By Zelma Smith, TAC Financial Analyst
The Texas Senate and the Texas House released their initial budget recommendations for the 2022-23 biennium on Jan. 21. These recommendations are the starting point for budget deliberations. Both chambers' recommendations for general revenue spending total $119.7 billion, an amount $7.2 billion greater than the available revenue Comptroller Glenn Hegar estimates lawmakers will have to spend during the biennium. The Legislature has various options to bring spending within available revenue, which must be done to comply with the "pay-as-you-go" constitutional spending limit. It is important to note that the limit includes the $946 million shortfall Hegar has estimated for the current two-year budget that ends Aug. 31, 2021.
Some of the tools in the legislative toolkit to align proposed spending with available revenue include:
- The Economic Stabilization Fund – the estimated fiscal year (FY) 2021 ending balance in the state’s reserve fund is $10 billion, with the fund balance projected to reach $11.6 billion by the end of FY 2023, absent any additional appropriations.
- Additional cost savings – more spending cuts beyond the 5% reductions most agencies offered up for the 2020-21 biennial budget and were carried forward into their appropriation requests for the 2022-23 biennium. Already built into the budget recommendations are cuts that would shift an even greater share of the costs of indigent defense and adult and juvenile community supervision programs to counties. Counties already fund 90% of the cost of indigent defense, an underfunded mandate, and 36% and 75%, respectively, of adult and juvenile probation costs.
- Accounting maneuvers – transfers of funds from outside the treasury and fund sweeps into available revenue, revenue speed-ups, and temporary deferrals of payments.
The fiscal effects of certain actions have yet to be factored into the budget numbers. The most prominent of the actions would be the 5% requested reductions to FY 2021, which Hegar has estimated total $1 billion. Also, not fully accounted for is the use of federal fiscal relief funds to reimburse the General Revenue Fund for eligible pandemic-related expenditures incurred by state agencies. This reimbursement could come from federal fiscal relief funds authorized by the CARES Act that the state has already received, as well as new federal relief measures. Additionally, the proposed American Rescue Plan could bring an added $350 billion to state and county governments.
These reimbursements and cost savings will likely be captured in the supplemental appropriations bill for the current two-year budget that ends Aug. 31. With the extension of CARES Act payments until December, these relief funds would be available to reimburse eligible expenses incurred in FY 2022, which begins Sept. 1, 2021. Likewise, the federal relief package adopted in December 2020 and any further relief measures adopted by the U.S. Congress would be available to fund eligible expenses budgeted for FY 2022 and FY 2023.
Considering its available options and the unaccounted for reimbursements and savings, the Legislature should be able to eliminate the gap between available revenue and proposed spending.
As county officials know, this is just the beginning of the budget process, with both introduced budget bills to go through mark-up by the House and Senate budget writing committees before adoption by each chamber. Eventually, a conference committee will be appointed to reconcile the differences between each chamber's budget proposal.
The TAC Legislative Department will provide a worksheet that will track budget items of importance to counties throughout the budget process. The first iteration of these worksheets, showing a side-by-side comparison of the House and Senate baseline bill recommendations, can be found here.