The 87th Texas Legislature is currently in session and our state budget is expected to be finalized by our elected officials during the current legislative session. Several of our folks have been going back and forth to Austin to testify and explain our needs, led by Chancellor Tedd Mitchell for the Texas Tech System and Dr. Lori Rice-Spearman for the Health Sciences Center. Penny Harkey, Vice President and Chief Financial Officer, is also very involved. Here are fundamentals of the budget and budgeting process. I hope you find this interesting.
First of all, the budget that will eventually be approved outlines state spending for the next two years and the budget will start September 1, a fact that most of us know since that is the start of our fiscal year. It will be contained in the General Appropriations Act.
Preparing the budget—never an easy task—will be harder for the next two years due
to COVID-19 and its effect on sales tax revenue, the energy industry, and other parts
of our economy. Of course, there are other factors, revenue streams as we say, as
well. Some examples are taxes (other than sales tax), interest and investments, federal
programs/grants, and even lottery proceeds. We are talking of a number around $112.96
billion! The federal government pays a good portion of Medicaid costs which relate
to our work—but it must be matched with state dollars. Most of this money goes into
our general revenue-related fund. Some of it is restricted for specific purposes and
therefore not available for general spending.
It is important to remember that Texas, by state law, must pass a balanced budget,
so how much income we expect directly affects spending (technically, it is possible
in an emergency not to have a balanced budget—but never likely, and requires a 4/5
vote in each chamber).
The Legislature gets some help with all of this from the Legislative Budget Board, or you may hear it called the LBB. Much of their work is done before the session even starts. They also work with the Governor’s Office of Budget Planning and Policy. Once in the Legislature, it goes to the Texas House Committee on Appropriations and the Senate Finance Committee for hearings. This is where you would hear Dr. Mitchell and Dr. Rice-Spearman present. Dr. Rice Spearman recently presented to the Senate Finance Committee on February 24th and to the House Appropriations Committee on March 4th.
When these committees are done with their work, it goes to the full respective chambers. The House and Senate develop their versions of the budget, approve their respective drafts, and then a conference committee is formed with members from both the Senate Finance Committee and House Appropriations Committee to resolve the differences in each version of the budget. The conference committee’s conclusions construct the foundation for the final version of the budget.
Then it goes to the comptroller’s office for what is called “certification,” and finally
to the Governor, who can approve it or veto. The Texas Governor has the ability to
veto specific line items rather than vetoing the entire budget. This is unique with
respect to executive approval of the budget, which is often approved in whole or not
at all. If a veto occurs, it goes back to both chambers and takes a 2/3 majority in
each chamber to override the veto.
While we have no way of knowing at this point what the Legislature will pass for the
upcoming biennium, we do know the allocation from the General Appropriations Act for
the current biennium is about $335 million. We all should thank the many people here
at the HSC that are involved in this process. Again, I hope you find this budget process
as interesting as I do.
Have a great week.