Texas Border Business
By State Senator Juan “Chuy” Hinojosa
Soon, lawmakers from across the state will begin a new legislative session. This session will be unlike any we have ever seen and require a bipartisan effort to enact sound policies that will help all Texans deal with and ultimately defeat COVID-19. Like many Texans facing difficult budget decisions at home, the state will be facing a significant challenge in balancing the budget without sacrificing the important services and investments provided by the state.
When we left the Capitol in May of 2019, we passed a responsible budget that invested billions in our students and teachers, lowered taxes, and shored up the Teacher Retirement System, all while maintaining a $2.9 billion surplus to address supplemental needs and over $9 billion in the “Rainy Day Fund.” As vice-chair of the Senate Finance Committee, tasked with creating this budget, I believe we passed a budget that while not perfect, did address most of the fundamental needs of our state.
However, this budget was built on the projection that the state would bring in $121.5 billion in revenue during this time period. It will come as no surprise that due to the coronavirus pandemic, the state’s revenue has seen a major decline, and is on track to collect nearly $13 billion less than projected. What was once nearly $3 billion in surplus is now projected to be a $4.6 billion deficit.
So how do we tackle this projected $4.6 billion deficit? While this is never the position we want to be in, my belief is that if we have a deficit that is less than $5 billion, we can manage it. It will not be easy, but there are budget tools available that we can use to lessen the pain. I am optimistic that the deficit will actually be less than the current estimate of $4.6 billion. When the economy shut down due to the COVID-19 pandemic last spring, the Comptroller dramatically reduced how much money he thought we would have available for the upcoming budget. However, while uncertainty remains, the latest report from Comptroller Glenn Hegar just a couple weeks ago shows a much more positive picture.
Fortunately, the combination of the $1,200 stimulus checks, extended unemployment benefits of an extra $600 a week, the Paycheck Protection Program, and the CARES Act Coronavirus Relief Fund allotment of $11.2 billion to Texas to pay for COVID related expenses, all have played a role in softening the blow of the double whammy, the pandemic and the crashing of oil and gas prices. I have worked with other members of the legislature as well as the Governor’s office to prioritize how the Coronavirus Relief Funds can be best spent to ensure we fully tackle the challenges presented by COVID-19. While this money has been critical in maintaining Texas’s ability to fight COVID-19, it is not enough, nor can it be used to simply plug the budget holes we will face next session.
The first item of business when we convene will be to address the supplemental needs of the current budget. Our budget is written in two-year cycles, with the present budget spanning from September 1, 2019 to August 31, 2021. Every cycle we pass a supplemental budget to fill in the gaps in the budget to end that cycle. We know that we are going to have unpaid bills from this current budget, but we will also have new federal dollars available that we did not anticipate, such as an increased level of Medicaid matching dollars, that will help alleviate the shortfall.
We will also have to craft a new budget for the 2022-2023 fiscal years. Sadly, this will not be the first time we are dealing with a revenue shortfall, but we have the budget tools to help get us out of this hole. In 2011 we experienced a recession where we reduced the budget by $15 billion. It was a very painful budget where we underfunded Medicaid by $5 billion to stretch out the payments. This session, while we are not starting in nearly as deep a hole, it is critical that we use the tools available to us to help us maintain the state’s current financial commitments and provide time for the economy to recover. Prior to the pandemic, our Texas economy was the strongest in the country, and I am confident we will return to that position soon.
Options available include the deferral of various payments like Medicaid or even delaying other payments by just one day to the next budget cycle. In utilizing these tools, we can maintain funding but pay for a part of it after the economy has had time to recover. Additionally, we have a Rainy Day Fund that is projected to have $8.7 billion. While we cannot use all of that fund, we can certainly use what is needed to help us fund the state’s needs for public health, education, and economic recovery. Moreover, state agencies have been asked to reduce their present budget by 5%, the savings of which have not yet even been subtracted from the projected deficit.
While there is uncertainty, I feel positive that next session’s budget is manageable without the painful cuts we experienced in the recession of 2011. The vaccine is coming online, discussions are taking place in Congress about additional federal assistance, the price of oil is increasing, and our economy is recovering. These factors will help make this a much more manageable budget than we feared even just a few months ago. Yes there might be some funding cuts, but they would be the type that required a Band-Aid, not a suture. It won’t be easy, but if everyone works together, it won’t be painful, but we will feel some discomfort.