January 2003

The Budget Looms Large for the 78th Texas Legislature

By Andy Homer
TPEA Director of Government Relations

The 78th Texas Legislature will convene on Tuesday, January 14, 2003, for its 140-day regular session. This may be the least predictable legislative session in memory. In part, this lack of predictability stems from wholesale changes in leadership in both the House and the Senate. However, as state budget writers struggle to fashion an Appropriations Bill for the 2004-2005 biennium, the looming budget shortfall adds another element of unpredictability.

Big Changes in Leadership

This will be the first session in more than 30 years where the presiding officers in both houses will be newly elected. Not only will Texas have a new Lt. Governor, David Dewhurst, presiding over the Texas Senate, but the Texas House of Representatives is poised to elect a new Speaker, Representative Tom Craddick (R-Midland).

The changes in leadership don't stop at the top positions. The combined effect of legislative redistricting and the results of the November general elections mean that the partisan composition of the legislature will be markedly more Republican and there will be a significant influx of new legislators.

Perhaps the most profound impact of these changes will be a major reshuffling of committee chairs in both legislative bodies, but particularly in the Texas House of Representatives. Although committee chairs and membership are usually not named until after the legislature convenes, it is generally believed that every committee in the House will have a new chair and a majority of Senate committees will similarly see new leadership.

Of partcular importance to state employees and TPEA are the chairs and membership of the two budget-writing committees, the House Appropriations Committee and the Senate Finance Committee. There is a widespread expectation that Representative Talmadge Heflin (R-Houston) will chair the Appropriations Committee during the next session. Representative Heflin was the recipient of TPEA's Legislator of the Year award in 2001 for his efforts on behalf of state employees. In the Senate, a number of members are interested in serving as Finance Committee chair, among them Senator Robert Duncan (R-Lubbock), Senator Steve Ogden (R- College Station), and Senator Teel Bivins (R- Amarillo).

According to TPEA's Executive Director, TPEA is well positioned to work effectively for state employees during the upcoming session. “Obviously, money will be very tight given the state's fiscal situation, but TPEA has strong working relations with Governor Rick Perry and his office as well as with Representative Talmadge Heflin, should he be appointed Appropriations Committee Chairman,” said Gary Anderson. “We'll also be working to build a relationship and an understanding of state employee issues with incoming Lt. Governor David Dewhurst.”

Budget Overshadows Other Issues

The 78th legislature will confront a number of major issues. Legislation to deal with the state's insurance crisis will no doubt be hotly debated, as will efforts to continue reforming the state's legal liability laws, so-called tort reform legislation. While a number of major issues will be considered during the 2003 session, the state budget looms as the largest and most difficult issue lawmakers will face.

Texas budgets are on a two-year, or biennial, cycle.The 78th Legislature will be writing the budget for the 2004-2005 biennium, which begins on September 1, 2003, and ends August 31, 2005. Under the Texas Constitution, lawmakers must pass a balanced budget. This means that the Comptroller of Public Accounts, Carole Keeton Rylander, must certify that the Appropriations Bill enacted by the legislature, subject to the Governor's line item veto authority, is within projected available revenues.

Media reports have repeatedly cited estimates of a state “budget shortfall” of $5 to $12 billion. The $5 billion figure was originally cited by Comptroller Rylander. It is the cumulative amount of funds used in the current budget that are one-time expenditures or use a one-time source of revenue. In crafting the current 2002-2003 budget, legislators used a $2.2 billion surplus from the previous biennium. An additional $1.25 billion was appropriated for the new public school district employee health insurance program, but that money only pays for the second year of the program in the current biennium and assorted other items totaling $5.1 billion.

Larger estimates of the budget shortfall are based on a “current services” budget analysis, estimating how much it would cost to maintain existing state programs with the same programmatic guidelines and eligibility standards. For example, ERS has estimated that it would require $716 million in new funds to maintain the current state employee health insurance program during the next biennium. Similarly, just in the area of health care, it would require $2.4 billion in new funds to maintain the Medicaid health insurance program. The health insurance program for retired teachers would need $700 million in new funding to continue providing the same benefits over the 2004-2005 biennium. Taken together, the cost to maintain current state services over the next biennium is probably in excess of $10 billion.

An explanation of the state's fiscal situation also requires an understanding of the revenue side of the equation. Texas normally sees significant growth in revenues from one biennium to the next. During the boom years of the 1990s, biennial revenue growth was once in excess of $8 billion, although more commonly it is in the $3 to $6 billion range. An improved economy and sizeable revenue growth would significantly lessen the pain of balancing the budget. Comptroller Rylander will provide her initial revenue estimate to the legislature in January, setting the basic fiscal parameters under which budget writers will operate.

State Employees at Risk

Given the dimensions of the state's fiscal situation, TPEA is encouraging all state employees to stay as informed as possible and to contact elected officials with their concerns. “Obviously, state employees have a lot at stake in the budget debate,” said TPEA Executive Director Gary Anderson. “We're working to prevent job losses, to minimize any cuts to our health insurance, and to find a way to get a pay raise for state employees. We're working hard, but it is a difficult challenge.”

One area of spending that is receiving special scrutiny is health care expenditures, including the state employee health insurance program. TPEA is working to maintain state health care benefits with the state paying 100 percent of the insurance premium for the individual employee or retiree, and 50 percent of the premium for dependent coverage.

Given the state's fiscal situation, some cuts in health benefits are likely to occur. TPEA believes that, if cuts are enacted, the savings must be used to fund a pay raise. Furthermore, TPEA believes there should be parity in terms of potential cuts so that if they are imposed on new state employees, they should be applied equally to employees of institutions of higher education and public school district employees.