Lawmakers could use $5 billion of a record surplus for raises, flood prevention and border operations

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Some $5 billion of the state’s historic $32.7 billion surplus would be earmarked for state employee pay raises, mental health hospitals, border security, flood mitigation projects, Medicaid costs, state debt reduction and other items under a bill that a key Senate committee advanced Wednesday.

Senate Bill 30, by Senate Finance Chair Joan Huffman, R-Houston, would add $11.8 billion to the state’s current budget, which runs until the end of August. The Senate Finance Committee passed the bill Wednesday.

The proposal includes $5 billion in general revenue made available to budget writers by unprecedented and unanticipated tax revenue left in state coffers as lawmakers entered this legislative session. It also allocates about $1.4 billion in federal recovery dollars from the American Rescue Plan Act.

House Appropriations Chair Greg Bonnen, R-Friendswood, filed his chamber’s version of this year’s supplemental budget bill, HB 500, on Tuesday. It is similar to the Senate bill, though not identical.

Both the House and Senate budget bills include $100 million for the first round of state employee pay raises, beginning immediately with more to come in the next two years; $600 million for grants to school districts for safety measures and $400 million for flood mitigation projects.

“As promised, SB 30 supports proposals and initiatives that will help keep Texas as the premier state for families and businesses alike,” Huffman said in a statement on Twitter.

Both proposals would pump $1 billion into the Employees Retirement System to lower debt payments by offsetting some of Texas’ unfunded pension liabilities for state employees, which amounted to $14 billion in 2021. They also earmark $2.9 billion in general revenue to fill in gaps in Medicaid funding due to enrollment and rising costs. They would also earmark $3.9 billion to give some energy customers relief on bills that increased after 2021’s deadly winter storm caused massive power outages. The full Senate is expected to work out the mechanism for that in the coming days.

Neither bill addresses the notion of property tax reductions this year, a cornerstone of GOP state leaders’ plans for a chunk of the surplus, for the current spending plan. The proposals for the next two-year spending plan include some $15 billion for property tax cuts.

Legislation supplementing the current budget, which was initially written based on projections made before it passed in 2021, is a routine task each session and allows budget writers to shore up any differences that appeared in costs and actual revenue during the previous two years.

Some $27 billion that would remain in the surplus — the same amount the U.S. has sent in military aid to Ukraine in the last year — is, so far, left out of separate budget proposals for the new budget that starts later this year. So is about $4 billion in federal ARPA funds.

The proposals come as House and Senate budget leaders work through the details of budget bills that propose spending $130.1 billion in general revenue in the 2024-25 spending cycle.

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