers.

Nearly $2 billion more would come from an accounting trick related to transportation funding approved in 2015. The proposed budget would delay a payment to the state highway fund in order to free up that funding for other needs in the current two-year budget. The House had previously been critical of the possibility.

Though lawmakers were creative in tapping alternative money sources to avoid steep cuts this budget cycle, some high-dollar expenditures, notably Medicaid, the federal-state health insurance program for the poor and disabled, were not fully funded. That means lawmakers will almost certainly need to address those underfunded parts of the budget in 2019 — their next legislative session — in the form of a supplemental budget.

The House had originally intended to use $1.4 billion from the Rainy Day Fund, then considered upping it to $2.4 billion, while the Senate aimed for $2.5 billion in pay-delay gimmickry. Nice to see everyone can give a little to get a little, I guess. No budget is ever going to be good under our current political circumstances, but this one could have been worse, and that’s about all you can hope for.

In other business from Saturday:

On property taxes, the lower chamber unanimously approved an amendment that contained key language from Senate Bill 2 — which, among other things, requires local governments to give constituents more information about proposed property tax increases — and attached it to Senate Bill 669.

The House sponsor of the bill, state Rep. Dennis Bonnen, R-Angleton, had been trying to move the legislation for weeks, and it wasn’t scheduled to come to the House floor until early next week.

The Senate bill is an item Lt. Gov. Dan Patrick has deemed must-pass legislation — he threatened on Wednesday to ask Gov. Greg Abbott to call lawmakers back for a special session if that and other measures didn’t pass. Whether Bonnen’s amendment is enough for Patrick and the more conservative Senate is still unclear: Bonnen’s amendment lacked a key provision that would require voter approval for some tax rate increases, something Patrick stated repeatedly he wanted included.

[…]

An amendment by state Rep. Four Price, R-Amarillo, would extend the lives of several state agencies that were scheduled to “sunset” – or expire. A separate measure that dealt with that specific issue didn’t survive last week’s deadline for the House to pass bills on second reading.

But Price added his language to Senate Bill 80, a measure that seeks to streamline reporting requirements for state agencies. The Senate must now concur with the changes to SB 80 in order for Price’s amendment to survive.

“The goal of the amendment originally as contemplated would not have had to extend these agencies, but for the fact they were caught up in that last night on the calendar,” he said. “It goes hand in hand [so] yes, it had the effect of extending the agencies to 2021.”

SB2 was one item on Dan Patrick’s hostage list, while the sunset bill was his leverage for it. Late last night there was a limited bathroom amendment attached to a Senate bill (I’ll have more on this tomorrow), and SB2 isn’t as Patrick wanted it, so we can’t say as yet whether his tantrum has been mollified. I’m sure he will let us know soon enough.

House approves bill to kill margins tax

Dumb.

The Texas House on Thursday approved a proposal that would phase out an unpopular business tax that provides funding for public schools.

The proposal by state Rep. Dennis Bonnen, R-Angleton, would not reduce the state’s franchise tax during the current penny-pinching legislative session, but it would do so in future years. Under Bonnen’s bill, economic growth would trigger reductions in the tax, which currently brings in about $8 billion every two-year budget cycle, until it ultimately disappears.

About $1.8 billion in franchise tax revenue in the current two-year budget cycle goes to the Property Tax Relief Fund, which pays for public schools. Democrats, arguing that the tax cut would cause lawmakers in later years to underfund crucial public programs, railed against the proposal for nearly two hours. They offered a series of amendments that would have lessened the extent of the tax cut or redirected funds for college tuition, pre-kindergarten and other priorities, but all were defeated.

The final vote took place late Thursday evening at the end of a long day on the House floor, which followed a marathon debate Wednesday over “sanctuary” jurisdictions that lasted until roughly 3 a.m. When Bonnen’s proposal finally hit the floor, few Republicans offered any remarks in response to Democrats’ outrage; most lawmakers in the chamber appeared to be paying little attention.

[…]

Businesses dislike the franchise tax, often called a “margin tax,” because they say it’s overly complicated and can punish them in less-prosperous years. Because it’s based on a business’s gross receipts, a business can still be required to pay the tax even in years it takes a loss. Many call the tax, which was passed as a way to reform the state’s school finance system, an unnecessary burden, and high-profile Republicans including Gov. Greg Abbott have sought its demise.

Lawmakers in 2015 cut the tax rate by 25 percent, which gave them $2.6 billion less revenue to help craft a budget this year. Proponents of the tax’s elimination argue it would stimulate the state’s economy and create jobs.

In the short term, it’s difficult to say just how much revenue is at stake in Bonnen’s proposal because the tax is highly dependent on economic conditions. A fiscal note written by the state’s Legislative Budget Board estimated it could cut public school funds by up to $3.5 billion in the 2020-2021 biennium.

I mean, look, I know the margins tax was a poorly conceived kludge that everyone hates (or at least claims to) and which has been a top GOP whipping boy for a couple of sessions, but please do keep two things in mind. One, this tax, which replaced the also-hated and seldom-paid franchise tax, was created in 2006 to help fill the revenue void left by the Supreme Court school finance decision in 2005 that led to a mandated across-the-board property tax cut. It was never going to fully fill that void, and indeed its poor design and regular underperformance has been a problem, but it at least made up for some of the funding for schools that disappeared when the previous system was declared to have been an unconstitutional statewide property tax. Something is going to need to replace the revenue lost to this tax being (eventually) eliminated, and all we have right now is wishful thinking about economic growth, a continued reliance on local property taxes, and a handful of magic beans. And two, it’s probably not a coincidence that the amount of revenue lost in this biennium to the previous one’s margins tax cut is almost precisely the amount the House and Senate are arguing about in order to make this session’s budget “balance”. Cause and effect, y’all. You should have one of your interns Google it.

One more thing about vouchers

I’m going to enjoy this just a little bit more.

The Texas House of Representatives all but killed Lt. Gov. Dan Patrick’s prized school choice bill Thursday, dealing the powerful Republican a major loss as he struggles to push his agenda through this year’s legislative session.

House members considering the state’s budget plan for the next two years voted overwhelmingly against diverting public education funds to private schools in the next biennium, registering their resistance to a so-called school voucher program and sending a message to Patrick that the bill has no chance this year of passage.

“The House stands strongly in support of our neighborhood schools and our public school teachers and that any scheme, such as a voucher or otherwise that attempts to siphon funds away from our public schools, is not something that would be acceptable in the House,” said Rep. Abel Herrero, a Robstown Democrat. He sponsored an amendment expressly blocking any school voucher program.

Lawmakers, in the midst of a day-long marathon session debating the state’s $218 billion spending plan for the next two years, voted 103-44 in favor of the amendment. The revision declared state money “may not be used to pay for or support a school voucher, education savings account, or tax credit scholarship program or a similar program through which a child may use state money for non-public education.”

The Republican-led House also rejected a follow-up amendment allowing the state to fund a smaller so-called school voucher program limited to children from poor families. The chamber voted that idea down 117-27, signalling that paring down Patrick’s prized Senate Bill 3 will not win it more votes.

“Good-bye SB 3,” Rep. Gene Wu, D-Houston, said from his desk after the vote.

Assigned a low bill number to reflect its importance among Patrick’s priorities, SB 3 would create education savings accounts that parents can tap to pay for private school tuition, home school costs, tutoring or other expenses. The bill would also create a tax credit scholarship program that rewards businesses with a tax break for cutting checks to the state to fund scholarships that could send children to private school. The Senate passed that plan last week on a 18-13 vote.

[…]

With the bill unlikely to pass this year, advocates for vouchers and school choice will use the vote to drive their political activities in the 2018 elections by singling out lawmakers who voted against vouchers, said Randan Steinhauser, co-founder of Texans for Education Opportunity, which advocates for broader school choice.

“This isn’t surprising. The House has always been an obstacle, and there are many Republicans who are not representing their constituents and their school children,” said Steinhauser, who has already gone door-knocking in several Republican lawmakers’ districts to pressure them into voting for vouchers. “This is an opportunity for parents in the state of Texas to see who is standing in the way of educational opportunity.”

See here for the background. I’ll get back to this in a second, but in the meantime, as Depeche Mode advises, enjoy the silence.

A day after Texas House members pointedly approved an amendment to prohibit the use of public money for private schools, Lt. Gov. Dan Patrick, the Legislature’s most vocal proponent of so-called “school choice,” has yet to issue a public reaction.

[…]

Repeated calls and emails to Patrick’s office for comment went unanswered Thursday and Friday, although his staff has posted videos of him on Facebook talking about child abuse prevention initiatives and tuition set-asides since the House vote Thursday morning.

Patrick, who has rallied for years to pass a school choice program, assigned the proposal a low bill number to indicate its importance among his legislative priorities. Last week, he and Taylor, the Senate education chairman, pared down the bill to appease senators on the fence about the proposal, agreeing to exempt counties of less than 285,000 unless voters there petition for a voucher program.

Taylor, a Friendswood Republican and sponsor of the bill, did not respond to requests for comment Friday about whether he had been in contact with Patrick about how they would proceed on the measure.

House lawmakers long have said they have little interest in passing SB 3 and Public Education Chairman Dan Huberty, R-Houston, said he did not want to force his committee to vote on the bill. The measure, which passed the Senate 18-13, is now awaiting action in the House.

A defeat on school vouchers likely would not hurt the lieutenant governor, said Jason Sabo, a longtime political observer and education lobbyist. Instead, he said, the House vote shows how politics are evolving away from party loyalty and toward regional and issue-based factions.

“It’s not about party. It’s about place,” he said. “If the largest employer in half the counties in your giant legislative district are public schools, you hate vouchers, it doesn’t matter if you’re a Democrat or a Republican. You’re anti-voucher. ”

Who knew it was even possible to get Dan Patrick to shut up? And with all due respect to Jason Sabo, whose remarks may be a bit out of context here, this alignment on vouchers is nothing new. As this DMN article from January notes, people have been pushing for vouchers, thankfully without success, for going on thirty years. The Legislature came fairly close to fulfilling the wishes of people like GOP megadonor James Leininger, who was then the main force behind vouchers, during the 2005 session. Among other things, this led to the rise of the Texas Parent PAC and its shocking primary win over then-House Education Committee Chair Kent Gruesendorf. Patrick has taken up the banner in the two sessions since he became Lite Guv, but the fight long predates him.

And this is why Randan Steinhauser is wrong. At this point, there have been many elections, mostly Republican primaries, in which public education has been a big issue. Even with the likes of Leininger and then-Speaker Tom Craddick and now Dan Patrick behind them, voucher proponents have basically gained no ground, and aren’t anywhere close to a majority in the House. Hell, we’re at a point where they had to rebrand themselves, because “vouchers” has become a toxic label, and resort to a third-rate astroturfing campaign for their lobbying. Voucher supporters are the definition of a narrow interest group seeking to carve out an advantage for themselves. I’m not going to say they’ll never succeed, because politics doesn’t work like that, but I see no evidence that they are gaining public acceptance. They got the fate that they, and Dan Patrick, deserved.

House passes its budget

Mostly shenanigan-free, with a nice little side order of shade for a few people who deserve it.

After 15 and a half hours of debate on hundreds of amendments to the Texas House budget, lawmakers in the lower chamber passed the two-year, $218 billion document, with 131 votes in favor and 16 votes against.

The House vote included using $2.5 billion from the state’s savings account, colloquially known as the Rainy Day Fund. State Rep. John Zerwas, R-Richmond, thanked lawmakers for exhibiting “true leadership” with their willingness to tap the fund, “instead of electing to use an unconstitutional transfer from the transportation funding.”

That was a jab at the Senate, which last week approved its version of the two-year budget using a $2.5 billion accounting trick to free up funds dedicated to highway spending. The House must now work with the Senate, which is under the leadership of Lt. Gov. Dan Patrick, who vehemently opposes using the Rainy Day Fund, to reconcile their budget differences.

House lawmakers, debating the budget late into Thursday night, took several jabs at Patrick and other statewide elected officials throughout the evening.

Included in the fray were Gov. Greg Abbott, who saw one of his prized economic development programs defunded; Patrick, who heard a resounding “no” when his favored proposal to subsidize private school tuition with public funds was put to a vote; and Attorney General Ken Paxton, who lost more than $20 million from his agency’s budget for lawsuits.

On the winning side of the House budget debate were child welfare advocates, who saw funding for foster care and Child Protective Services tentatively boosted; social conservatives, who scored $20 million for the Alternatives to Abortion program; and the lieutenants of House Speaker Joe Straus’ leadership team who, in a display of unity, easily brushed aside most challenges from far-right Republicans.

Statewide GOP leaders took some of the heftiest blows in the House chamber. Lawmakers there voted to strip $43 million from the governor’s Texas Enterprise Fund, the “deal-closing” fund the state uses to lure businesses from elsewhere, and divide it into two equal pots: one for Child Protective Services and foster care funding, the other for a program that pays for disabled children’s physical, occupational and speech therapy services. Both are hot-button issues that have dominated the House’s budget negotiations during this legislative session.

[…]

Private school subsidies, a pet issue of Patrick and his Senate, also suffered a perhaps fatal wound on Thursday. House lawmakers voted 103-44 to prevent state money from being spent to subsidize private school tuition in the form of vouchers, education savings accounts or tuition scholarships. The proposal’s author, state Rep. Abel Herrero, D-Robstown, said it was “in support of our public schools and our neighborhood schools.”

[…]

Paxton’s attorney general’s office also saw funding gutted by House lawmakers who opted to instead fund programs that serve vulnerable children. Foster care funding would receive $21.5 million that was previously intended to pay for Paxton’s legal services budget under a proposal by state Rep. Ina Minjarez, D-San Antonio, that passed 82 to 61.

See here for more on the Enterprise Fund de-funding, which made me smile. Despite promises of shenanigans and roughly a gazillion amendments filed, there was more good done to the budget than bad. Which is not to say it’s a good budget, but it’s far from the worst we’ve ever seen. Take your positives where you can.

Especially when they involve Dan Patrick getting pwned.

In late March, lobbying group Texans for Education Opportunity used an online campaign to generate thousands of letters to 29 state representatives lobbying them to back education savings accounts, one of the subsidy programs in SB 3. Though the group claimed the letters were credible, the letters stirred up suspicion after no representative could find a constituent who remembered adding their name to that correspondence.

Of the 29 representatives targeted in the campaign, 26 voted Thursday to block money from funding “private school choice” programs.

RG Ratcliffe called it a “mugging”. As former Houston Rockets radio announcer Gene Peterson used to say, how sweet it is. Also, too, going back to the first story, there’s this:

Stickland had filed an amendment defund a state program for the abatement of feral hogs, which he’s become known for championing at the Legislature each session. Stickland railed predictably against the program, calling it “ridiculous” and a waste of money.

“It has not worked, and it never will work,” Stickland said, his voice rising.

That apparently offended rural lawmakers, notably state Rep. Drew Springer, R-Muenster. In response, Springer attached an amendment to Stickland’s proposal that would cut the same amount of funding for the Texas Department of Transportation, but only for roads and highways in Stickland’s hometown of Bedford.

Stickland took to the back microphone to cry foul.

“Someone else has chosen to make a mockery of this system and play gotcha politics,” he said before being interrupted. Laughter had erupted in the gallery.

“It’s funny until it happens to you,” he continued.

Springer and Stickland then confronted each other on the middle of the House floor and had to be separated by colleagues. Springer’s amendment ultimately passed, 99 to 26, forcing Stickland to withdraw his own proposal to which it had been attached.

What is best in life is to crush your enemies, see them driven before you, and hear the lamentations of Jonathan Stickland. And Briscoe Cain, too, the Chester to Stickland’s Spike, except without the victorious denouement for Chester. Look, just because the House passed a budget doesn’t mean this is the budget we’ll get. The Senate passed a budget, too, and there are lots of differences to be worked out between the two. The final version will be different, and some of the things we are cheering now may be undone in that. But that’s no reason not to cheer for the things that deserve it now. The Observer and the Press have more.

Senate passes its budget

It’s the one bill that has to pass.

The Texas Senate unanimously approved a two-year budget on Tuesday that would shift nearly $2 billion in public education costs from the state to local taxpayers.

The Senate’s $218 billion document now goes to budget writers in the House for debate.

“This is a lean budget, but it’s also a smart budget,” said state Sen. Jane Nelson, R-Flower Mound, the 2018-19 Senate budget’s lead author. “It responsibly meets the needs of our state.”

The Senate’s proposal would spend $106.3 billion in state revenue, which is a significant bump from the $103.6 billion budget Nelson originally rolled out in January. That puts the Senate’s total spending level much closer to the House’s than they were when the proposals were originally published.

Still, there are major differences in funding priorities and methods of finance that the two chambers will need to reconcile before the Legislature adjourns in May, setting the stage for some of the biggest points of contention this year.

Nelson touted her budget’s focus on education. The Senate proposal actually strips about $1.8 billion in state funds for education but uses local property taxes and other revenue to make up the difference. In total, Nelson said, her proposal would boost public school funding by $4.6 billion compared to the prior budget, including a $2.6 billion provision to cover student enrollment growth.

“Under our formula, the local share of education funding fills up the bucket first, as local property tax collections go up, the state share goes down,” Nelson said. “But in the aggregate, funding for education is going up every year.”

At the same time, the Senate is advancing controversial tax cut proposals that critics say would make it more difficult for the state and local governments to pay for schools. Last week, the upper chamber passed Senate Bill 2, which seeks to curb the growth in property taxes, and Senate Bill 17, which would cut the franchise tax paid by businesses in future years.

Emphasis mine. Note the on-the-nose Trib headline, “Texas Senate approves its budget, shifting school costs to local taxpayers”. Whatever else happens this session, I feel like at least the message that it’s the Legislature that is the main driver of property tax discontent has gotten out. Whether it’s gotten through is another matter, but at least it’s out there. I can’t recall that ever being the case before. The Chron has more on the Senate budget.

Meanwhile, over in the House:

The House Committee on Appropriations unanimously approved a two-year, $218.2 billion budget as a substitute for the Senate’s leaner proposal, putting the chambers on a collision course in the last two months of the session.

HB 1 now heads to the full House for a vote with contrasts to the $217.7 Senate proposal, which the upper chamber approved earlier this week.

House appropriators want to spend $2.5 billion from the Rainy Day Fund in their budget, leaving a $9.4 billion balance. That decision has touched off a public fight between House and Senate budget writers about whether they should dip into the state’s savings account.

On Wednesday, Chairman John Zerwas, a Republican from Katy, took a swipe at the Senate, which signed off on a maneuver that would delay until 2020 the transfer of $2.5 billion for transportation funding that voters approved in 2015.

“This budget does not rely on budget gimmickry that puts the state’s investment in transportation at risk,” he said. “The budget balances by cutting spending, prioritizing critical items and using a modest amount of (the Rainy Day Fund), for the exact purpose for which it is created.”

See here and here for some background on that. The conference committee for this one is going to be very interesting. The Trib has more.

Who loves budget gimmicks?

The Senate Budget Committee, that’s who.

Texas Senate budget writers on Wednesday unanimously approved their two-year budget, which avoided some steep cuts by using an accounting trick to free up $2.5 billion state dollars that were originally slated to go to the state highway fund.

By delaying a diversion of sales tax money from August 2019 to September 2019, and therefore moving the funding from the 2019 fiscal year’s budget to the first month of fiscal year 2020, Nelson said her two-year budget had an additional $2.5 billion to spend on needs such as health care and schools.

The accounting maneuver “solved a lot of our problems,” Nelson told reporters shortly after her Senate Finance Committee approved the budget unanimously. She said the move would not affect the Texas Department of Transportation’s ability to pay for highway projects in 2019.

But House Speaker Joe Straus called the move “gimmickry” and likened it to “cooking the books.”

“Counting money twice in order to balance a budget is not a good idea,” Straus told reporters Wednesday morning. “This is the Texas Legislature. We are not Enron.” He was referring to a Houston-based energy company that collapsed in spectacular fashion because of fraudulent accounting practices.

[…]

Nelson said her proposed budget “meets our responsibilities” and “keeps Texas on the path to success and prosperity.” The proposal now moves on to the full Senate, where a full chamber vote is expected on Tuesday.

Nelson told reporters the Senate had no appetite to use the state’s Rainy Day Fund, a $10.2 billion savings account lawmakers have available to address budget shortfalls or emergencies.

See here for some background. Let’s be clear about two things. One, this is far from the first time this particular accounting trick has been used. Indeed, accounting tricks of all kinds are baked in our legislative DNA. They are a natural and totally expected outgrowth of the many artificial budget constraints that our Legislature is subject to. I wouldn’t claim that there’s anything honorable about any of this, but given that the constraints aren’t going away, I’d greatly prefer a bit of financial prestidigitation to slashing critical services.

That said, it seems crazy to me to resort to this sort of trickery when there’s more than enough money in the Rainy Day fund to actually pay for the things that need to be paid for. There was a time when the general consensus was that this is what the Rainy Day fund is there for. The diversion tactic doesn’t make that $2.5 billion in obligations go away, it just shoves them into the next budget cycle. Which is fine of the state’s finances wind up being better than the Comptroller projects them to be for the next two years, not so fine if not. Remember, the House wants to use the Rainy Day fund to plug a gap in the budget from the last session, which resulted in part because expenses were higher than we thought they would be. We have the wherewithal to take care of this problem now. Why wouldn’t we do that? The Chron has more.

House considers a bigger ask from the Rainy Day Fund

Needs must, as they say.

The proposal from state Rep. John Zerwas, a Richmond Republican and the House’s chief budget writer, would withdraw about $2.4 billion from the Rainy Day Fund as part of a supplemental budget to pay bills coming due for programs like Medicaid, the federal-state insurance program for the poor and disabled, and to pay for repairs to state-run institutions including mental hospitals and the School for the Deaf.

Previously, Zerwas advocated spending about $1.4 billion from the fund, which holds about $10 billion currently. He updated his proposal at Thursday’s meeting of the House Appropriations Committee, saying that without making a “modest withdrawal” from the savings fund, budget writers would be forced to make draconian cuts to public programs.

Entities that face budget cuts absent a cash infusion include the state’s public education system, pensions for retired teachers, and the Texas child welfare and foster care system charged with protecting vulnerable children from abuse and neglect, Zerwas said.

“Some members of our body have said publicly that our situation isn’t really that bad,” he said. “I can’t disagree more with that.”

Most legislative sessions, the Texas Legislature does not fully fund the cost of state programs, so lawmakers must typically pass a supplemental bill to cover the rest. Zerwas’ proposal would net some matching federal dollars, bringing the total value of the bill to $5.2 billion, officials said. About $3 billion would plug funding holes left by lawmakers in 2015, mostly in Medicaid and in a health care program for the state prison system.

The rest would go toward current needs, such as “deferred maintenance” costs at state-run institutions including mental hospitals, many of which are in disrepair.

See here for the background. I approve of Zerwas’ approach and appreciate what he is saying, but I would be remiss if I didn’t point out that a big part of the problem he is trying to solve is self-inflicted. As the story notes, tax cuts passed in the last session, at a time when oil and gas prices were low and the state’s economy wasn’t doing so well, cost $4 billion this biennium, while the referendum to dedicate a portion of sales tax revenue to the state highway fund has taken $5 billion out of the general fund. Zerwas had to file a separate bill to claw some of that money back. These were choices made by the leadership and the Legislature, the former because tax cuts are Republican crack, and the latter because we absolutely, positively refuse to consider raising the gas tax to meet our road needs. Budget gimmicks are just that, and whatever they purport to do, there’s always another gimmick to undo it. As a certain former President once said, reality has a way of asserting itself.

Bill to restore some budget flexibility filed

Call it the Law of Unintended Consequences Act of 2017.

The Texas House’s chief budget writer filed legislation Friday that would allow lawmakers to claw back billions of dollars that voters approved for state highways, freeing them up for other budget needs.

Texans overwhelmingly voted in 2015 to boost funding for the state’s public roadways and bridges, which have strained under a growing population. Proposition 7 amended the Texas Constitution to route some taxes collected on car sales to the State Highway Fund.

But House Appropriations Chairman John Zerwas, R-Richmond, filed a resolution Friday that would cut that initial cash infusion, aiming to free up money at a time when cash is tight.

House Concurrent Resolution 108 could cut the first transfer under Proposition 7 of nearly $5 billion in half, but only if two-thirds of lawmakers in both the House and Senate support such a move.

It’s a prospect made possible by what some lawmakers have called a “safety valve” in Senate Joint Resolution 5, the legislation that the Legislature approved in 2015 to send Proposition 7 to voters later that year.

See here for the background. I don’t expect this to pass – I really don’t think two thirds of the Senate will go for it – but I will be very amused if it does. Whether this is more or less likely to happen than tapping the Rainy Day Fund is now something we can test empirically. If nothing else, that’s a victory for science.

House releases school finance fix bill

A step in the right direction.

Rep. Dan Huberty

The top public education policymaker in the Texas House unveiled a $1.6 billion plan on Monday that he described as a first step to overhauling the state’s beleaguered school funding system.

At a Capitol press conference, state Rep. Dan Huberty said House Bill 21 would boost per-student funding for nearly every public and charter school in the state while reducing the amount of money wealthier school districts are required to give up to buoy poorer ones. The state’s so-called Robin Hood plan has become a hot-button political issue as large districts like Houston have recently had to begin making payments.

“House Bill 21 will not only improve our schools but it will also reduce the need for higher property taxes,” said Huberty, a Houston Republican who chairs of the House Public Education Committee.

[…]

He said HB 21 would increase the basic funding for almost all school districts from $5,140 to $5,350 per student per year. That would happen in part through an increase in transportation funding by $125 per student for all school districts, including property-wealthy districts that currently have limited access to that money.

It also would increase the amount of money the state gives to schools for students with dyslexia. And it would include additional funding for high schools and non-professional staff.

Huberty estimated it would lower payments that property-wealthy school districts pay to the state to subsidize property-poor school districts by $163 million in 2018 and $192 million in 2019. As the state’s share of school funding has decreased, more school districts with swelling enrollment are on the hook for such Robin Hood payments.

The bill is similar to an unsuccessful school finance initiative filed in 2015 that would’ve injected twice as much money into the system — $3 billion — and boosted per-student funding across the board. Still, $1.6 billion is a significant sum amid the current budget crunch.

This bill had a hearing yesterday as well, and despite being overshadowed by the sound and fury of the bathroom bill hearing, there was a report about it.

The bill would inject about $1.6 billion into the public education system, boosting funding for almost every school district in the state although a few would be left out. It also wouldn’t renew a soon-expiring program that awards supplemental state funds to more than 150 districts to offset a decade-old property tax cut — a major concern for education officials who depend on the funding. A provision in the bill that would award some grant money to make up for the loss isn’t enough, they told the committee Tuesday.

“My districts are going to lose,” said Mike Motheral, executive director of the Texas Small Rural School Finance Coalition. He said he represents 14 West Texas school districts that could lose up as much as 53 percent of their state revenue with the end of the state aid program.

“One of my districts will lose $4.5 million and they have a $10.5 million budget,” he said.

When the Legislature reduced property taxes by a third in 2006, it guaranteed school districts like the ones Motheral represents at least the same amount of funding they received in 2005-06 through a state aid initiative. The extra aid expires Sept. 1, so many districts have been asking for an extension to avoid falling off a funding cliff. About 156 school districts currently receive such aid.

As written, the bill proposes letting the initiative providing extra state aid expire and instituting a $100 million two-year grant program, prioritizing districts that would lose money through the new funding formulas. That’s not enough to cushion the blow, school officials told the committee Tuesday.

[…]

Numbers released Monday along with the bill show that about 35 of the state’s 1,200 school districts and charters would lose funding in 2018 and 58 would lose funding in 2019. The rest would see basic funding increase from $5,140 to $5,350 per student annually thanks to an increase in transportation funding and more money for students with dyslexia.

Many school officials and advocates who testified on the bill Tuesday said it leaves too many behind.

“We want a bill that has no losers,” said Christy Rome, executive director of Texas School Coalition, which represents mostly wealthier school districts.

Here’s HB21. I agree with Christy Rome and Mike Motheral. There shouldn’t be any losers in this. As much as HISD and the other districts affected by recapture should be made right, it should not come at the effect of these other districts. The right answer is the put enough money in to fix the formulas. Easy to say, and Lord only knows what kind of reception this gets in the Senate. But this is what it comes down to, and what needs to happen. The Chron has more.

Zerwas proposes using Rainy Day Fund

We’ll see if this goes anywhere.

Rep. John Zerwas

The chief budget writer in the Texas House on Friday proposed using $1.4 billion from the state’s savings account to pay bills coming due for a wide array of the state’s health and human services programs.

The proposal from state Rep. John Zerwas, R-Richmond, would continue pay raises for Child Protective Services workers that state leaders ordered last year. It would also pay for renovations at the state’s aging mental health hospitals and state-supported living centers for people with disabilities.

And it would partially reverse a sweeping $350 million budget cut to a therapy program for children with disabilities ordered by the Texas Legislature in 2015.

The funding would come from the state’s Economic Stabilization Fund, also known as the Rainy Day Fund, a savings account lawmakers may use in tight budget years. That fund currently has about $10 billion.

“Using a small portion of the Economic Stabilization Fund, combined with spending reductions, is the responsible way for us to close out the current budget cycle and respond to the slowdown in our economy,” Zerwas said in a prepared statement.

This is for the supplemental budget, which is to say the budget passed by the 2015 Legislature, not for the one this Lege is working on. It will free up some money for the current budget if Zerwas’ proposal is adopted, in the sense that current revenues would not have to be used to close out the previous budget. Given the emergency that everyone agrees CPS is and the outcry that followed the cuts to the therapy program for children with disabilities, you would think this would be a relative no-brainer, but don’t count on it. The Rainy Day Fund morphed from being a tool to use to smooth out economic bumps to a lump of gold buried in the backyard that is never to be touched unless there’s a natural disaster, with the 2011 session in which cutting $5 billion from public education was seen as the better choice as the turning point. A supermajority is needed to tap the Rainy Day Fund, and I have a hard time believing Dan Patrick and his Senate sycophants will go for that. But at least someone had the guts to bring it up, so kudos to Rep. Zerwas for that. Keep an eye on this, because it may be a precursor of the larger budget fight between the chambers. If Zerwas gets his way, that bodes well. If not, things could get ugly.

How the Legislature is raising your property taxes

RG Ratcliffe explains it all to you:

Just how much money does the increased appraisal on property in your school district and elsewhere save the state budget writers? The projection is $1.5 billion for the next two-year budget. And where does this money go? In its initial budget, the Senate plans to use the savings on other state expenditures. The Straus starting-point budget includes giving the money to the public schools, but only if a school finance reform passes. But even if the $1.5 billion is put back into the school system, the state’s share of funding the public schools will decline to 39 percent by 2019 without a major boost in state spending.

That figure does not include the $3.8 billion that the state will recapture from property-wealthy school districts over the next two years to redistribute to low-wealth school districts. (That amount is about equal to what the state collected in oil-and-gas severance taxes in the current two-year state budget, or to the taxes collected on alcohol and tobacco combined, or about twice the tax motorists paid to fill the tanks of their cars and trucks.)

In the meantime, a program that was meant to keep school districts from losing money because of 2006 property tax cuts is set to expire. A decade ago, state legislators wanted to make certain that no school district had its budget cut because of state-mandated tax cuts, so they set up a program called Additional State Aid for Tax Reduction. Originally, they intended the program to phase out as property values rose. But faced with a budget crunch in 2011, the Legislature put an expiration date on the program: September 1, 2017. When the program expires, it will leave 175 school districts faced with having to raise taxes or cut budgets to make up for $225 million in lost state funding. For the 55,000-student Frisco school district near Dallas, that means a $30 million budget cut, while the 100-student Webb Consolidated on the border will lose $4.3 million in state funding – 66 percent of its total operating budget. Losing the state tax-relief funding is a hardship for the districts; for the state’s budget writers, it’s just another $225 million they won’t have to finance.

“Even though the state is working to say, ‘We want to provide property tax relief,’ they benefit from higher tax rates and higher tax efforts made by the locals,” Christy Rome, executive director of the Texas School Coalition, told me.

[…]

Plano ISD last year sent Governor Greg Abbott a letter explaining, how as a property-wealthy district, rising values did not increase funding for local schools even though local property owners were paying higher taxes. In the 2015-16 school year, the PISD collected $470 million from local taxpayers, sent $52.6 million to the state for redistribution, and kept $417.6 million to pay for local education. If the district did not change its tax rate, rising values would push tax collections up by almost $40 million, but the state would now take an additional $43.6 million in recapture and leave the district with $5 million less to pay for schools.

The district could cut the tax rate so that total tax collections stayed the same, but the formulas would still take an additional $25.6 million because of rising property values and leave Plano with $392 million to run its schools—a $25.6 million cut from the previous year.

The other idea was to give taxpayers some relief by adopting a $10,000 local option homestead exemption while leaving the tax rate unchanged. But even this proved problematic for PISD: the district would raise another $30.2 million in total property tax collections and boost the transfer of funds to the state by $43.6 million, all while leaving the district with $13.4 million less to pay for schools.

No matter how it was calculated, Plano taxpayers paid more, the state reaped cash that lawmakers could use to reduce how much they had to spend on public education, and the schoolchildren of Plano were left with less money to pay for their education.

Read the whole thing. And as RG says, when you hear Greg Abbott say that he wants to cut the business franchise tax even more, understand that he’s really saying he wants to put a bigger share of the burden of paying for schools on you.

Turns out a little budget flexibility is a good thing

Some lessons have to be learned the hard way.

More than a year after Texas voters approved routing billions in state sales taxes to roads and bridges, some lawmakers are questioning whether the first payment of $5 billion should move forward as planned.

Texans voted in 2015 to boost funding for state’s public roadways and bridges, which have strained under the state’s growing population. Proposition 7 — loudly cheered by top Texas leaders and supported by 83 percent of voters — changed the constitution to route some taxes collected on car sales to the State Highway Fund.

But in an unusually tightfisted legislative session, some Texas lawmakers are raising the prospect of reducing that initial cash infusion to the State Highway Fund scheduled for this year to free up money for other state programs.

No one has publicly backed such a move, but key budget writers have privately discussed the option. And at a Senate Finance Committee hearing Monday, Sens. Kirk Watson of Austin and Charles Schwertner of Georgetown asked Legislative Budget Board staffers about how it might work.

It turns out that the enabling legislation for that referendum included an escape hatch, in which a two-thirds vote can be used to divert some of that $5 billion for other purposes. That probably won’t happen, though I presume it’s no less likely than a vote to tap the Rainy Day Fund to get through this session and hope that things will be better in 2019. We can certainly debate whether it should happen or not, but my reason for highlighting this is that it’s yet another example of why artificial budget constraints are so often a bad idea, whose main effect is to force budget writers to come up with creative ways around said constraints. I say it’s more honest to just let them have the flexibility to figure it out rather than be forced into certain choices, but that’s not how we do things.

Senate to begin studying school finance changes

We’ll see what this looks like.

Leaders in the Texas Senate are vowing to find ways to overhaul the state’s school finance system, saying a recent Texas Supreme Court decision granted them a prime opportunity to shake up the heavily criticized status quo.

On Monday, they announced the creation of a Senate budget working group — led by Friendswood Republican Larry Taylor — to tackle the issue. That group will work with the Senate Education Committee, which Taylor chairs, to propose replacements for the current school finance system.

“The opportunity is huge for us to get it right,” said Jane Nelson, chairwoman of the Senate’s powerful Finance Committee. “We need a whole new method of school finance.”

They’ll face an uphill climb in a session where legislators face several obstacles to major reform, not the least of which is money. The announcement comes a week after the Senate unveiled its preliminary budget, which did not include additional funding for public education.

During the Finance Committee’s first hearing of the 2017 legislative session on Monday, Nelson, R-Flower Mound, advised the newly formed working group to “start with a clean slate” in recommending a new school finance scheme. “It should be less complicated, innovative and should meet the needs of our students,” she added.

[…]

“We’re left with a question mark as to what this effort will mean by the Senate,” said Lynn Moak, a school finance expert at the Austin-based consulting firm Moak, Casey & Associates. The main question is “whether they’re trying to reform school finance within existing dollars or looking for possible additional dollars to fund the system.”

Nelson last week unveiled the Senate’s $213.4 billion two-year budget proposal, calling it a bare-bones starting point for financial discussions in what promises to be a particularly tight-fisted year. That proposal did not touch funding formulas for public education.

The House’s base budget — also released last week — included an additional $1.5 billion that could be spent on public education only if the Legislature reforms the school finance system.

Here’s the Chron story, which has the local angle.

In Houston, where voters last November overwhelmingly rejected having local taxpayers pay the state for $162 million in so-called “recapture” of school funds, HISD Trustee Jolanda Jones said the creation of the Senate group signaled that the message from the ballot initiative had been heard in Austin.

“They’ve done more with HISD pushing back than they have in 24 years of hearing school districts complain about it,” Jones, a vocal opponent of “recapture,” said Monday. “Recapture is based on the premise of Robin Hood, taking from the rich and giving to the poor, but that’s never what it did. It took from the poor and reallocated to the poor. Help me understand why 75 percent of our kids are poor, really poor, receiving free and reduced-priced meals, and you’re taking money from us? It makes no sense; we need more money, not less.”

Because the district will refuse to pay the recapture fee, the Texas Education Agency has threatened to remove commercial buildings from HISD’s taxing district this July so it can give the money to other “property poor” districts.

HISD Trustee Anna Eastman said she hopes lawmakers will act before the TEA takes the property tax revenue from local commercial properties, though she is not sure overhauling the school finance system can be done in one session. But she was heartened to see the Senate look at the funding system.

“School finance can’t be based on some kind of cryptic formula that makes it so kids in a certain pocket are getting lots of money and others are getting little,” Eastman said. “Areas such as ours shouldn’t be picking up all the slack for areas that can’t generate revenue off property growth. It shouldn’t be that big of a gap.”

In Pearland, where local schools receive $9,358 per student, the lowest share in the Houston area, Superintendent John Kelly said that if the state does not increase its share, his district may have to dip into reserve funds to provide any kind of an increase to employees or to meet rising costs. He said lawmakers have been disingenuous in saying they want to lower taxes while requiring districts to raise more local taxes.

“They talk out of one side of their mouth ‘tax cuts’ for people, but on the other side they’re confiscating the increase in tax values across the state,” Kelly said of the Legislature.

That would need to be a part of any overhaul for it to be worth the name. I’m more wary than optimistic. I fear what we will get will be another shuffling of existing funds that will mostly change who’s getting screwed less. I don’t have any faith that Dan Patrick’s Senate will put more money into the system, or that they will alter it in a way that allows for, let alone mandates, covering the costs of growth in a sensible fashion. Let’s not forget that at the same time this is going on, there will be a renewed push for private school vouchers, which will only drain more money from public education. They could surprise me in a good way, and I will reserve judgment until I see what they come up with, but I do not start out feeling very hopeful about this. The track record of the players involved argues otherwise. RG Ratcliffe, who also sees vouchers in this, has more.

Where we begin with school finance

A nice overview from the Trib on school finance, where the problems are many and the budget situation is non-optimal.

The current system is held together by a number of short-term fixes that have not been updated or reformed in decades. The Texas Supreme Court upheld the funding system as constitutional in May, and at the same time put the onus on state lawmakers to reform it — but few believe a major overhaul will come without a court order.

Even if legislators decided to tackle an overhaul of the whole system, experts say there is not enough money in state coffers to increase state spending, lower local spending and relieve Texans upset about rising property taxes. For now, some lawmakers are backing a simple plan to increase money to all school districts through the general appropriations bill, instead of taking apart the complex school finance system. Others have filed bills to tweak individual weights in the system, which provide additional money for disadvantaged student populations.

[…]

Legislators will also have to decide this year whether to re-up a program that provides extra funding for fewer than 200 districts that would otherwise have lost money in previous school finance rewrites. When the Legislature reduced property taxes by a third in 2006, it guaranteed school districts at least the same state funding they received for the 2005-06 school year by creating the Additional State Aid for Tax Reduction initiative.

That aid expires Sept. 1, but the districts still receiving the money are clamoring for an extension. “At some point, it does need to go away for the sake of more equity. But it can’t fall off a cliff at this point in time,” said Guy Sconzo, executive director of the Fast Growth School Coalition, which represents the fastest-growing districts in the state. “It does the entire system no good if any part of the system effectively goes bankrupt.”

So far, five legislators have filed bills to extend the funding program. State Rep. Ken King, R-Canadian, filed House Bill 811, which would extend funding through 2020-21. Sen. Lois Kolkhorst, R-Brenham, proposed an extension through 2022-23. Both lawmakers were members of their chambers’ public education committees last session.

King, who is on the short list to chair the House Public Education Committee this session, said some districts are still getting a large chunk of their overall funding through this program and that they cannot be cut off immediately. “I’m going to put a mechanism in place for school districts to roll off of the aid in 2021 and hopefully replace the dollars with another school funding system,” he said.

Other school finance advocates oppose the extension, calling it a “Band-Aid” that exacerbates the inequity among districts.

“It maintains an already inefficient portion of the system,” said Ray Freeman, deputy executive director of the Equity Center, which represents property-poor districts. Instead, he said, legislators should reform the base formulas so districts have access to a stable source of funds.

The Houston Independent School District will be a major focus this session because its voters in November rejected sending $165 million in local property taxes to poorer school districts. In the Texas finance system, districts with a wealthier tax base spend local money to help educate students in districts with less property tax money, as part of the “Robin Hood” or “recapture” system.

Texas Education Commissioner Mike Morath has warned that the state will probably move commercial properties from Houston ISD tax rolls to those of a nearby district. Houston legislators will be under pressure to find a way to ease the burden, as those property owners could face higher tax rates in their newly assigned districts.

David Thompson, an attorney representing Houston ISD, said a legislative win for Houston on school finance could also mean a win for other districts. “There are particular issues that would address some of the concerns in Houston and at the same time be helpful for schools across the state,” he said.

The state should update its formulas for determining which districts get transportation funding, and the state should also provide full-day pre-K funding for all districts, Thompson said.

“Everybody starts by saying, ‘There’s no money.’ There is,” he said. The state should allow the local dollars people are already paying to stay in education, instead of “siphoning local property taxes” for non-education purposes, he said.

But some legislators are saying Houston ISD voters dug themselves deeper into a school funding hole and should live with the repercussions. “I don’t think the Legislature has a lot of appetite to let Harris County out of recapture when everybody else is paying it,” King said.

[…]

School finance experts agree that increasing the basic allotment, the base funding each district receives per student, is likely to be the most popular way of changing the system. The House Public Education Committee recommended this approach in its interim report.

“The amount we set for the basic allotment drives the entire school finance system and, given our current system, increasing that amount would be a prudent move to help all districts,” said State Rep. Trent Ashby, R-Lufkin. “It’s important to note, this method can also be achieved through the General Appropriations Act alone, so it may also be the most realistic thing the Legislature can do this session without having to pass a stand-alone bill.”

It’s likely to be a favored proposal in the House, Ashby said. But like many other plans, it requires more dollars to public education, a difficult challenge this session, given that lawmakers have less money to spend than they did when they last met in 2015.

There’s also vouchers, the A-F grading system for accountability ratings, continued discontent with STAAR, curriculum and graduation requirements, etc etc etc. It’s important to remember that the local property tax boom that helped lead HISD and other districts into recapture is also a huge boon for the state budget, and not something legislators will give up easily. I think the best case scenario is some more money from general revenue, adjustments to the funding formula for transportation and pre-K as David Thompson noted, and a temporary extension of the Additional State Aid for Tax Reduction initiative with a plan to fix it next session. HISD will still owe recapture money even if all that is done, but I for one would feel a lot less aggrieved by recapture if these things happened, and would support a recapture re-vote to take place before detachment could begin. We’ll see how it goes.

Here’s your 2018-19 revenue estimate

It’s pretty mediocre.

Facing sluggish economic forecasts amid low oil prices along with billions in tax revenue already dedicated to the state highway fund, Comptroller Glenn Hegarannounced Monday that lawmakers will have $104.87 billion in state funds at their disposal in crafting the next two-year budget, a 2.7 percent decrease from his estimate ahead of the legislative session two years ago.

Hegar told state lawmakers he expected a “slow to moderate” expansion of the Texas economy. Still, he said, the amount of revenue they will be able to negotiate over has fallen. That’s largely because lawmakers in 2015 moved to dedicate up to $5 billion in sales tax revenue every two years to the state’s highway fund, rather than being spent on other priorities such as schools, health care or reforms to the embattled Texas foster care system.

“We are projecting overall revenue growth,” Hegar said. “Such growth, however, is more than offset” by the demands of the state highway fund and other dedicated funds.

The revenue estimate does not determine the scope of the entire Texas budget. Rather, it sets a limit on the state’s general fund, the portion of the budget that lawmakers have the most control over. The general fund typically makes up about half of the state’s total budget.

Two years ago, Hegar estimated that the Legislature would have $113 billion in state funds, also known as general revenue. Adding in federal funds and other revenue sources, lawmakers would have $221 billion in total for its budget, as well as $11.1 billion in the state’s Rainy Day Fund, he said at the time. Lawmakers ultimately passed a $209.4 billion budget, which included billions in tax cuts.

On Monday, Hegar estimated lawmakers would have $104.87 billion in general revenue, and $224.8 billion in total revenue to write a budget for the 2018-19 biennium which begins in September.

See here for more on Hegar’s 2015 estimate, which would up being a tad bit optimistic, but not too far off. It won’t be surprising if this one is off a bit one way or the other – this is why 2014 Comptroller candidate Mike Collier called for more frequent revenue estimates during his campaign, so the course can be corrected as needed more often – but again I expect this to at least be in the ballpark. Assuming the economy doesn’t crash and burn and/or we don’t have ten percent annual growth under Dear Leader Trump, of course.

There are a lot of ingredients that go into making the budget sausage, and there are various things that can and will be done to avoid doing anything too painful. We could of course just assume this was a temporary dip and take a few bucks out of the Rainy Day Fund to smooth out the curve – that was its original purpose, after all; now it serves as a hole in the back yard into which we bury sacks of cash for no clear reason – but that isn’t going to happen. We do have your local property taxes bolstering the state’s bottom line, so be sure to send a thank you note to the State Supreme Court for that. And as always, remember that the biggest boost to spending in 2015 was tax cuts, but that’s never what the leadership has in mind when it says we need to “cut back” on expenses. We do things one way in this state, and will continue to do them that way until there are different people running the state. The Chron and BurkaBlog have more.

We’re still lousy at funding schools

In case you were wondering.

BagOfMoney

Texas still ranks in the bottom third of states in spending per pupil in the U.S., with essentially no change in either amount or standing, a new study shows.

The finding doesn’t help, and could undercut, the state’s position in a long-running school finance case.

Figures compiled by the National Education Association and released Friday show that Texas schools are spending an average $9,561 per student in the current school year. That is well under the national average of $12,251 and ranks Texas 38th among the 50 states and District of Columbia.

Of neighboring states, only Oklahoma spends less, said Clay Robison, spokesman for the Texas State Teachers Association, the state NEA affiliate.

Last year, Texas also was 38th in the comparisons, based on numbers furnished to the NEA by state education agencies. In the 2014-15 school year, Texas spent $9,559 per student in grades K-12, based on average daily attendance. The national average was $12,061.

In recent years, Texas has fallen about $1,000 per child further below the national average, said Noel Candelaria, president of the state NEA affiliate. This school year, Texas is $2,690 below the national average. Five years earlier, in 2010-11, it was $1,685 behind, he noted. Back then, Texas spent $9,462 per child. The 2010-11 academic year was the last one before the Legislature whacked $5.3 billion from public schools.

“At a time when the Texas Supreme Court is considering a lower court ruling that found the state’s school finance system unconstitutional, these figures tell a shameful story,” Candelaria said in a statement.

[…]

Combining budget writers’ decisions in the past two legislative sessions, the Legislature put an additional $6 billion into public schools, Solicitor General Scott Keller noted.

But former Chief Justice Wallace Jefferson, who appeared as a private lawyer for Dallas, Fort Worth and dozens of other districts suing the state, said lawmakers have put the districts in a straitjacket by raising expectations of student performance while lowering the state’s share of the total tab.

Meanwhile, the Legislature effectively has imposed an unconstitutional statewide property tax because “once again local districts are without meaningful discretion over their rates,” he said.

Even if one accepts Keller at his word, that barely takes Texas back to where it was before the 2011 cuts, and that’s without accounting for enrollment growth or stricter accountability standards. I don’t expect Texas to be at the top of a list like this, but we do have an awful lot of students who live in poverty, and an awful lot of students who come from homes where English is not the primary language spoken. We also don’t do much in terms of pre-kindergarten, meaning that not only do we have a lot of high-need students to educate, we let them fall farther behind by not preparing them for school ahead of time. Yet we demand more of our districts and our students. It makes no sense.

The argument stated by former Justice Jefferson is basically what the Supreme Court found in the last school finance lawsuit, in 2005. That led to the 50-cent cut in local property tax rates, which was supposed to be made up by the state in the form of the business margins tax and other sources. We all know how that has gone. Having the state pay a higher share of the public education budget is the right idea – local districts have been shouldering an ever-increasing about of the burden in recent years – but it needs to be done in a way that doesn’t allow the state to shirk its responsibilities. I hope that’s what this Court has in mind, and if so I wish them luck in writing an opinion that will get the Lege to do what it needs to do.

The state is starting to feel the squeeze

Things are tough all over.

BagOfMoney

The state is facing big problems affecting vulnerable populations that will take significant money to fix at the same time that a slump in the energy industry is chipping into its revenues, House Speaker Joe Straus warned Tuesday.

“Writing a balanced and disciplined budget that appropriately funds our top priorities is going to be a significant challenge,” Straus said in a letter to House budget-writers, expressing confidence they are up to the challenge.

“This is not a theoretical exercise, but rather a task that affects children, taxpayers, and our state’s future,” he wrote.

Oil prices that stood at close to $60 a barrel when the Legislature adjourned last year are averaging “closer to $37 a barrel,” Straus wrote. And the state sales tax has marked five monthly declines.

Texas Comptroller Glenn Hegar last year reduced his estimate of anticipated tax revenue for the current budget period by billions of dollars, while still leaving more than enough money for the state to pay its obligations.

Even before this week’s costly flooding, lawmakers were facing budget challenges such as addressing a foster care system in crisis, Straus wrote. A federal judge has ruled that the system violates the rights of children who most often “leave state custody more damaged than when they entered.”

The public school funding system also is under court challenge. A state district judge already has ruled it unconstitutional, suggesting that a fix could cost up to $11 billion. The state has appealed the case to the Texas Supreme Court, which could rule this year.

In addition, Straus said, the program providing health-care benefits to retired teachers is in need of a long-term solution.

Those challenges will require “significant financial resources,” wrote Straus, R-San Antonio, and they alone would pose a challenge for lawmakers who return in regular session in January 2017.

[…]

In addition to looking at state program needs, leaders including [Lt. Gov. Dan] Patrick are setting the stage for additional tax relief in the next legislative session. Sen. Paul Bettencourt, a Houston Republican named by Patrick to head the Select Committee on Property Tax Reform and Relief, said there will be room for reducing taxes and that zero-based budgeting, in which all spending items must be justified, will help accomplish that goal.

Of course there’s room for property tax reductions. There’s always room for property tax reductions. We can do those other things with whatever’s left. Wafer-thin mint, anyone?

I don’t know what the Lege will do about this next year – who knows, the price of oil may go back up and we’ll all have forgotten any of this happened by then – but I do know how I’d be planning to run a campaign in 2018. The Republicans running this state are all crooks or crook-coddlers. They busted the budget giving tax breaks to big corporations, while the rest of us get standardized tests, jam-packed highways, a foster care system that kills kids, and no solutions from state leadership. They’ve been in complete control for 15 years. It’s time for a change.

Maybe that would work and maybe it wouldn’t. I doubt it could be any worse than what we’ve done before, and who knows? Maybe the business community will finally have had enough by then, especially if the Lege goes all North Carolina on gays and all Trump on immigration. Democrats would still need good candidates running on a whole lot of faith, the money to get that message out, and some clue how to boost turnout past the pathetic 1.7 million in off years level we’ve been stuck at. I can dream, can’t I? Trail Blazers has more.

Lawsuits and low oil prices

Both are threatening the next Texas budget.

BagOfMoney

Last week, lawyers for the state of Texas got the latest in a string of bad legal news.

A lawsuit challenging the state’s foster care system as inhumane appeared to gain steam when an appeals court rejected the state’s request to stop the appointment of two “special masters” to recommend reforms.

The overhauls that have been discussed so far would be pricey to implement — as much as $100 million per year, according to rough estimates from the state comptroller’s office. But they actually are on the lower end of all the extraordinary legal expenses the state is facing at a time when stubbornly low oil prices are simultaneously threatening to blunt its coffers.

Three other lawsuits against the state — two of them pending before the Texas Supreme Court, with rulings expected soon — could cost the state billions if it ends up on the losing side. Experts say the state may have the cash to cover one of them in a single budget cycle, but probably not any more than that — especially if low oil prices persist, dampening the state’s stream of tax revenue. That could mean budget cuts when lawmakers meet for the 2017 session, at least if the Republican-dominated Legislature remains steadfast in its refusal to tap the state’s nearly $10 billion Rainy Day Fund.

Two of those three lawsuits, both tax cases, could cost the state a combined $10.4 billion in tax refunds and up to $2 billion in collections per year beyond that, according to the comptroller’s office, which is closely monitoring them.

Potential cost estimates do not exist for the last case — a high-profile challenge to the state’s public education funding system — but past school finance rulings have cost the state billions.

Such sums would handily eclipse the state’s $4.2 billion projected surplus, which could itself dwindle if oil prices remain low and further blunt tax collections. (Comptroller Glenn Hegar has already lowered projections once.)

“Any of those by themselves are a huge hit,” said Dale Craymer, president of the business-backed Texas Taxpayers and Research Association. “But if you start losing two or three of those issues then, yeah, it’s much more questionable that the state’s general revenue reserves are sufficient to cover that.”

See here and here for some background. There’s not much that can be done about the price of oil, though after years of living it up, and of politicians claiming credit for all that robustness, I doubt there’s much sympathy out there for us. The rest are the result of policy and/or legislative decisions, some of which may well bite us in the bottom line. I’m rooting for the Supreme Court to stick it hard to the Lege on school finance, but the other cases I’d rather see the state win. As much political hay as there is to be made in a chaotic situation, there’s nothing good from a public policy perspective on those cases, and I have little faith the Lege would do a good job cleaning up the mess. But on school finance, all bets ought to be off. We’ll see how it goes.