Texas House and Senate propose similar spending amounts in preliminary budgets

Texas leaders in the state House and Senate have each proposed budgets that spend $119.7 billion in general revenue for the next two fiscal years, signifying notable agreement on the top lines as lawmakers try to draft a state spending plan while they confront the coronavirus pandemic.

The proposals from the two chambers, issued first on Thursday by the Senate and then by the House, are about $7 billion over the amount of general revenue Comptroller Glenn Hegar said lawmakers have to spend during the session.

State lawmakers are required to pass a balanced budget, meaning they will have to either cut down that spending later in the budgeting process, delay spending on certain items until a later budget cycle or tap into the state’s rainy day fund to pay for some of its expenses, among other accounting maneuvers budget writers could use.

Hegar last week estimated the state’s general revenue at $112.5 billion for the 2022 and 2023 fiscal years, but cautioned lawmakers that his projection was “clouded in uncertainty,” as the coronavirus pandemic continues to upend daily life.

Combining state revenues and federal funds, the proposed budgets would be around $251 billion, but officials have said it’s too soon to know what amount of federal relief money could be on the table. The state’s share of the spending is about 4% higher than the current two-year budget set to end in August 2021, but 3% lower when factoring inflation and population growth, legislative leaders said.

The two chambers have not always been so closely aligned when proposing budgets at the start of legislative sessions — in 2019, for example, there was a $3 billion difference in public education funding proposals. In 2017, they were nearly $8 billion apart.

This year, the proposals fully fund Texas public schools under a school finance system they overhauled in 2019 to boost funding and slow the growth of local property taxes. They both also include $70 million to transition to statewide online STAAR testing.

The proposals did not say how they would cover the gap between the spending limit and the proposed expenditures. Hegar could revise his revenue estimate later in the legislative session. And lawmakers could also tap into the state’s large reserve, known as the Economic Stabilization Fund or the rainy day fund, which ended 2020 at a balance of nearly $10 billion.

“Will the Economic Stabilization Fund be used at all somehow?” said Eva DeLuna Castro, who oversees budget analysis for the progressive organization Every Texan. “It’s not used at all in (either proposal).”

Lawmakers have time to decide whether they will use it, and the budgeting process may end up being less painful than they once imagined. In addition to writing a budget for the next two years, they will need to pass a bill that covers any shortfall from the current budget. In July, Hegar projected that lawmakers would have a $4.6 billion shortfall. When providing an update in January, Hegar projected a nearly $1 billion deficit for the current state budget that runs through August 2021.

That number, however, doesn’t account for 5% cuts to state agencies’ budgets that Gov. Greg Abbott, Lt. Gov. Dan Patrick and former House Speaker Dennis Bonnen ordered this summer, or any supplemental changes to the budget lawmakers will have to make.

“The Texas House’s base budget prioritizes the needs of Texans during this consequential moment in our state’s history and advances the Legislature’s commitment to the historic public education and school finance and property tax reforms passed last session,” new House Speaker Dade Phelan, R-Beaumont, said in a statement. “The decisions we make during the 87th legislative session will have lasting effects on the future of our state, which is why the House will work to improve our business climate, foster economic prosperity and do what’s right for our students.”

State Sen. Jane Nelson, R-Flower Mound, who as chair of the Senate Finance Committee released her chamber’s proposal, emphasized the legislature’s focus on the state economy.

"Texas' economic strength — and the work we did to scrutinize agency budgets — puts us in a better than anticipated position to keep our commitment to education, defeat the coronavirus and invest in our economic recovery," Nelson said in a statement. "SB 1 funds essential services, keeps up with growth and meets our obligations to vulnerable citizens. It is a starting point. We have many tools available to balance this budget, which will require us to re-establish our priorities, stretch every dollar and find more efficient ways to deliver services.”

Still, there’s a lot of work to be done before the budget becomes law. Both chambers will need to pass their budget bills through their respective committees and the full chambers. Changes to each proposal are near certain before that happens. Then both sides will have to reconcile the difference in their proposals before sending the final version to Abbott for his signature.

Vance Ginn, chief economist with the conservative group Texas Public Policy Foundation, was optimistic about the legislature’s priorities despite a tumultuous pandemic year.

"At a time when many Texas families and employers are struggling financially across the state, we are glad to see the Texas Legislature come together to introduce a state budget that protects taxpayers,” Ginn said in a statement.

Disclosure: Every Texan and Texas Public Policy Foundation have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.