Texas House budget writers send budget to full House with massive health care cut

Just one day after the Texas Senate passed its two-year budget, a key House committee sent their own spending proposal to the full House – but not before cutting $2.4 billion from the state’s largest health care program for the poor and disabled.

Emboldened by the election of President Donald Trump, Texas House budget writers voted to cut $1 billion in state funding for Medicaid, the federal-state insurance program that mostly serves children, pregnant women and people with disabilities. In doing so, they agreed to forfeit another $1.4 billion in federal funding, though they promised the move would not harm patients’ ability to receive health care.

“This type of a maneuver has been incorporated many times before, and I’m very proud that we’ve never compromised access to services as a consequence of any of those types of actions,” state Rep. John Zerwas, R-Richmond, and the House’s lead budget writer, said in response to critical questions from Democrats.

It was the latest attempt to pare down the budget proposal initially offered by House Speaker Joe Straus. The House's revisions to the budget now move for a vote in the lower chamber as a $218 billion document, down from Straus's $221 billion proposal when it was first written in January.

The latest version of the budget directs the Texas Health and Human Services Commission, which administers Medicaid with financial help and guidance from the federal government, to work with the Trump administration to find “flexibility” to reduce costs. It would amount to almost a 4 percent cut to the total two-year funding for the Texas Medicaid program.

The proposal could mean reducing the amount doctors and other health care providers get paid by the public insurance program, or restricting patients’ eligibility for health care services. Texas health officials could also ask the federal government to pony up more matching funds for certain specialty programs, including for women’s health, Zerwas said in a telephone interview.

“Perhaps it’s a stretch goal, but as you know, we’re into stretch goals these days,” he said, adding: “I am absolutely confident that services won’t be compromised, that quality won’t be compromised.”

State Rep. Sarah Davis, R-West University Place, said in committee that Charles Smith, an appointee of Gov. Greg Abbott and the executive commissioner of the health agency, had signed off on the proposed cut. “He felt like this was very reasonable and doable,” said Davis, who led a group of lawmakers in examining health and human services spending.

“With the election of Donald Trump, I think the commissioner feels like the state of Texas is going to be given more flexibility by our federal counterparts,” she said.

Democrats on the budget committee expressed anxiety about the spending cut, which was first made public Wednesday afternoon.

“I’m just trying to get some clarification on the net effect of a $1 billion reduction,” said state Rep. Armando Walle, D-Houston.

State Rep. Donna Howard, D-Austin, said the budget was “the best we could do with what we have but not something to be proud of in terms of not dealing with the growth.”

The budget passed unanimously out of the House Appropriations Committee and is expected to move next week to the House floor for debate and a vote, laying the groundwork for a showdown between the House and Senate as they seek to reconcile major funding differences. The two chambers are at odds over which methods they should use to finance certain aspects of the two-year budget. There are also fierce disagreements about which state programs should be cut in a lean budget year.

State lawmakers have less money at their discretion this year in crafting a two-year budget. By cutting taxes in 2015, the Legislature reduced state revenue available to them for this session by about $4 billion. Lawmakers also dedicated nearly $5 billion that year to highways — a move that voters later approved in a statewide election — which left fewer dollars for priorities like health care and education.

In addition, a moderately sluggish economy slowed revenue growth, leaving the state's coffers emptier than state officials had projected.

Zerwas’s proposal would draw $2.5 billion from the state’s $10.2 billion savings account, known as the Rainy Day Fund, a move budget writers in the Senate vehemently oppose. Previously, Zerwas had recommended using $2.5 billion from the savings account to pay down some holdover costs from the 2015 budget, but he instead chose to use that pot of money for the current two-year budget because it was a “more palatable” option for conservatives, he said.

Using the Rainy Day Fund meant the House budget “does not rely on budget gimmickry that puts the state's investment in transportation at risk,” Zerwas said.

That was an apparent reference to the Senate budget, passed by the upper chamber yesterday, which relies on a $2.5 billion accounting trick to find desperately needed funds in a tight budget year. By delaying a scheduled diversion of sales tax money for highway funding from the 2019 fiscal year’s budget to the first year of fiscal year 2020, the Senate freed up $2.5 billion for other purposes. Though Senate leaders have promised the accounting trick would not adversely affect highway improvement projects approved by voters, Straus and other House leaders have criticized the proposal harshly.

In total, the House version of the budget would spend $104.3 billion in state cash, with an additional $2.5 billion coming from the Rainy Day Fund. The Senate’s proposal would spend $106.3 billion in state funds.

Zerwas’s proposal taps the Rainy Day Fund to cover a shortfall in a pension program for retired teachers ($500 million), continue increased border security spending ordered by state lawmakers in 2015 (about $650 million), and finance basic improvements at decrepit state-run mental health hospitals (about $240 million).

Zerwas downplayed concerns raised by some fiscal hawks about using the Rainy Day Fund, calling the proposed withdrawal “modest” and “responsible.”

The House budget would add about $430 million in additional funding for the Child Protective Services and foster care systems. That's just less than half of what child welfare officials have said they need to make serious reforms in the face of crisis. It would also add $1.5 billion for public schools if the Legislature passes a school finance reform bill championed by the House.