1. The 2018-2019 TEXAS State budget: current & future outlook
@DeLunaEva
June 2017

2. 2018-19 Budget “wins” & “Losses”
More funding for child protective services/foster care, and for mental health
Almost $1 billion in Economic Stabilization Fund used, though mostly for building repairs
Higher education avoids massive cuts proposed earlier this year
State share of school funding drops; basic aid per student stays at $5,140, losing ground to inflation
Medicaid underfunded: big “IOU” for 2019 Legislature
Unwillingness to talk about inadequate revenue; instead, local property tax caps & state franchise tax phase-out proposals
$500 million more for CPS (17% more, All Funds)
$400 million more for BH (11% increase) – not counting Medicaid/CHIP-funded (another $3.5 B), and ESF increases for hospital repairs & maintenance

3. Special session & beyond
Local governments: tighter property tax caps
New: local spending cap, on non-emergency spending by municipalities (and counties?)
State spending cap (SB 9); would apply to ALL General Revenue, not just undedicated taxes
Economic Stabilization Fund: $11 billion by 2019
Keep an eye on state sales tax collections and on federal budget proposals

4. US average: $8,500 per resident; in Texas, $7,300, or 14 percent less
Per capita not the same thing as “per person served”
NASBO for 2015: Texas is 50th in per capita spending (most likely, due to other states expanding Medicaid)
2016, Census: Texas is 48th in state taxes per cap. (About $1,900 per resident, or $1,000 below US average for state governments)
2014: 41st in state taxes per cap, but 14th in local taxes per cap
TX was only $700 below US avg for state govts ($2,044 vs $2,725 for US)
Local: almost the same. $2,001 per cap in TX, versus $1,956 US average

5. 2015 Actions that Created Challenges for the
Budget
2017 Legislature considered a phase-out of franchise tax ($1.6 B to $3.5 B hit next time) will also see another $900 m diversion to Highway Fund
State tax share of income has dropped from 5% since early 90s (last big state tax increase was 1991), to less than 4%. Doesn’t seem like much? It translates to almost $14 billion more per year that could’ve been spent on schools, higher ed, health care.

6. Explain this was what budget looked like, going into conference
In the end, no major reform for public ed; basic allotment stays flat for 4 years, losing ground to inflation and to changing needs of students
Higher ed: special items not eliminated immediately but will be phased out
HHS: Medicaid IOU of $1.2 Billion for 2019 Legislature; as much as $2 B if cost-containment doesn’t pan out
TXDoT: gets an almost 8% biennial All Funds increase in SB 1. Will get rest of Prop 7 money ASAP in fiscal (Lege delayed $1.8 billion so GR budget would balance)
Final (SB 1): 1.8% 1.2% % -2.1% 7.4%

7. State Budget
“Other”: General Government, Natural Resources, Judiciary, Regulatory, and Legislative Agencies
HHS programs are 31% of GR. Public ed: 38% of General Revenue.
GR (the part that has to balance / “be certified”) versus All Funds, which includes federal funds, State Highway Fund, other dedicated money.
LBB estimates that in , 83% of General Revenue-related budget is “restricted” [determined by state law (36%) or state-determined formula (11%).
1991: 46% of GR went to public ed (TEA, TRS); 18% went to higher ed. Those 2 combined were almost two-thirds of GR spending.
HHS was 20%; TDCJ was 6%, about half as big a share as Public Safety/Crim Justice currently takes up. Prison lawsuits; DPS now part of the GR budget (border security)

8. General Revenue appropriations: lower than 2016-17 budget for almost all areas of state spending

9. Brings in Rainy Day Fund, Property Tax Relief and appropriated recapture for public ed, tuition & constitutional funds for higher ed, State Highway Fund
Nothing sees more than a 2% increase except Article VII (TXDoT)
HHS, even with another $1.5 B, would be less than a 5% increase.

10. Funds that Medicaid will Need, Falls Behind
State Budget, Even After Supplemental
Funds that Medicaid will Need, Falls Behind
Talk about why spending caps are bad in this context: two years go by with no growth, and then next time, the base is “reset” from this low point. Even if revenue grew, the cap would have to be exceeded to make up for 4 years’ worth of population & cost growth.

11. CPPP Wrap-Up - More Details on Health & Wellness, Economic Opportunity in 2018-19 Budget
Only 7 pages long.

12. 79 percent of state HHS spending
Medicaid: only 1 yr of caseload growth, no cost growth per enrollee.
Cost containment: $350 m GR in Rider 34, another $76 m in rider 158 (managed care premiums)

14. 79 percent of state HHS spending
biennial 17% increase

15. Spending per enrollee dropping due to managed care, caseload mix (more kids), but also rate cuts. Provider rate cuts reduce access to health care.
Every state dollar not put into Medicaid costs even more in lost federal matching funds (about $1.33 federal, per state dollar, assumed in SB 1. FMAP = 57% federal)

17. 2018-19 State Budget Assumes School Taxes Rise
Combined state/local effort in early 1990s: 9.7% of Texans’ personal income was for state & local govt taxes
By 2019: 8.4%. The big drop has been in the state share: went from 4.9% twenty-five years ago, to 3.6% currently. If it had stayed the same, that would be $19 billion more in state funded services, A YEAR. If it had stayed at 2001 level (4.4%): $12 billion more a year in state revenue
SB 1: assumes (needs) local school taxes to go up about 7% a year for next two years. Almost a $7 billion biennial increase.

18. Local taxes account for more than half (55%) of taxes paid in Texas

19. Without tax revenue, we lose out on federal matching funds for Medicaid, CHIP, women’s health, foster care, etc.

20. 2018-19 Sources of General Revenue

21. Federal dollars are the lion’s share of some state-administered programs: workforce / job training; nutrition & school meals; housing
Most HHS: almost 60% federally funded. Some as high as 90%.

22. CPPP is circulating a sign-on letter for our Congressional delegation about entitlement cuts (SNAP, TANF, SSI). So is the Coalition for Human Needs (One Voice Central TX). Also opportunities to speak out on the need to preserve ACA.

23. MEDICAID: CLIENTS ARE MOSTLY KIDS; COSTS MOSTLY FOR ELDERLY OR WITH A DISABIITY
(HHSC: 4.1 million full benefit caseload; 3 million is kids)