The Office of the Governor directed Texas state agencies and institutions of higher education to expect a 5% reduction in budget plans for the 2020-21 biennium, according to a May 21 press release.
In a letter addressing these agencies and institutions, Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen said the reduced budget is in preparation for the coronavirus pandemic’s effect on state finances expected to be felt in the coming months.
"As Texans recover from this pandemic, it is incumbent that state government continues to maintain mission critical services without placing a greater burden on taxpayers,” the letter reads. “To prepare for this economic shock, we must take action today to ensure that the state can continue providing the essential government services that Texans expect."
The letter also encouraged agencies to utilize additional cost-saving measures that do not affect the state’s ongoing response to COVID-19, such as avoiding unnecessary travel expenditures, deferring capital expenditures when possible, cutting administrative expenses and forgoing hiring decisions for positions not essential to combating the pandemic.
Earlier this month, Texas Comptroller Glenn Hegar reported April sales tax revenue totaling $2.58 billion statewide, 9.3% less than the previous year’s revenue and the state’s steepest decline since January 2010.
Hegar said the decline was a result of statewide business closures, stay-at-home orders and decreased demand for oil amid the pandemic.
“The steepest declines in tax remittances were from businesses most quickly and dramatically affected by social distancing: restaurants, performing arts venues, movie theaters, theme parks and fitness centers, as well as department stores and boutique retail shops,” Hegar said in a statement. “However, those losses were, to a degree, offset by increases from big-box retailers, grocery stores and online vendors. Remittances from oil- and gas-related sectors also fell significantly as oil and gas exploration and production companies slashed capital spending in response to the crash in oil price.”
Hegar said sales tax remittances for the month of May are projected to show even steeper declines.
Who is exempt?
According to the release, agencies exempt from the budget decreases include the Texas Division of Emergency Management, the Texas Department of State Health Services, the Texas Workforce Commission, the Texas Military Department and the Texas Department of Public Safety.
Budget adjustments will also not be made to current law requirements for the Foundation School Program and school safety; health-related institutions and community colleges; employer contributions to the Teacher Retirement System of Texas, Employees Retirement System of Texas or to Social Security; or correctional security operations or correctional managed health care at the Texas Department of Criminal Justice.
Funding will not be affected for debt service requirements, bond authorizations, Child Protective Services and behavioral health service programs.
Additionally, benefits and eligibility levels in Medicaid programs, the Children’s Health Insurance Program, the foster care program, the adoption subsidies program, the permanency care assistance program and services for individuals with intellectual or developmental disabilities are also not expected to be affected.
Push back from public policy organizations
According to Luis Figueroa, legislative and policy director for the Center for Public Policy Priorities, budget decreases could result in programs and services being cut that cater to some of the most vulnerable populations in Texas.
CPPP State Budget Analyst Eva DeLuna said while community colleges remain exempt from state budget reductions, four-year higher education institutions could still see decreases in state support, which could force cuts in courses offered or increases in student tuition. Castro recalled the fiscal year 2009-10 Texas state budget, where the state ranked 50th in the nation in per capita spending by state.
“In 2010, we started off the process with a direct cut by 5%, and then, in December, there was another round [of] cuts of 2.5%, and both of those fell very heavily on higher education,” DeLuna said. “We also cut provider rates for health care. So if that's what we see again this year, we think that's going in the wrong direction, especially when there's $8.5 billion in the Economic Stabilization [Rainy Day] Fund, which is supposed to be used exactly for times like these.”