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rainy day fund

Coronavirus and the state budget

Ain’t gonna be great. How bad, we don’t yet know.

Comptroller Glenn Hegar briefed Texas House members on the state’s economy and budget Sunday night, saying that while it was too soon for specific forecasts, both are expected to take potentially massive hits in the wake of the new coronavirus pandemic, according to multiple people who were on the conference call.

The members-only call, led by House Speaker Dennis Bonnen, R-Angleton, was one of state lawmakers’ first glimpses of the impact the virus is expected to have on multiple industries, state finances and Texas’ largely oil-fed savings account, known as the Economic Stabilization Fund or the rainy day fund.

Hegar, who referred to the state of the economy as “the current recession,” according to multiple people on the roughly hourlong call, predicted both the general revenue for the state budget and the savings account balance will be drastically lower — possibly by billions of dollars — when he makes a revised fiscal forecast. He said that update could happen in July.

Later Sunday, the comptroller’s office said that unless the Legislature spent money out of the savings account before July, the balance for the fund would be revised down, but not by more than $1 billion.

In October 2019, Hegar estimated that the state budget would have a nearly $3 billion balance for the fiscal 2020-21 biennium. The balance of the Economic Stabilization Fund, Hegar announced at the time, would be around $9.3 billion by the end of the 2021 fiscal year in August of that year.

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Abbott, for his part, noted last week that he and the Legislature can tap into the state’s disaster relief fund immediately to help respond to the virus. He also said that the Economic Stabilization Fund could be used “at the appropriate time,” which he said would happen when state leaders “know the full extent of the challenge we’re dealing with.”

Before the stabilization fund could be used, Abbott would need to summon state lawmakers back to Austin for a special session before the Legislature reconvenes in January 2021. When asked at a town hall about the possibility for calling such a session, Abbott said “every option remains on the table,” while noting that there would not be any need for such an action if every Texan followed guidance to help curb the virus.

Obviously, the crash in oil prices doesn’t help the state’s financial picture, either. It’s sales tax collection that will really suffer, and that pain will be spread to the cities and counties as well. As always, the big picture here is “how long will this take” and “how many businesses and jobs will be lost in the interim”, and right now we don’t know.

I will say, situations like this are among the reasons why balanced budget requirements are such a bad idea. Let the state – and the cities – run a deficit for a year or two, rather than cut a bunch of programs and lay off a bunch of employees, both of which will exacerbate the effect of the overall downturn. I assure you, society will not crumble around us if we do that. We will see plenty of shenanigans pulled by legislators to worm their way around the balanced budget requirement, as we have always done. So why not be honest about it and just admit that the whole thing is a sham and we should just not worry about it, at least for this cycle? We can always get back to it next time. Much easier said than done of course – constitutions and charters can’t be so easily cast aside, which again goes to my point about why these things are stupid – but in a world where everything has been thrown into chaos, this just makes sense. Same for revenue caps as well – if the revenue for the state, or the city of Houston, falls ten percent this year, it will take three years under the existing 3.5% revenue cap just to get revenue back to existing levels, while forcing needless cuts in the meantime. It’s all a sham, we should seize the moment to recognize it for the sham that it is, and free ourselves once and for all from its ridiculous shackles. Won’t happen happen, but I’ll never stop pointing it out.

Worrying about the restaurants

Alison Cook laments the potential fate for her favorite part of Houston.

Depending on local or state strictures, to help stem the spread of Covid-19 restaurants in most major markets would be able to provide takeout, drive-thru or delivery rations only. Dine-in was done, for the present and — according to some epidemiologists and public health experts — very possibly in rolling closures for the next 18 months. That’s the time it will take for a vaccine to be tested, manufactured and made available.

If we’re lucky.

Even though I’ve suspected this was coming since the calamitous February business drop experienced by restaurants in Bellaire Boulevard’s Asiatown — a preview of what lay ahead for the whole market as Covid-19 spread, I feared — the reality of the closures has hit me hard.

I gasped when I saw an Open Table graph that showed restaurant bookings, already down 45 to 65% last week, plunging off the cliff to zero on Tuesday in Boston, L.A., New York, San Francisco, Seattle, Toronto and Washington, D.C. It looked like the highway to hell.

I’m in mourning daily as I read the anguished tweets from Houston chefs and restaurant owners I admire. I’m sick with worry for the servers and bartenders and bussers and line cooks whose livelihoods are in peril.

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My greatest sorrow is that I see a great winnowing ahead. On the other side of this public health crisis, it seems likely that Houston’s dining landscape will be substantially altered. Restaurant profit margins are slim in the best of times, and without serious public investment at the state or federal level, we are likely to see many bankruptcies.

It’s not the big chain restaurants I’m worried about — it’s the mom-and-pops and the small independent operators who help to define the city. Those are a cultural legacy well worth saving.

Ian Froeb, the restaurant critic at the St. Louis Post-Dispatch, told a radio interviewer the following: “I have a top 100 restaurant list and somebody that’s in the industry said, ‘You could be looking at 80 of the 100 might not come back.’ I didn’t push back. That seems like a real possibility.”

I’m not quite that pessimistic, yet, but the fallout is going to be bad.

Obviously, we can all do more ordering takeout in the interim, in the hope that these places we love can weather the storm, which we also hope will be measured in weeks and not months. But let’s be clear, the state of Texas could also help.

Up against a Friday deadline, the broad base of workers in the Texas restaurant industry have asked Gov. Greg Abbott and other officials to waive monthly sales taxes due by the end of the day.

Bobby Heugel, owner of several popular bars and restaurants in Houston, said many businesses could ride out the new coronavirus’ social slowdown for months if the state waived, delayed or deferred the monthly taxes.

“We have been crushing the governor’s office for requests of deferrals,” Heugel said Thursday. “Their voicemail actually stopped working late last night.”

Comptroller Glenn Hegar said the state won’t push back Friday’s deadline, though it has done so after hurricanes and other disasters. Hegar and aides cited a couple of reasons: Hurricanes and similar disasters, unlike pandemics, can knock out the infrastructure used to calculate and pay taxes. More importantly, the state and local governments that depend on those taxes to keep hospitals and emergency services going need the money as they prepare for the number of Texans testing positive for the new coronavirus to skyrocket within weeks.

“It would be irresponsible, but more popular, to delay collections,” said Karey Barton, associate deputy comptroller for tax. “The people who paid those taxes need that money to be available to keep operating hospitals and other services.”

I understand the concern, but the state has a rainy day fund it can tap into to bridge the gap in the interim. Maybe Greg Abbott needs to use his emergency powers to make that happen, maybe he needs to call a special session to enable it, or maybe he just needs to order it and let someone file a lawsuit to stop him, I don’t know. But the effect of losing a significant portion of the hospitality industry will last a lot longer than this crisis. We need to think outside the box here, and take action as needed before it’s too late.

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.

Senate presents disaster relief bills

Better late than never, though why they’re late remains a subject of interest.

More than a year and a half after Hurricane Harvey ravaged the state, Texas Senate leaders announced a $1.8 billion trio of disaster relief bills on Wednesday that they said would create “a roadmap to prepare our state for future hurricanes and natural disasters.”

The legislation — Senate Bill 6Senate Bill 7 and Senate Bill 8 — would require the Texas Department of Emergency Management to create a disaster response plan for local officials, direct the state’s water planning agency to devise a statewide flood plan and create a “resiliency fund” to support flood projects.

Flanked by senators who represent Harvey-impacted districts, Lt. Gov. Dan Patrick acknowledged at a Capitol news conference that storm-ravaged communities have been waiting for a long time to see what the state might do to help them recover. But Patrick and the senators who authored the bills emphasized in their Wednesday remarks that the result was the product of “a lot of thought and input” and is the best possible outcome.

“We said at the time [of the storm] we would dedicate ourselves to helping people rebuild their homes, their businesses, their communities and do all we could to mitigate,” Patrick said.

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Sen. Brandon Creighton, a Conroe Republican who authored SB 7, which would create the flood infrastructure fund, described the package as the “most comprehensive, forward-reaching approach that any state has offered following a disaster.”

His bill is the most expensive of the three. It would withdraw $900 million from the state’s historically flush Economic Stabilization Fund to help local officials put up the so-called “matching dollars” they’ll need to draw down billions more in federal recovery funds.

That’s far less than the $1.3 billion that Houston Mayor Sylvester Turner has asked for on behalf of all 55 Harvey-impacted counties to help with local matching funds. He has said that would draw down another $11 billion in federal dollars for debris removal, for repairs of storm-battered government facilities, and to harden public and private structures so they can better withstand future storms.

A similar bill Creighton filed in early February would allocate $3 billion from the state’s emergency savings account for the fund. But he said in an interview after the news conference that the total price tag of the projects local communities have told the state they want to complete is less than that.

Sen. Larry Taylor, a Friendswood Republican who also spoke at Wednesday’s news conference, said about $200 million of the $900 million allocated under SB 7 would go to draw down federal funds for a multibillion-dollar project to construct nearly 27 miles of coastal levees in southern Orange County and to shore up nearly 30 miles of existing coastal levees in Port Arthur and Freeport. That project is a significant component of a larger coastal protection system that local officials and scientists have long envisioned to safeguard the state from deadly storm surges during hurricanes.

We can certainly debate whether or not there should have been a special session to get all this done. For now, this is what is on the table. I’m going to wait and see what the experts have to say about these bills before I draw any conclusions. Feel free to chime in if you have opinions already.

Dems propose their school finance bills

It’s good to have a broad array of options.

The Texas House Democratic Caucus laid out a $14.5 billion plan for school finance reform and property tax relief Thursday, releasing a list of priorities in advance of a key school finance bill Republican education leaders are expected to file and support.

The Democrats’ plan is composed of dozens of bills members have filed — or will file — to increase teacher pay and benefits, pay schools more for educating low-income students, and provide more counselors for school districts. It does not include two policy items that may be included in Republican-filed legislation: merit pay for teachers or paying schools more for higher student test scores.

“We hope to work with our colleagues to incorporate some of these ideas into their bills,” said state Rep. Chris Turner, D-Grand Prairie, who chairs the caucus.

[…]

Some of the House Democrats’ proposals dovetail with recommendations in the school finance panel’s report. [Rep. Mary] González filed House Bill 89, which would increase the base funding districts get per student and ensure they receive more funding for low-income students and those learning English.

A few House Democrats have filed bills that would fund full-day pre-K for all school districts, an estimated cost of $1.6 billion.

The proposal also includes $3.78 billion for teacher pay and benefits — around the same amount Senate Republican leaders have proposed in across-the-board $5,000 raises for full-time classroom teachers. House Democrats are championing proposals that would increase salaries for not just teachers, but also support staff, while also boosting financial support for teacher health care premiums. The exact amount of the proposed raises for each person has not yet been determined.

See here for more on the school finance panel report. Some of these ideas will be included, in whole or in part, in the omnibus school finance bill that Rep. Dan Huberty will file. Others are there more as a statement of values, since none of these bills will pass without sufficient Republican support. If I could pick just one thing to make it to Abbott’s desk, it would be the full day pre-K, which will have a big return on investment if we do it right. When all is said and done, I’d love to know how much of what was on offer today makes it through into the final bill.

Things the Rainy Day Fund was not intended for

This, for one.

A pair of conservative lawmakers want Texans to help pay for President Donald Trump’s border wall and plan to ask lawmakers to take $2.5 billion out of its rainy day fund to cover the costs.

Reps. Briscoe Cain, R-Deer Park, and Kyle Biedermann, R-Fredericksburg, told Breitbart, a conservative news publication, they plan to file legislation that would cover costs to “design, test, construct, and install physical barriers, roads, and technology along the international land border between the State of Texas and Mexico to prevent illegal crossings in all areas.”

Texans and Texas-owned companies would be given preference on all bids and contracts, the publication reported.

“If Congress refuses to keep Americans safe, then Texas will answer the call,” Cain said in a statement. “Our office is receiving many calls in support of this effort. We’ve even received calls from citizens of other states offering to help fund the wall.”

[…]

Texas now spends about $400 million a year on border security. Texas Gov. Greg Abbott suggested that lawmakers will renew that commitment over the next two years. The proposal from Cain and Biedermann would spend $2.5 billion by Aug. 31, according to Breitbart.

You know, I’m old enough to remember when this was known as the Economic Stabilization Fund. I’m also old enough to remember what its original intent was:

Texans approved a constitutional amendment creating the ESF in 1988, following an oil price plunge and economic recession that forced lawmakers to raise taxes to keep state government in the black. The Legislature structured the fund to automatically set aside some tax revenues in boom years to help the state during downturns.

It actually worked that way for awhile, too. Then Rick Perry came along and used the cover of the 2011 budget deficit to declare that the ESF was actually a fund for helping the state cope with natural disasters, and not to be used to avoid the deep and damaging cuts to things like public education and Medicaid that happened during that session. That change by executive fiat, along with the popular moniker of “The Rainy Day Fund” led to many people demanding its use in the aftermath of Hurricane Harvey, which Greg Abbott refused. It’s still not clear what the state will do to help further the recovery from Harvey, but tapping into the ESF in a time of need for one-time expenditures is at least within hailing distance of its original purpose. The Cain/Biederman exercise in pants-wetting and xenophobia, on the other hand, is not. I’m glad we had the chance to have this little conversation. The Observer has more.

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.

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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