Interim Studies on State Spending Issues Afford Early Warning of What’s to Come

Former Lt. Gov. Bill Hobby used to say that the only must-pass bill the legislature ever considers is the budget, and the rest is poetry. With that axiom in mind, take a look at some of the interim-study assignments given by the presiding officers in the Texas House and Texas Senate to their respective budget-writing committees. They are harbingers of what’s to come.


Texas House Speaker Joe Straus directed the House Appropriations Committee to consider the following key items, including one with strong bearing on the future of active and retired school employees’ health plans (see number 7 below), among other things:


1. Evaluate potential fiscal policy challenges or economic disruptions in the 2016-17 biennium, including the long-term impact of price declines in oil and natural gas on the Texas economy and any fiscal implications for the state budget. Examine options to mitigate the risk of unexpected downturns in state revenue. Examine further progress made during the 84th legislative session to reduce reliance on general revenue dedicated accounts for budget certification. Recommend new or alternative methods to further reduce reliance on dedicated accounts for budget certification purposes and maximize usage of dedicated funds for their intended purposes. Examine other accounts and funding streams utilized by state agencies and institutions of higher education for opportunities to further increase budget transparency.


3. Examine Texas constitutional spending limits compared to limits utilized in other states, evaluate their effectiveness in maintaining fiscal discipline, and recommend potential modifications, if needed.


5. Monitor the accumulation of available funds within the Texas Economic Stabilization Fund (ESF) [also known as the Rainy Day Fund], particularly in light of the passage of HB 903 (84R). Determine the accuracy of prior ESF revenue predictions, the feasibility of long-term projections for the fund, and the effectiveness of proposed investments strategies utilized by the Comptroller of Public Accounts. Study the impact, if any, on the state’s credit rating when the ESF is utilized at various thresholds including usage for one-time expenses versus recurring costs. Examine potential limits in utilizing the ESF for specific uses, such as addressing unfunded liabilities or retiring state debt.


7. Monitor the implementation of HB 2 (84R) as it pertains to the short-term funding provided to TRS-Care. Evaluate additional methods to address the health care needs of retired teachers in light of the current health insurance market, including the feasibility and costs associated with retired teachers not eligible for Medicare remaining on a school district’s health care plan until Medicare eligible.


13. Conduct a review of current public education programs administered by the Texas Education Agency that are funded outside of the Foundation School Program. Make recommendations to increase, decrease, or eliminate programs based on measurable performance and effectiveness.


14. Conduct a review of current funding formulas for community colleges. Specifically, focus on the elements of the instructional funding structure created by the 83rd Legislature: core operations, student success points, and contact hour funding and also the adequacy of state funding to sustain community colleges in light of the variance in resources available to individual colleges. Make recommendations for possible changes to the funding structure of community colleges or changes in the levels of current funding given the future workforce and higher educational needs of the state. (Joint charge with the House Committee on Higher Education)


Over in the Texas Senate, Lt. Gov. Dan Patrick, the chamber’s presiding officer, has given the Senate Finance Committee a number of topics to tee up for probable new action in the 2017 legislative session, including two that would lead to even more restrictions on state spending than the extensive barriers already built into state law:


Spending Limit: Examine options and make recommendations for strengthening restriction on appropriations established in Article VIII Section 22 of the state constitution, including related procedures defined in statute. Consider options for ensuring available revenues above spending limit are reserved for tax relief.


Fiscal Responsibility: Review the budgeting format of other states, such as whether they use strategy-based budgeting, program-based budgeting, or some other approach and discuss the level of transparency with each approach. Review and make recommendations to reduce state debt liabilities, including state pension liability. Consider how to incentivize state agencies, boards, and commissions to identify and realize savings to taxpayers.