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The House Committee on Appropriations met on February 22 to hear presentations from the Comptroller’s Office, the Legislative Budget Board, the Governor’s Office, and Education Commissioner Mike Morath regarding the House base budget, funding recommendations, COVID relief funds, and impact of recent severe weather.

This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

Opening Comments

  • Chair Greg Bonnen – Work on figuring out what happened last week & correcting has already begun
  • Events of last week will have an impact on appropriators as budget is put together
  • Will start with revenue recommendations from the Comptroller, S/Cs will start hearing from agencies with Art. III on Thursday, other 3 S/Cs meet starting Monday, March 1

Comptroller Revenue Presentation

Comptroller Glenn Hegar

Tom Currah, Chief Revenue Estimator, Comptroller’s Office

  • $112.53 billion in GR expected, slight decrease from amounts available in current biennium; not due to decline in revenue collections, we expect these to grow with total collections growing by $7.1 billion
  • Decrease in expected revenue due largely to shortfall and necessary transfers to SHF/ESF, as well as shortfall in Texas Tomorrow Fund
  • Expected revenue does not include any savings from 5% cuts called for last Summer
  • Economic Stabilization Fund (“ESF”) should have $11.6 billion at the end of FY 2023, fed into by transfers from O&G proceeds
  • Must maintain sufficient balance; starting in 2022-23, the sufficient balance will be 7% of GR, $8.4 billion
  • Unique economic circumstances are leading to large uncertainty in the economic forecast
  • Economic forecast assumes continued growth, vaccines, etc. should lead to more growth, but recent holiday surges could slow growth
  • Not expecting a repeat of sharp economic contractions experienced in the Spring of 2020
  • Personal savings were elevated in 2020, some consumer debt has decreased; suggests we may have capacity for a substantial surge in consumer spending
  • Estimate is based on the information available
  • Will face difficult challenges in balancing budget, saving could reduce need, but supplemental appropriations bill could increase spending
  • Expect to be able to have accurate reports in April & May, every few months of data added helps determine what will happen with the economy
  • Severe weather over the last week will affect economy, sales tax proceeds will be down as people did not move, but will grow as people perform needed repairs
  • Rep. Jay Dean – Regarding ESF, what is the projected O&G price?
    • Roughly $50 projected price for Oil, higher than what we usually have
    • Currah – Gas is around $265
  • Rep. Matt Schaefer – Regarding agency budget cuts, are we seeing cuts relative to spending in the past budget, or based on asks this biennium?
    • Hegar – Each agency is a little bit different, these numbers are not in the BRE as they are retained in the treasury and will not be incorporated until recognized by the legislature
  • Rep. Schaefer – Hearing a lot about hiring freezes, but FTEs are retained, how does this save money?
    • Cuts expenses as new personnel are not brought on at all regardless of FTEs, e.g. Comptroller’s Office has hired no new auditors
  • Rep. Donna Howard – Can you elaborate?
    • Didn’t absolutely freeze every hire, e.g. IT people; but auditors are like teachers, new round of hires doesn’t impact too much, but long-term you are losing experienced personnel
  • Rep. Howard – Asks about the agency reductions
    • Legislature reduced appropriations per legislative action, there is some discussion over how this is realized, roughly around $1 billion
  • Rep. Howard – Can you provide us with a programmatic breakdown?
    • We see the overall, but not each reduction per strategy at each agency
  • Rep. Gene Wu – Regarding 5% cuts, with most cuts coming from not bringing in new hires, bulk of budgetary cost is salary?
    • My guess is this is the bulk of the money, yes
  • Rep. Wu – Not necessarily talking about agencies expanding staff, but also replacing retirees, etc.; will lose people overall
    • Correct, we can reshuffle, but still need people to do these jobs
  • Rep. Wu – So with a hiring freeze, the size of each agency decreases, and this is where most of the savings come from?
    • For most agencies, yes
  • Rep. Wu – My concern is that we have a lot of agency staff that generate funds, i.e. auditors at the Comptroller’s Office or TABC?
    • Every hiring freeze we have is someone who brings in revenue; there is a relation between these numbers
  • Rep. Carl Sherman – Do you factor in unemployment rate overall?
    • Yes, unemployment, GDP growth, others are important and influence estimates; still a significant number of people who are unemployed
  • Rep. Sherman – Are we using CARES Act funds to continue highway projects?
    • TxDOT can likely speak to this better than I can, there are federal dollars that have gone to TxDOT, but unsure what they’ve been used for
    • Federal Gov. has talked about infrastructure bill
  • Rep. Sherman – You do expect a positive impact on our economy?
    • Whenever you see federal dollars put into the economy, that obviously is a temporary bump, but this comes from other sources like spending cuts in the federal budget, tax increases, or deficit spending; possibly trading future growth
  • Rep. Lynn Stucky – How have Texas revenues grown compared to other states around us?
    • Texas is very attractive for businesses, however with telework, etc. the landscape has shifted
    • May not seeing much new construction, but the state is still an attractor for businesses
    • Need to give confidence to businesses that Texas is still a place to be
  • Rep. Steve Toth – A big part of our revenue is due to international trading, how does this factor into estimate?
    • Difficult to tell, Texas is very tied to global economy, economic impacts of pandemic on other countries have ripple effects on the state; difficult to apply historical trends to the current situation
  • Rep. Toth – How much of international trade is based on current revenue projections?
    • Exports won’t be to the level they were due to O&G price drop, economy is much more diverse than it used to be though and not absolutely dependent on one industry
    • Ag is still a very important part of the state economy and trade
  • Rep. Cecil Bell – Are rehire considered new hires for the purpose of the freeze?
    • For most agencies the best way to see savings is to not rehire and not replace
  • Rep. Schaefer – GR available is around $112 billion, House and Senate budgets spend about $7 billion in GR more than this estimate?
    • We have around $1 billion deficit, which has been somewhat traded off with savings at agencies
    • Also have the supplemental appropriations bill & Federal Gov. has extended FMAP rate increase
    • Some of the federal assistance can be swapped out for state expenses, likely more federal assistance coming
    • Also have the ESF; combinations of all the pieces probably gets us close to the introduced budgets from the House and Senate
  • Rep. Schaefer – So $7 billion in GR is primarily due to federal dollars and budget savings you can’t account for yet?
    • No, deficit is roughly balanced by the agency savings; also have additional supplemental cost, increased FMAP that will likely continue, increased Medicaid costs, etc., plus federal dollars possibly freeing state spending
    • All pieces moving together could get us close to introduced budgets
  • Rep. Schaefer – So increased Medicaid utilization, we are prevented from disenrolling people?
    • Will have to leave that up to HHSC
    • Currah – Federal funds that came to Texas in Spring are accounted for in the All Funds number in the BRE
  • Rep. Schaefer – So these numbers are fungible and can offset some GR spend?
    • Hegar – Some, yes
  • Rep. Armando Walle – A couple months ago we had a call and everything was doom & gloom, everyone was worried about revenue reductions this cycle; what changed?
    • Texas and other states saw revenues hold up better than anticipated, one part of this was online sales tax, pandemic drove these revenues much higher, initially estimated $500 million in receipts but ended up with $1.3 billion over the pandemic, trending to $1.7 billion in the coming year
  • Rep. Walle – Too early to project what the last week did to the economy, how does this impact our ability to compete globally?
    • No analysis as of yet of economic impact, but using Hurricanes as an example, initial closures and losses are a temporary drag on revenues, but as people rebuild you will see increases in certain categories, i.e. pipe fitting tax receipts will go through the roof
  • Rep. Walle – Asks about unemployment, any projections based on anticipated federal assistance?
    • Once the federal government passes something we will know, we’re watching but unwilling to put anything out until we have more information
    • Will revise the BRE on new data
  • Rep. Toth – Asks after increase in online sales tax from $500 million original to $1.7 billion new expected amount
    • There are many more online marketplace providers and remote sellers than we anticipated, much more activity overall than expected
    • Pandemic accelerated how much people consume online
  • Rep. Toth – Have you observed any other buying practices COVID has changed?
    • Online, takeout, etc.; but the question is how long has this changed for?
    • Will not go back to March 2020
    • Currah – Can see some of the effect in sales tax receipts, like increased furniture, sporting goods, etc., decreased service receipts
    • Hegar – Sporting goods, other home goods like exercise equipment, state saw an increase of $400 million in receipts
  • Rep. Ann Johnson – Not mentioned possible future crisis with the pensions systems
    • Long-term outlook issues like pensions need to be monitored; TRS was handled partially last session, but have not done this with ERS
    • Possible drag on state credit rating, ERS deserves to be examined and will be testifying on this next week

LBB Budget Recommendations Presentation

Jerry McGinty, Director LBB

  • Link to House budget recommendations presentation
  • Slide 2 provides overview of biennial change
  • $24.8 billion in federal funds available that will be flowing through the state to different areas, ends up as roughly $8 billion in the Federal Funds numbers in the budget recommendations
  • Slide 3 provides an overview of GR changes; most noteworthy changes are for Art. III education agencies, largest spend is in public ed @$4 billion more
  • Art. V public safety/criminal justice savings are due to TDCJ closures
  • Art. VIII decreases due to funding swap where amounts were redesignated as GR-D
  • Recommendation highlights:
    • Fully funding Foundation School Program
    • Medicaid recommendations include $74 billion, All Funds decrease of $3.8 billion related to COVID; will be altered by FMAP 6.2% remaining through 2021 and will not need a Medicaid supplemental appropriation, will be offset by people remaining on Medicaid/increased utilization
    • All Funds decrease of $2.5 billion for Transportation
    • Higher Education formulas were maintained at 2020-21 levels
  • Don’t expect spending limit to be a problem, but the pay-as-you-go limit will be an issue; starting from a $7.3 billion deficit for this limit
  • Agency savings & COVID relief will put this negative between $2.5 billion to $3 billion

Wayne Pulver, LBB House Liaison

  • Slide 7 highlights state debt; total is $62.4 billion, state is below the debt limit
  • Introduced bill funds debt service throughout the budget, totaling $4.3 billion

Jerry McGinty, Director LBB

  • Federal COVID funding on slide 8; multiple pieces of legislation passed led to $24.8 billion total in assistance, but does not reflect new bill Congress is considering currently
  • Highlights that agency strategies, strategic fiscal reviews, etc. are available on the LBB page (link)
  • Rep. Toth – Slides mention an increase in TRS? Is this for TRS-Care?
    • This is just for TRS, did not need increase for TRS-Care
  • Rep. Toth – How? TRS-Care is a mess, we’ve broken faith with retired teachers
    • Can get more info on this
  • Rep. Toth – Would like to hear more on this
  • Rep. Walle – Asks after federal assistance
    • LBB has a breakdown presentation, updating as we get more information
  • Rep. Walle – Do we have a ballpark for local budgets?
    • Easiest to point to would be those that receive CARES funding, some got a direct allocation, some got it through the Gov’s office; don’t have all the information in some cases
  • Rep. Howard – There was a different spending limit amount earlier than the $3.2 billion in the materials today? Was $2.6 billion earlier?
    • $2.6 billion is for those funds subject to the spending limit, $3.2 includes all GR expenses, e.g. things not subject to the spending limit
  • Rep. Howard – Have you analyzed what federal funds, more favorable FMAP, etc. would do to the spending limit?
    • Spending limit is related to GR, significant influx of federal funds won’t affect this
  • Rep. Howard – If federal funds replace GR spending?
    • If federal funds replace GR then the spending limit would grow
  • Rep. Schaefer – we have an extraordinary outlay of funds from unemployment insurance fund, some from federal loans; how are we going to pay this back?
    • Either through tax increases or appropriated amounts
  • Rep. Schaefer – What is the debt that we need to account for?
    • I think in excess of $6 billion, will need to get back to you
  • Rep. Schaefer – We need to make a policy decision on whether we fund this from employers paying into the system or if we put $6 billion into the system, correct?
    • Yes

LBB Contract Oversight Presentation

Benjamin Cross, Contract Oversight, LBB

  • Link to presentation on contract oversight, provides an overview of contract oversight operations
  • Managed Care contracts account for over 1/3 of total contracted amounts, 40 contracts @$149 billion

Governor’s Office Federal Assistance Presentation

Sarah Hicks, Budget Director, Office of the Governor

  • Governor directed creation of a task force to determine federal COVID aid usage
  • 5 federal COVID bills, funds have flowed to local communities, some to agencies, and 3 managed by the Gov’s office
  • $40.5 million of Coronavirus Emergency Supplemental Fund has been dispersed, remaining has been made available to local governments
  • $11.2 billion from the Coronavirus Relief Fund, $3.2 billion went to local govs, remaining $8 billion went to the state, applicable to costs incurred beginning in March for defined purposes
  • In May $584 million was made available to counties and cities that did not otherwise receive funds, request s received totaled $540 million, $320 million has been paid out & TDEM is continuing efforts to pay out
  • TDEM estimates a total of >$2 billion in costs due to COVID through the current date
  • Second large use of funds has been to help local ISDs with COVID expenses and begin paying for Operation Connectivity ($200 million given to TEA to purchase distance learning and other devices for students)
  • $7.2 million was paid to DIR for IT costs associated with online transition
  • $15 million to SOS to publicize census outreach to increase response
  • $3.5 million was allocated for public health and safety salaries in agencies, allowable under CRF to administrative efficiency
  • Expecting a 75% FEMA match for expenses totaling $1.9 billion under CRF guidance, but still waiting on this
  • Biden admin also spoke about possible 100% FEMA match, could mean $3.5 billion available to re-spend, but not certain
  • Education projects for distance learning include Texas Home Learning @$30 million, $30 million for supplementary special education services, $46.5 million for higher ed reenrollment support, $15 million for strategic data infrastructure, $10 million for smaller higher ed distance learning support; $68 million balance remains in this fund
  • Chair Bonnen – Asks after other federal assistance amounts
    • Unsure of what is happening with funds not flowing through the Gov’s Office
  • Rep. Toth – For the smaller counties and cities, CRF funding goes to counties and counties rely on Gov’s Office guidance?
    • Yes, state is ultimately on the hook to ensure CRF funds are spent according to law and guidance, way this is administered is through grants essentially that local governments agreed to
  • Rep. Toth – Montgomery County was one of the larger counties receiving funds directly? Their guidance comes from the federal government on fund disbursement?
    • Yes
  • Rep. Howard – What is the authority for the Governor to expend these funds without the legislature’s involvement?
    • Rider in article XI and disaster rider covers fund management, CRF was designated to Governor of each state
  • Rep. Howard – Difficult to sync numbers up; LBB, Comptroller, etc. numbers don’t always align on what has been expended
  • Rep. Howard – Smaller communities have submitted request for $544 million, initial number was $1.5 billion?
    • At the beginning we didn’t know how funding would happen, initial assumption was that local govs would be paying for alternate care sites, hospital staff, etc., but state took this responsibility and paid for it
    • Made $584 million available to cover initial costs, were able to cover local costs through this
  • Rep. Howard – Asks after initially anticipated reductions in grants at Texas Higher Education Coordinating Board of 5%?
    • We saw these anticipated reductions and Gov’s Office replaced 5% GR reductions with federal funds
  • Rep. Howard – Are cuts at TEA being replaced similarly for non-formula programs?
    • We didn’t do this with TEA, cuts still in place
  • Rep. Howard – What about FEMA reimbursement?
    • Funds for COVID expenses were disbursed as events occurred, trying to get FEMA reimbursement, easy for some things like PPE, difficult for other areas like staffing
    • Do not typically have $8 billion in funding awaiting for FEMA reimbursement
    • 100% potential reimbursement is also new, have not yet received this for anything
  • Chair Bonnen – $3.2 billion going to local cities and counties are responsible to responding to FEMA, may be responsible for paying funds back if they cannot account for expenses
  • Rep. Erin Zweiner – Do you have a document for CRF funds on where funding went by local governments?
    • Can get you what has been paid out by jurisdiction
  • Rep. Ina Minjarez – What is the turnaround time for countries to be reimbursed by FEMA?
    • Possibly can be answered by TDEM; have been operating similar to FEMA and paying out verifiable amounts, have been auditing expenses on the front end and only paying verified amounts
  • Rep. Minjarez – Some counties haven’t been submitting required documentation, can you speak to this and have you given them deadlines?
    • We’ve had several deadlines, did lots of outreach before and on deadlines
  • Rep. Jarvis Johnson – There was a lot made of the $300 million contact tracing contract
    • This was a new stream of federal funds for this purpose that went to DSHS
  • Rep. Johnson – Regarding GEERF funds, do you have a breakdown of students and universities?
    • Can provide this
  • Rep. Johnson – Was there criteria put in place?
    • THECB can walk you through this
  • Rep. Sherman – Regarding the trusteed programs, incl. the ESF, can you tell us about qualifications for these funds and how local governments can apply?
    • Balance before the last week was about $60 million, typically used for reimbursing state response, e.g. when TDEM buys water, MREs, or fuel
  • Rep. Toth – The CRF guidance and formula, did we derive this directly from the federal gov?
    • For the 18 largest counties and cities, this was in the federal statute and based on population
  • Rep. Toth – Crystal City was included at 71k population, but The Woodlands at 110k population was not included
    • Amounts sent to Montgomery County accounted for all people in the county, state did not make additional allocations after people in the county got a per capita allocation
  • Rep. Toth – Then there wasn’t a lot of guidance to the counties to send to the municipalities
    • Yes, there were quite a few conversations about this, some countries did a really good job sharing with cities and others did not
  • Rep. Schaefer – How much was unspent at the end of the calendar year for COVID expenses?
    • More than $1 billion, still had invoices coming in for November and December expenses
  • Rep. Schaefer – Do we have more or less in federal aid to meet expenses?
    • We have more expenses coming in and have not received FEMA reimbursement
  • Rep. Schaefer – Does the state need more federal COVID relief money?
    • Not in a position to answer this, we currently have more expenses than cash available and still accumulating
  • Rep. Schaefer – Has your office been talking with our congressional delegation? Has the message been give us more money, less, or indifferent?
    • Yes, primarily focused on requirements on funding that has been made available already
  • Rep. Schaefer – Has the Governor asked the congressional delegation for more COVID relief?
    • Don’t know all of his conversations
  • Rep. Schaefer – Regarding Medicaid funding, additional rules were in place for this funding, what were some of these that would have changed Medicaid requirements for the state?
    • Primary was the requirement to not disenroll, HHSC would be better on specifics
  • Walle – Appears that a lot of costs are surge staffing, always afraid of claw back costs; how are these amounts paid?
    • We’re paying the invoice up front and submitting to FEMA for reimbursement
  • Walle – Do you have an idea of what we’re paying for on evictions and rent? Legal aid?
    • Initially courts approached the Gov’s Office with a potential program, wanted to avoid people getting something on their record; OCA can probably speak more to this
  • Walle – My local community and county teamed up on this, but did not seem to be enough
  • Walle – Regarding vaccine rollout, staffing, logistics, etc. costs money
    • Specific funds flowed to DSHS to help with this, not cost to individuals receiving vaccines

TDEM Presentation

Chief Nim Kidd, TDEM

  • Rules on CRF funding have been more fluid than we would’ve liked, length of time to reimburse is dependent on local entities; happy to get a response together on individual communities
  • For local gov reimbursement, typically 3 days to transfer funds, but can take a long time to get qualified contract and documents together so can take longer
  • FEMA reimbursement is a complex issue, they have been very good at advancing funds, interpreting rules as grants come out has been challenging to ensure funds are used appropriately; don’t think mistakes have been made and continuing to use audit office to ensure amounts
  • Rep. Toni Rose – Chief Nim Kidd and TDEM have been very helpful over the course of the pandemic
  • Rep. Zweiner – Have heard there are a lot of shifting guidelines on CRF dollars, difficult for local communities to work through these
    • Have been working through the guidelines to assist local communities, federal flexibility has been good, but has delayed a lot of the funding to local governments
  • Rep. Zweiner – I know there was a 75/25 rule where 75 needed to be spent on public health, 25 on business support; how did we arrive at this?
    • 75/25 criteria was given to TDEM and TDEM’s job was to implement according to the guidelines
  • Rep. Walle – Want to make sure that FQHCs needing to use their own staff for vaccine distribution are taken care of

LBB Federal Assistance Presentation

Edward Rodriguez, Federal Funds Manager, LBB

  • Link to federal funding presentation
  • Slides provide history of federal funding given to the state, federal funding is constantly changing
  • 5 pieces of federal legislation passed that gave assistance to the state; as of Feb. 8 agency survey $16.5 billion of $24.8 billion expected had been received
  • Provides overview of federal bill enactment and funds, slides 2-3:
    • March 6, 2020 – CPRSA @$8.3 billion
    • March 18, 2020 – FFCR @$3.5 billion for testing, food assistance, and unemployment
    • March 27, 2020 – CARES @$2 trillion
    • April 24, 2020 – PPPHE @484 billion for small business loans, providers, and testing
    • Dec. 27, 2020 – CRRSA @900 billion
    • FY 2021 – anticipated enactment of additional federal aid @1.9 trillion
  • Spending conditions and guidelines change from bill to bill, spending guidelines are a constantly moving target
  • CARES
    • Coronavirus Relief Fund (CRF): $150 billion nationally, $8.038 billion to Texas
    • Public Assistance Grants (PA): $9.5 billion nationally, $2.3 billion to Texas
    • Governor’s Emergency Education Relief Fund (GEERF): $3.0 billion nationally, $307.0 million to Texas
    • Elementary and Secondary School Emergency Relief Fund (ESSERF): $13.4 billion nationally, $1.3 billion to Texas
    • Higher Education Emergency Relief Fund (HEERF): $13.9 billion nationally, $879.2 million to Texas
  • CRRSA
    • Governor’s Emergency Education Relief Fund (GEERF): $4.1 billion nationally, $287.5 million to Texas
    • Center for Disease Control Grants (CDC): $22.1 billion nationally, $1.8 billion to Texas
    • Elementary and Secondary School Emergency Relief Fund (ESSERF): $54.8 billion nationally, $5.5 billion to Texas
  • Presidential Directive
    • Lost Wage Assistance: $20.9 billion nationally, $1.9 billion to Texas (pass through direct to individuals)
  • Highlights details of major funding programs found on slides 5-6
  • Highlights appendix document (link) with numbers for amounts given to state agencies
  • Rep. Howard – Do you have numbers on what has been expended?
    • Have this data, but this is self-reported and not necessarily accurate
  • Rep. Howard – Are expenditures reflected in the base budget for the current biennium?
    • McGinty, LBB – About $8 billion of this is reflected in the budget
  • Rep. Howard – Will we need to consider replacing some of these expenses with GR dollars?
    • Possible

Foundation School Program Presentation

Aaron Henricksen, LBB

  • Link to presentation, provides overview of the FSP
  • 6 funding streams flow in the All Funds amounts for the FSP, GR adjusts to make up difference in funding from various streams
  • Highlights major FSP budget drivers; district property values & student growth
  • Expecting no growth in DPV in 2021, but 3.92% growth in 2022
  • Expecting districts to pass TREs each year for a 2022-23 biennial cost of $300 million
  • Projecting .71% student growth 2021-23
  • Total base amounts for FSP were reduced by $5.4 billion GR, leading to $3 billion All Funds reductions with offsets
  • Highlights cost growth on slide 7, recapture and TREE funds anticipated to grow over the next biennium and decrease GR spend
  • Rep. Gonzalez – How do you derive numbers for tax compression
    • Comptroller projected 2.9% property value growth in 2022 & 3.9% in 2023
    • These numbers will be updated over the course of the session
  • Rep. Gonzalez – Can you relate this more to FSP
    • HB 3 provided additional property tax compression, Tier 1 compression based on property value growth rates; if a district has growth over 2.5%, the Tier 1 rates are compressed further
    • Expecting nearly flat for 2022, but expecting growth in 2023 leading to a cost to the FSP; 3.92% in 2023 will mean compression of roughly 1.5 cents, faster growth will mean more compression
  • Rep. Gonzalez – And this will cost the FSP roughly $1 billion?
    • Yes, have $992 million built into estimates
  • Rep. Gonzalez – In terms of the state share, what are we looking at?
    • Overall, including M&O and facilities, is estimated 41.5% in 2023; 44.5% for M&O alone
  • Rep. Gonzalez – What is the methodology for enrollment growth in the base budget? Do you expect revising estimates in April?
    • We will revise & update through session, generally incorporated by the time we get to conference committee
  • Rep. Gonzalez – We expect enrollment growth to potentially be higher?
    • Wouldn’t want to speculate, TEA looks at each district over roughly 4 years, projecting growth rates forward
    • Districts will have input on updates received over session
  • Rep. Toth – Regarding CARES funds, can you break down how that money is spent?
    • CARES funds were provided to ISDs & TEA used it essentially as a means to supplant state funds; TEA adjusted state aid districts receive under FSP roughly 1 to 1
    • Other funds came through the CARES act
  • Rep. Toth – CRF funding went to state, counties, and districts, do we know what is happening with all of the funding?
    • I believe so, TEA is tracking some funding flow, agency would be a better resource
  • Rep. Justin Holland – So districts are giving you enrollment numbers and you are projecting over the next few years, do you know where these numbers are coming from?
    • Don’t have this exactly, these numbers are actually significantly lower than historic numbers; Average Daily Attendance growth rate is slower than in the past
  • Rep. Holland – Would you speculate that the near doubling of the ADA is people moving to Texas?
    • This contributes, birth rate is also a factor
    • One idea on why ADA growth is not as high is because birth rates went down during the last recession
  • Rep. Wu – Schools lost a significant number of students due to the pandemic, does the enrollment growth projection consider student potentially lost permanently? IS there any calculation of effort needed to locate these students?
    • Would need to defer TEA on extent this was considered
  • Rep. Wu – Are numbers based on typical school year numbers?
    • FY 2020 numbers have been trued up to what districts have experienced, but TEA provided a hold harmless for the remainder of the school year
    • TEA has not updated the number s yet, some data shows that headcount is lower than expected, but difficult to determine and unclear how this will translate in FY 2021 actual ADA
  • Rep. Schaefer – Asks about tax compression, last session this cost us about $5 billion, and now we need another $1 billion to maintain for additional compression from HB 3?
    • Correct
  • Rep. Schaefer – District property value growth is almost $1 billion, so this almost gets ahead of it? Causes tax burden to increase beyond what compression was added?
    • No further compression happens until values grow beyond 2.5%
  • Rep. Schaefer – So neither Senate nor House budgets add any property tax relief this session
    • In FY 2023, budget assumes an additional 1.5% property tax compression
  • Rep. Schaefer – But property value growth will overtake this?
  • Chair Bonnen – If you project a 3.5% increase and the state has to kick in, the state will have to kick in? So it will not overtake all of this
    • Yes
    • Essentially the first 2.5% is related to value growth, which is a savings, but above 2.5% it impacts state cost; not a 1-to-1 correlation
  • Rep. Schaefer – Does your office maintain records of ISD reserve accounts?
    • I believe TEA has this information

Public Education Presentation

Education Commissioner Mike Morath

  • Very clear from HB 1 and SB 1 that education is a legislative priority, fully funding FSP and HB 3
  • Highlights reading academies from HB 33, 33k teachers have completed or are in process
  • Other items incl. average teacher pay went up statewide, full day Pre-K saw huge increase in enrollment
  • Most of education funding is pass-through funding, FSP increased by $4.4 billion, $872/child
  • In the last 3 years spending for public ed has increased by $10 billion, very big increases in spending in recent history
  • FSP is the funding driver for education, HB 3 was a change in the FSP; cost drivers associated with the FSP include enrollment growth, entitlements growth, and incentives like CCMR, cost reimbursements such as for transportation, etc.
  • Property values bring costs for the FSP down
  • For roughly a decade state grew ADA by roughly 70k/year, this growth rate has massively declined in recent years, meaning associated cost escalation in FSP has also gone down
  • HB 3 created a dyslexia waiver, special education identification and population growth
  • Prior to HB 3, essentially all property value growth meant less state spending, after HB 3 this leads to lower taxes
  • 5 year transitionary period in HB 3, transition grant is roughly $1.3 billion almost entirely due to high property values
  • TEA and schools have tried huge adjustments in the system to deal with COVID; challenges are primarily making sure students and staff are safe and making sure the remote experience results in the same academic experience as on-campus learning
  • $2.2 billion in federal funds were allocated to public education, roughly $1.1 billion was mandated and the other $1.1 billion was a state decision to spend on public education; includes PPE support for remote instruction, etc.
  • Effectively closed digital divide on devices, but bandwidth/internet connectivity still remains a challenge
  • Degree of learning we are facing is significant, what to do about it is a large issue; remedial education is not the answer, teachers need support to teach children with educational gaps, instructional time is also a concern and costs money
  • Highlights studies on learning loss; children coming into the state post Katrina caught up in reading after 4 years of effort, but did not catch up in math; group of children in Argentina coming back to education after an 80 day teacher strike saw lowered outcomes and lagging GDP effects
  • Rep. Toth – You and Chief Kidd have done a great job, made yourselves accessible during this time
  • Rep. Toth – Question from district superintendent, will school districts be allowed to continue remote learning next year and still receive full ADA?
    • In June/July of last year we set up a new framework funding remote instruction through emergency rulemaking
    • Would love to give clarity to schools immediately, but don’t want to get in front of the legislature
  • Rep. Toth – Who ensures children out of school receive an education?
    • Local districts are doing this as they are funded for remote and in-person equally
    • Very important area that the legislature has to decide on
    • Those in the field need clarity on what will be fundable next year, we’ve instructed districts to plan as if some sort of remote funding is available
  • Rep. Toth – Have you spoke with anyone carrying legislation on this?
    • Undoubtedly, happy to work with you on this
  • Rep. Toth – Students are basically at a 3-6 month deficit, in a normal year STAAR tests are an incredibly stressful issue for students; was bad last year, but is even worse this year; mental health problems are spiking right now, concerned we’re not doing everything we can to give relief to students, teachers and parents
    • Have used all my authority to ensure students see no consequences, waived A-F accountability
    • From a consequence perspective, STAAR is no different from a test or quiz in the classroom
    • From a content perspective, it is good to have a benchmark
  • Rep. Trent Ashby – Regarding formula transition grants estimate, we missed the mark pretty big in HB 3; FTGs ending in 2025 is like a funding cliff, what are the ideas about how to deal with this?
  • Rep. Ashby – Many are still facing impacts from the recent winter storm, many superintendents are struggling with how to respond; what can we tell those districts now trying to replace critical infrastructure
    • On FTGs, ultimately it will be up to legislature; size of FTGs is much larger than anticipated, but this doesn’t necessarily mean the cliff is as large as the FTG amount, can run models for the legislature
    • Don’t yet have surveys back from schools on plumbing and other damage resulting from the storm; per state law, schools most go through insurance, then FEMA, then the state as funder of last resort
    • State funding is subject to appropriations being available for this purpose, so up to legislature; TEA will likely have preliminary data on scope of cost in about a month or month and a half
    • Also expect the 77 county list in the disaster declaration to expand
  • Rep. Stucky – One of the big concerns is making up lost days due to the storm, but virtual education is not available just yet; will there be credit given?
    • Yes, waiver is available for up to 2 weeks, can talk to TEA after
  • Rep. Stucky – Virtual education ongoing is causing burn out, what are we doing to help these teachers stay in the system?
    • There are 4 models: concurrent virtual and in-person, split scheduling, split staffing, and entirely virtual
    • We don’t think concurrent instruction is tenable, have been sharing guidelines on planning and prep to transition to different models of remote instruction
    • Encouraging certain modes of instruction could be part of the long-term conversation on funding
  • Rep. Stucky – I know we waived A-F, but is this still reported?
    • This year, you won’t be able to see the A-F runs due to low STAAR participation
  • Rep. Stucky – I don’t want to see people comparing A-F from this last year
    • Website will have data from the 18-19 school year
  • Rep. Gonzalez – Speaker’s office has been working with Rep. Keith Bell on HB 1468 regarding instruction next school year
  • Rep. Gonzalez – We will see enrollment and entitlement growth; there was an HB 3 special education advisory committee, is there a report?
    • Yes, can send it to you
  • Rep. Gonzalez – Asks after students in other entitlements
    • Compensatory Services will certainly be growing this next year, students entitled to services are also entitled to lost time
  • Rep. Gonzalez – Asks after funding concerns
    • Have seen such an increase in special education identification, HB 3 increased special education support; have no maintenance of effort concerns
    • Legislature will need to consider policy on MOEs and federal funding that can be brought to bear
    • MOE negotiations with federal gov have meant previous supplemental appropriation has not been spent, asking for this appropriation to continue to be available
  • Rep. Gonzalez – Can we have a timeline on this spending?
    • 3 buckets of SB 500 funding, 2 have been spent and the last is wrapped up in litigation
  • Rep. Gonzalez – Understand, asks that legislature be updated
  • Rep. Gonzalez – You received a bipartisan letter on the 75/25 split; have you had any conversation on full reimbursement on COVID expenses?
    • We have a very bad estimate on what that cost could be; TEA provided roughly 75% on tech and other items, but if it wasn’t tech and it was in the new year, there hasn’t been a reimbursement
    • Loose estimate is between $.5 billion and $1.5 billion on unreimbursed expenditures throughout the crisis
    • Congress passed CRRSA in December, which includes $5.5 billion for public education which the legislature will need to deliberate over; enough in there to cover the reimbursement theoretically
  • Rep. Gonzalez – So the $5.5. billion could cover reimbursements, special education possibly, and other aspects
  • Rep. Gonzalez – What are our contract terms on STAAR with less students taking the test?
    • Will save the state some money on paper, grading, buildings, etc.
  • Rep. Gonzalez – Asks for cost savings data on STAAR
  • Rep. Jarvis Johnson – What has TEA done to ensure teachers are protected if students are in person; testing is not enough, what are we doing to ensure they get vaccines?
    • TEA is providing testing and rapid testing, not in charge of vaccine priority, this is done through DSHS and EVAP
    • Many educators were in group 1B for those 65 and older or those with health risks, but no professions identified just yet
  • Rep. Johnson – What is our position then on attendance for STAAR tests?
    • We encourage parents to send kids to safe testing sites and if they want to stay home, stay home
  • Rep. Johnson – STAAR testing will still be part of the A-F assessment
    • Data will be available, but won’t be part of the A-F run
  • Rep. Johnson – My concern is that if this information is public it widens the gap of educational levels, wants to ensure we’re protecting districts like HISD, Aldine, with vulnerable populations, etc.
    • Last set of data that will be available is 18-19
  • Rep. Gary VanDeaver – Is there another instrument we’re using to measure progress or lack thereof and to compare remote versus in-person?
    • We do lack data for distance learners, will hamper ability to determine the gap
    • Info TEA has is information people choose to share or that we are authorized to collect
  • Rep. VanDeaver – Are you comfortable and confident in using STAAR data to measure growth?
    • STAAR is used to measure proficiency, confident that the test will tell individual students if they are proficient in subjects
    • Growth is a measure of two STAAR tests and we don’t have any from last year
  • Rep. VanDeaver – It appears there a lot of students who did not show up or missing, appears also that low socioeconomic students are overrepresented in this group and it will affect funding for schools they attend
    • Compensatory education is snapshot at a certain time of year based on enrollment
    • This has been part of internal TEA deliberations on hold harmless extension and how it is applied, hopeful that we will have clarity soon
  • Rep. VanDeaver – What things do you not have the authority to waive?
    • Largely graduation requirements for students, ultimately a question for the legislature to decide
  • Rep. VanDeaver – Since EOC is taken early in the high school career, should also consider how students taking EOCs during the COVID gap will affect outcomes later
    • Yes, in certain classes TEA assumed everyone in a class passed, e.g. US History with no test administered
  • Rep. Holland – Asks after federal funding; can we be certain that the $5.5 billion in CRRSA for school funding gets to districts and is not filtered into some other state program
    • Initial funding was used to fund the hold harmless done last year
  • Rep. Walle – About mental health issues, Communities in Schools, etc. were impacted
    • These riders were impacted by the 5% cut
  • Rep. Walle – Should reconsider this, highly effective program; do we have the ability to or have we thought about contracting with LMHAs or mental health professional to connect teachers to these services?
    • Stood up and connected mental health community assets during Hurricane Harvey, expanded this and doing this kind of work around the state; this is ongoing, but is hard work due to practice and policy changes
    • SB 11 last session created the school safety allotment that could be spent on things like this as well
  • Rep. Walle – Regarding the digital divide, was $200 million enough to cover?
    • Ended up spending much more than $200 million, $175 million was the bulk purchase of devices, also spent $420 million on direct reimbursement for tech, and another $190 million in other reimbursement, etc.
    • Ballpark estimate is that we spent a little under $1 billion, roughly $750 million was federal passthrough
    • Was enough to close the device divide, but connectivity is still a problem; did a survey of ISPs around the state and reported on connectivity issues
  • Rep. Walle – What is the cost to close the connectivity gap
    • We have a rough idea of the cost to subsidize closing the gap through school systems, can get the amount to you
  • Rep. Walle – Asks after enrollment in Pre-K and kindergarten
    • We have about 60k fewer children enrolled in Pre-K, about 20k fewer in kindergarten; over 50% of total enrollment drop
    • Guessing some part of this is parents skipping enrolling this year to enroll next year
  • Chair Bonnen – The school safety bill had a $100 million Mental Health Consortium that coordinates between different state mental health resources; would be good to look at how to measure the success of this
    • Leadership, Talent, Culture, Curriculum, and Instruction framework has informed district assessment, thinking about this framework in context of mental health is informing TEA’s mental health approach
  • Chair Bonnen – Asks about placement disputes with those not attending Pre-K or kindergarten
    • When you have a new child enrolled, district determines the grade the student enters
  • Rep. Howard – Regarding connectivity, are there any funds left in Operation Connectivity or other relief funds to help start TEA proposals?
    • No more allocation available now, but CRRSA $5.5 billion is forthcoming and appropriators will choose priorities
  • Rep. Howard – What is the timeline?
    • My assumption is that this is tied to adoption of the General Appropriations Act
    • Hold harmless is state funded and decision can be made sooner, somewhat interrelated
  • Rep. Howard and Comm. Morath discuss the hold harmless and graphs provided to the committee; ADA is based on school district reporting
  • Rep. Howard – Do we know what the cost of the hold harmless is?
    • We know the amount of the hold harmless, but we don’t know actuals until data comes in at the end of the year; no real time data, there is a request for $2 million to implement
    • Hold harmless ceiling is included in all the numbers, budget for next year assumes a hold harmless level in line with ADA
  • Rep. Toth – Regarding federal funding and money flowing in from the county
    • This is why the 75/25 split is only roughly 75, in some cases all is reimbursed, in some only 50% is reimbursed
  • Rep. Toth – If money came through CARES directly to the counties and counties decided to give money to the school district, is this money districts would’ve received anyways through a different funding stream?
    • No, this amount would be offset by amounts out of the local district budget
  • Rep. Ann Johnson – STAAR test weighs heavily on students, teachers, and parents & were able to waive the test last year; could waive the test this year
    • Technically it wasn’t me who waived the test, there is a federal
  • Rep. Johnson – Is there a federal requirement to hold the test this year?
    • Yes
  • Rep. Johnson – Even with that, you indicated the accountability component would be waived
    • Yes, accountability waiver has been offered, but an assessment waiver has not been offered
  • Rep. Johnson – There won’t be fidelity in the testing, because we will only get an accurate snapshot of those in schools
    • Each individual child will get an accurate picture of how they are doing relative to grade level
    • Won’t have performance management information that compares current year to last year
  • Rep. Johnson – So garbage in, garbage out; we won’t have accurate data moving forward
    • Won’t have an accountability system this year, we will have accurate data for children in schools and we won’t have data for those not in schools
  • Rep. Johnson – It does not give us an accurate picture of education in Texas
    • Depends on the size of your sample, can have an accurate picture for state policy measures, but measures at a local
  • Rep. Johnson – State recently signed a contract for STAAR testing at $75 million, but we won’t have accurate data or a clear picture
    • We are getting accurate data for the children who take the test
  • Rep. Johnson – Not an accurate picture of those in remote learning or those not taking this test; we’ve already determined there is no fidelity in the testing for purposes of accountability
    • We will have accurate info for those taking the test, we will have no info for those who don’t
  • Chair Bonnen – Is there value in knowing how students who take the test perform?
    • Absolutely, STAAR is designed to tell you if a student has mastered grade-level performance
  • Chair Bonnen – My understanding is the pandemic has set children back significantly, is there value in knowing just how much? Can inform remedial education needed, etc.
    • Yes
  • Chair Bonnen – So if we have new strategies that will be funded above and beyond, this data could help inform
  • Chair Bonnen – Can you comment on the impact of in-person versus remote learning?
    • Can’t give you any kind of accurate assessment of impact on which is more effective, will be using STAAR data at the end of the year to determine this
    • Anecdotal data from school districts led me to conclude that most students in remote instruction are learning far less than in normal years, a small number are seeing a benefit, and for some it is about the same
  • Chair Bonnen – What has been the impact of COVID in schools
    • Data available leads us to believe schools are about the safest possible congregate setting; Dr. Fauci recently said children are less likely to contract COVID at school than in the community
  • Chair Bonnen – Will need to get students back up to speed if possible, can you envision a local option where districts can submit remediation plans to TEA?
    • This seems extremely logical
    • From a policy perspective, the questions are how rigorous you want TEA review to be and if there is assurance on the back end that plans were followed through
  • Rep. Bell – Regarding connectivity, is there an incentive available to ensure rural communities have access?
    • Would be wise, roughly 300k students are in areas where there is no commercially viable option to connect
    • Incentives and other options are good to consider, construction is expensive, especially if wired to just one location per acre
  • Rep. Minjarez – Regarding meals, are these federally funded, do districts fund this?
    • Meals are usually funded by the federal government or the parents, if meals are not served, districts do not get this revenue; school districts set up huge operations to run meal service, but volume was still much lower and received significantly less revenue
  • Rep. VanDeaver – It’s true that we don’t have a waiver from the federal government on administering the STAAR test, but we have not requested this; we have not requested this because you feel there is some value in this test?
    • Yes, and it is state law

Closing Comments

  • Chair Bonnen – Will begin tomorrow at 9 AM with several discussions, including ERS and TRS
  • Minutes will reflect S/C assignments that were distributed by memo previously to House Appropriations members