Texas Senate approves a $250 billion state budget — but questions remain about how federal aid will be used

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The Texas Senate unanimously signed off on a two-year, $250 billion state budget Tuesday, though there are still questions about how tens of billions of dollars in expected federal aid will be used — and whether it will arrive in time for lawmakers to use this legislative session.

“This budget … meets our essential needs in this growing state [and] it holds true to the principles of fiscal responsibility that make Texas strong and successful,” state Sen. Jane Nelson, the Flower Mound Republican who chairs the budget-writing Senate Finance Committee, told senators as the chamber took up Senate Bill 1.

The Senate’s budget as passed includes $117.9 billion in general revenue, which is roughly $5 billion over the amount Texas Comptroller Glenn Hegar projected lawmakers would have to work with. But it does not factor in over $35 billion in federal funding in coronavirus aid, much of which will go to the state government. Senators acknowledged during Tuesday’s debate that those funds may be a challenge to appropriate, depending on when they come in and what strings could be attached to them.

Nelson, asked by state Sen. Royce West, D-Dallas, whether those federal dollars would be appropriated before the end of the regular legislative session in May, said she “sure can’t say they definitely will be.” If those dollars arrived during the interim, Nelson said, there was language in the spending plan that would let lawmakers have input on how that money is appropriated.

The legislation now heads to the House, which filed its own two-year budget proposal in January. The House’s proposed budget as filed would spend $119.7 in general revenue which is also over Hegar’s projection. The comptroller made that forecast in January, but cautioned that his projection was “clouded in uncertainty” due to the coronavirus pandemic’s impact on the state economy. He could modify his revenue estimate before the Legislature adjourns.

Still, the Legislature must pass a balanced budget before lawmakers gavel out. The two chambers will have to cut down their proposed spending plans or rely on accounting maneuvers, such as pushing off certain items or tapping into the state’s Economic Stabilization Fund, to help offset some of those expenses.

The Senate’s spending plan as passed would not pull dollars from the fund — also called the rainy day fund — which ended 2020 with a nearly $10 billion balance and is projected to end fiscal year 2023 at $11.6 billion if lawmakers do not use it, according to Hegar’s update in January.

The Senate’s budget continues to spend the most on public education and health care, with the plan fully funding the state’s public schools under a school finance system. The Legislature overhauled that financing system during the 2019 session by boosting funding, which included pay raises for teachers and slowing the growth of local property taxes. The current budget plan also adds $1 billion toward property tax cuts the Legislature spent over $5 billion on in 2019 and an additional $453 million to put toward retired teachers’ pensions.

State Sen. Eddie Lucio Jr., a Brownsville Democrat who serves as vice chair of the Finance Committee, said his “worst-case scenario” this session would have been massive budget cuts to public schools like the cuts lawmakers made in 2011 after a recession.

“It was my dearest hope that we would not have to enact another cut so devastating 10 years later with the budget,” he said, referring to the economic fallout last year related to the pandemic. “I am pleased that we did not do so.”

On top of writing the 2022-2023 state budget, lawmakers will also have to pass legislation that covers expenses from the current budget. In January, Hegar projected the Legislature would face a nearly $1 billion deficit for the current budget — an improvement from the $4.6 billion projection he made in July 2020. Hegar’s estimate, he said, did not include savings from the 5% cuts to certain state agencies.

Before the Senate gave a final stamp of approval on its proposed spending plan, state Sen. Judith Zaffirini, D-Laredo, read a statement to the chamber explaining why she was voting for the legislation.

“After the year we’ve had,” she said, “it is miraculous we have produced a bill we can all support.”

And in a statement after the vote, Lt. Gov. Dan Patrick applauded Nelson for her leadership, saying the lawmaker "has done a masterful job."

"Like every budget passed by the Senate since I have been lieutenant governor, SB 1 is within the spending limit set by the Texas Constitution, and, once again, the growth rate does not exceed population times inflation," Patrick said. "SB 1 will help ensure that the economic forecast for Texas will continue to be bright."