State Budget Outlook Improves

February 12, 2021

Legislative News

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During a Senate Finance Committee organizational meeting on Feb. 8, Chairwoman Jane Nelson (R-Flower Mound) indicated that the state’s budget outlook was much improved due to better-than-expected sales tax collections, federal aid funds and 5% cuts to certain state agencies.

Nelson made it clear that the Senate at least will rely on federal COVID-19 relief funds, 5% budget reductions required by leadership and tax receipts from online sales not previously collected by online marketplace providers and merchants to eliminate the current $946 million budget deficit and fund the 2022-23 budget. Another option for balancing the state budget that might still come into play is the possibility of a higher revenue estimate from Comptroller Glenn Hegar later in the session. Although not mentioned at the hearing,
appropriations out of the state’s Rainy Day Fund remains an option. However, additional budget reductions and accounting maneuvers, other than the ongoing practice of using unspent balances in dedicated accounts such as the state indigent defense account to balance the budget, may not come into play.

Just as counties and cities were able to use CARES Act funds for the payroll of public safety and public health staff, the state will use $3.5 billion in CARES Act funds to do the same for state public health and public safety staff, including Texas Department of Criminal Justice prison staff. According to gubernatorial staff, state funds expended on payroll for state public health and public safety staff between March 1 and Oct. 30, 2020, will be reimbursed by federal funds. As a result, an estimated $3.5 billion in General Revenue funds will become available for expenditure on other budget priorities. These savings, along with the 5% cuts, would be captured in the supplemental appropriations bill for Fiscal Year 2021, which the 87th  Legislature will adopt along with the General Appropriations Act for the 2022-23 biennium.

At the Feb. 10 Senate Finance Committee hearing, Gov. Abbott’s staff indicated that $583 million had been distributed by the Texas Department of Emergency Management (TDEM) to cities and counties not eligible to receive a direct federal payment from the US Treasury. In questioning the Governor’s staff, Sen. Kolkhorst (R-Brenham) stated that Texas counties and cities receiving funds through TDEM were reluctant to apply for the grants due to concerns about “clawbacks” – i.e., being forced to return federal funds or to pay expenses subsequently deemed ineligible with local funds. The governor’s staff’s detailed breakdown of the uses of the $11.2 billion in CARES Act Coronavirus Relief Fund received by the state can be found here as taken from their written testimony.

Other issues that came up during the same Senate Finance Committee meeting of interest to counties included testimony regarding the governor’s proposed body-worn camera grant program for local governments and funding for the Texas Historical Commission’s County Courthouse Program. The body-worn camera grant program, although funded in both the House and Senate base budget bills, has a matching requirement and requires unfunded equipment maintenance. Although not funded at requested levels in Senate Bill 1, Chair Nelson and other members of the Senate Finance Committee were supportive of funding the agency’s $25 million ask for the County Courthouse program. They also mentioned the Mason County Courthouse fire.

Other agencies with funding of importance to counties to be heard by the Committee this week include: the state courts; the Office of Court Administration, which includes funding for the Texas Indigent Defense Commission; and the Comptroller’s Judiciary Section, which includes funding for district judge salaries, prosecutor salaries, and county judge supplements.

For more information about this article, please contact Zelma Smith.