House Appropriations S/C on Art. VI, VII, & VIII – February 21, 2023

The House Appropriations Subcommittee on Articles VI, VII, & VIII met on February 21 to discuss the following Article VI, VII, & VIII agencies. This report focuses on LBB and agency presentations for the following:

• Texas Department of Housing and Community Affairs
• Texas Lottery Commission
• Texas Department of Motor Vehicles
• Texas Department of Transportation
• Texas Workforce Commission
• Reimbursement to the Unemployment Compensation Benefit Account

 

This report is intended to give you an overview and highlight 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.

 

Texas Department of Housing and Community Affairs

LBB Staff

• LBB presentation here
• Total funding $1.4b; $1.7b decrease mostly due to COVID federal funding dropping off
• Authorization by HUD of COVID HOME Investment Partnerships Program
• Includes salary increases
• Increase of Housing Trust Fund grant award
• Increase of IIJA Weatherization Assistance Program grant award
• Recommendations provide $1.27b in Federal Funds
• Include $535.8m in Covid-related Federal Funds for the 2024-25 Biennium
• Recommendations include capital budget authority for IR tech refresh, Java upgrade, etc.

 

Robert Wilkinson, Executive Director TDHCA

• Overviews the number of low-income units
• 775k Texans received emergency housing
• Texas Homeowner Assistance Program has paid out $337m to 30k households
• Texas Rent Relief has paid out $2.1b to 315k households; expect one more reallocation this Spring will end program by Summer
• LAR requests were for capital budget authority to use Federal Funds and capitol receipts
• Have one additional request related to the 5% salary increase; ask to use additional Federal Funds to increase this amount

 

Jim Hicks, Manufactured Housing Division TDHCA

• Work in partnership with TDHCA
• Division acts as HUD’s state administrative agency
• Last year issued 61k title documents, 18k inspections, 8.3k hours of education, issued 2.75k occupational licenses
• New Rider allows division allow unexpended balance authority so we keep the money we make and increase salaries
• C. Bell – Where should we be directing related warranty complaints?
  • Can contact the manufacturing housing division
• Martinez Fischer – Why ask for unexpended balance authority? Why do this now?
  • Have had issues with payroll especially at the beginning of the year; had almost 100% turnover last year
  • Has been talk about a filed bill that may address this and do not have a rider every time; just for our agency
• Martinez Fischer – How close work with AG Office Consumer Protection Division?
  • Not often, have our own jurisdiction
• Martinez Fischer – Asks about the Renter’s Assistance Program portal
  • Wilkinson – Have had a number of reallocations; will communicate when we reopen it
• Martinez Fischer – Notify local jurisdictions when you open it? Demand is there
  • Wilkinson – Yes
• Walle – Agency was a recipient of many Federal Funds; where did the money go?
  • Wilkinson – Received about $4b and majority of it $2.1b went do Rent Relief
• Walle – Clarify the type of demand you are seeing?
  • Wilkinson – Two separate programs for renters and homeowners; more demand for the renters’ program
  • Wilkinson – Still have a few $100m left of the homeowner assistance program
• Walle – Certain percentage for administrative costs; not concerned about clawbacks?
  • Is always a concern about that, but less concerned about fraud
• Walle – Contracts will expire?
  • Yes, as programs die down; federally funded FTEs are state employees
• Walle and Martinez Fischer discuss the rental/homeowners programs with Wilkinson
• Martinez Fischer – Competitive tax credits?
  • Have had issues with rising costs/interest rates; had to use future credits to use for past rounds
• Walle and Wilkinson discuss TDHCA working with local municipalities on issues homelessness

 

Texas Lottery Commission

Jeb Bell, LBB Staff

• LBB presentation here
• Total funding $637.4m; $2.8m increase; maintaining FTEs
• $4.3m increase for scratch ticket production
• Includes salary increases
• Maintain General Revenue-Dedicated Lottery Account No. 5025 due to agency’s lottery sale estimates for the 2024–25 biennium
• BRE estimates lottery sales will total $7.8b each year; will adjust these amounts later if needed
• Agency has one exceptional item totaling $17.4m GRD funding to address scratch ticket manufacturing
• Increase in Fund 5025 due to development of technology for the lottery competitive market.
• Modified Rider reflects revised contractual percentage of gross sales to lottery operators to 2.03% and 1.99% in FY 2024 and 2025
• Toth – Asks about advertising
  • Allocated $10m each biennium
• Martinez Fischer – Lottery Commission funds count against the cap?
  • No

 

Gary Grief, Executive Director TLC

• FY 2022 set a new sales record; shy of $8.3b
• Is the twelfth year we have set a sales record
• Have generated $2b for public education and veterans’ services
  • Will exceed this mark FY 2023
• FY 2022 administrative costs were 3.5% of lottery sales
• Exceptional item request is $17.4m for the authority to increase scratch ticket production and service contract strategy
• Are due to inflationary increases, supply chain issues, and contracts will be renegotiated in 2025
• Without additional funding, sales will go down as we will not have enough product to put into the market
• For every $1m not funded of that $17.4m, decrease in net revenue loss of $14m for education and veterans’ programs
• Toth – How much are we spending on advertising; how spending?
  • $10m per year; are the billboards, some digital ads, everything is in house
• Toth – Utilize outside ad agency? Segmentation research
  • Yes have an Austin agency; do not concern ourselves with segmentation
• Toth – They do it anyway; what direction are you getting from the segmentation research
  • We direct them, we do not do any targeted advertising
  • Will provide you whatever you need from our agency
• Ed Thompson – Is $3.5m left in your marketing budget not from advertising?
  • Promotional events, what kind of games, etc.
  • Kelly Stuckey, Comptroller TLC – Also includes our scratch ticket production and staffing costs
• Ed Thompson – Not the only state with a lottery; concerned about how you market to people?
  • Yes, have been in the industry for 30 years and have a sensitivity for that
• Martinez Fischer – Print tickets contracts length? No adjustments for market conditions?
  • Executed in 2012 and have exercised all extensions; expire in August 2024
  • Come across new products and do negotiate those in on existing contracts
• Martinez Fischer – Will negotiate on existing contract language? No triggers for cost increase
  • Discussed putting a CPI clause in there, but is in best interest to not do that
• Martinez Fischer – Know the impacts any other authorized forms of gambling? Would be curious to know as the lottery provides funds for education and veterans; your analysis may have a profound effect on those proposals
  • Will have an impact on lottery sales; are keeping a close eye on that
  • Are looking at some of the bills filed concerning sports betting, casinos, etc.
  • Do not have enough information from these bills to be able to analyze that
• Walle – Have taken some preliminary actions on fiscal notes for these bills?
  • Kelly Stuckey, Comptroller TLC – Are working on developing FTE costs on the sports betting
  • That bill places responsibility of sports betting on the lottery commission; looking at what we would need
  • Kelly Stuckey, Comptroller TLC – In the sports betting bill, TLC would be tasked on licensing/regulatory
  • In the proposed sports betting bill, we would be the regulator
  • Casino bills would be under a new gaming commission, which is not TLC; looking at how that would impact us
• Walle – Bills will have fiscal implications
  • Are different groups around the country who have feedback on that
• Martinez Fischer – Are conversations about the hit to the agency these bills could have; concerned there is something out there that could compete with the funds this agency brings to public education?
• Martinez Fischer – Want your feedback before finalized versions of those bills are out
• Walle – Apps that are selling lottery tickets? Need legislative changes with that separate to this committee?
  • Third parties negotiate a business relationship with a lottery ticket seller; display the picture of the ticket
  • This is out of the Lottery Commission’s preview; would need licensing or regulatory authority to handle that
• LBB Staff – Clarification on if funds count against the cap; $17.1m how much is remaining

 

Texas Department of Motor Vehicles

Thomas Galvan, LBB Staff

• LBB presentation here
• Total funding $376.3m; increase in $31m
• Decrease for ongoing TxDMV Automation System information technology capital projects
• Increase General Revenue for Motor Vehicle Crime Prevention Authority grants and administration
• Increase for Data Center Services to maintain current obligations and provide agency-initiated data storage enhancements in the data center
• Includes salary increases
• 6 exceptional items totaling $186m

 

Daniel Avitia, Executive Director DMV

• Requesting five exceptional items to be funded with other funds
• Exceptional item 1 funding to replace the agency’s legacy Registration and Titling System
• Exceptional item 2 funding to create two additional regional service centers
• Exceptional item 3 funding for construction of a new office building and renovations to existing facilities at the agency’s Camp Hubbard headquarters in Austin
• Exceptional item 4 funding to increase FTE cap by 38 FTEs each FY
• Exceptional item 5 funding to increase state’s inventory of general issue plates to a six-month supply
• Exceptional item 6 funding to increase ED salary
• Ed Thompson – Request for a study for RTS replacement; why not go ahead and request funding for the whole system?
  • Need to engage with DIR as this is a major process; need identification of what we need to improve
• Ed Thompson – Could ask for seed funds? Want to work on this as soon as possible
  • Want to have a thorough process
• Ed Thompson – Motor vehicle crime prevention; my community got a grant for license plate scanners; increase for that?
  • Yes; will continue those programs
• Walle – Have data on how often system goes down? Have heard complaints from tax assessors
  • Do not; are all aligned that we need complete replacement; will study what we need first
  • Actual replacement of the system could cost $85m-$105m
• Walle – Next session the financial picture may not be as good as it is now
  • Have been in discussion with LBB and DIR; currently have the funding in Fund 10 to replace the system
• Walle – Is enough that you would just need permission
  • Glenna Bowman, CFO DMV – Should be able to substantially support a new system from Fund 10
• Walle – How much is in Fund 10?
  • Glenna Bowman, CFO DMV – Do not have the exact amount; bring in about $185m a year; would have to do financing
• Walle – Would need more staff to implement the system? In partnership with DIR?
  • Are not requesting additional FTEs; would need to wind down and wrap up existing projects
• Walle – Would need statutory authority?
  • Glenna Bowman, CFO DMV – Would need appropriation authority through a rider, line item, or in supplemental bill
• Toth – What kind of system is it?
  • Wendy Barren, CIO DMV – DB II based system in Java; need a direct network connection to counties
• Martinez Fischer and Barren discussed system stabilization efforts
• Martinez Fischer – Concerned about asking for too much? Is that why you have not asked for funding the whole replacement?
  • Not concerned about that
• Martinez Fischer – Have discussed with
  • Are vendors who are successful in other parts of the country; will not say their names as we do not want to disrupt the procurement process
• Ed Thompson – Additional funds for Fund 10?
  • Bowman – Would take additional funds in Fund 10, but part of the issue would implementation timing
• Ed Thompson – Is webDEALER a part of this?
  • Is a subsystem that feeds into the registration and titling system; have not heard complaints about webDEALER
• Toth – Communications issues between counties and the system; does DIR have mainframes?
  • Barren – Contract with AT&T; transferred over to the state data center
• Toth – Will not change operating system?
  • Will change the entire system
• Toth – Why are you not asking for these funds now; will cost more if we start later?
  • Need to do this in a methodical way
• Toth – What are you doing with DIR now?
  • Are working with them as it is a major information resource project; exceeds $5m
• C. Bell – Is in the treasury? Want clarification
  • Thomas Galvan, LBB Staff – Fund 10 in the treasury, but outside of the GR fund; does not affect certification
• C. Bell – Difficult to get these IT projects through; interested in stabilizing existing system, if there is a bigger number to accomplish that, want to know
• Walle – How much is in Fund 10?
  • Thomas Galvan, LBB Staff – $185m coming in
• Walle – If they wanted to use Fund 10, would have enough?
  • Thomas Galvan, LBB Staff – Would defer to the agency on what their projected future fund balance would be

 

Texas Department of Transportation

Thomas Galvan, LBB Staff

• LBB presentation here
• Total funding $35.5b; $3.9b increase; maintain FTEs
• $3.2b for highway planning/design, right-of-way, financing, construction, and maintenance
• $550m increase for maritime port capital improvement projects and to capitalize the Ship Channel Improvement Revolving Fund
• Net increase for capital facilities construction, deferred maintenance, land acquisition
• Increase for bond debt service payments
• Recommendations include $12.8 billion in Federal Funds
• Recommendations provide $5.4 billion for 2024-25 from Prop 1 oil and natural gas severance tax-related deposits to the State Highway Fund
• Recommendations provide $6.2 billion for 2024-25 from Prop 7
• Recommendations provide $222.0 million in SHF and capital budget authority for the agency’s ongoing information technology, cybersecurity, and legacy modernization initiatives
• C. Bell – Federal Funds for certain projects, require matching dollars? Not included in this report?
  • Yes and no
  • EV Vehicle program non-federal matching funds would come from private entities they partner with
  • Carbon-reduction matching funds some would come out of the states, but would send
• Martinez Fischer – Deletion of three different airport riders?
  • Previously for McKinney National Airport and South Texas International Airport projects that are soon to be completed
• Walle – SHF redirection?
  • Prop 1 mechanism based on previous years oil and gas severance taxes
• Walle – SHF are restricted use? Not a lot of discretionary use
  • Three primary limitations: highway purposes, non-toll public roadways, and non-toll public roadways and debt service on highway GO bonds

 

Marc Williams, Executive Director TxDOT

• UTP totals $85b; future UTP could be $100b
• TxDOT is predominantly state funded at 64%
• 88% of funds are project development, delivery, and maintenance on state highway system
• Highway cost index was unprecedented 30%
• Many programs rely on non-dedicated sources of funds; may have budget authority, but if the availability of funds do not match, need to take other steps
• Exceptional items 1 increase FTE cap by 349 each FY
• Exceptional item 2 $94m for Airport Facilities Development Program and Routine Airport Maintenance Program
• Exceptional item 3 $7.5m increase funding for grants to support rural and urban transit districts to adjust for the 2020 census outcomes
• Exceptional item 4 amend Rider 3 increase discretionary authority from 5% to 10% for contracted planning and design
• Exceptional item 5 delete Rider 14 to remove reporting requirements for Toll Project Revenue and Funds Report
• Exceptional item 6 amends Rider 14 to allow all reports to the Legislature outlined in Rider 14 to be satisfied by Project Tracker on TxDOT’s website
• Remaining exceptional items are 7, 8, 9
• Ed Thompson – Federal Funds are not included?
  • Stephen Stewart, CFO TxDOT – All COVID funds have been obligated
• Ed Thompson – Federal Funds can supplement UTP? Asks about flowing of Federal Funds
  • Federal fund increase is included in the current UTP
  • Federal Funds are accounted for by reimbursement basis; work with LBB to estimate reimbursements in the future
• Ed Thompson – Issues with locals coming up with matching funds; how can we help solve this?
  • Try to work with all communities on this; is also a Disadvantaged Counties Program
• Ed Thompson – Some local projects off track due to COVID; seeing that cure?
  • Yes; often reflected in bid prices; still seeing challenges in utility relocations
• Martinez Fischer – Requested $94m for general aviation support; how can my city work with RAMP program?
  • $94m request for general aviation airports for smaller airports
  • RAMP program is a 50/50 match for routine maintenance of runway facilities
• Martinez Fischer – Decrease in rail funding, other sources could make up for this?
  • Some fund sources in the UTP could be used related to safety
  • Underutilized Rail Improvement Fund
• Martinez Fischer – Funding sources for rail would come from GR or highway funds? Could tap into Federal Funds for this?
  • Yes; and difficult to count on those because they are very competitive
  • Prefer available funds we can count on
• Martinez Fischer – Are rail needs in San Antonio and other areas in South Texas; would like to work with you on this
• C. Bell – When will you receive Federal Funds? Where would matching funds come from
  • Stephen Stewart, CFO TxDOT – Would be private matching dollars on the NEVI program; Carbon Reduction matching funds would be part NPOs and part state
• Walle – Do not have a lot of discretion on how funds are used?
  • Yes; a lot of needs for modal programs would be restricted; majority are constitutionally dedicated
• Walle – Are some things in HB 1 you have not been able to do historically; 1% of budget is discretionary?
  • Represents non-dedicated source could be used on activities not provided for in constitution
• Walle – Asks about funding for rail
  • $20m is dedicated Federal source for rail, highway, and grate crossings
  • Is difficult to find funding to identify eligible sources of funds for off-systems improvements
• Walle – SHF used for safety? Like grid separation funds?
  • Yes; could also use Federal Funds; are limited by availability
• Walle – Fund 306 for rail improvement has not been capitalized?
  • Stephen Stewart, CFO TxDOT – Correct
• Walle – Want to continue this conversation offline
• Walle – Dollars going to ports are new?
  • Yes; Ship Channel Improvement Revolving Fund has been capitalized and $150m for port capital improvements
• Walle – Will set up scoring system on how to allocate those dollars?
  • Yes; will work similarly to what we have done with Port Authority Advisory Committee
• Walle – Revolving Fund?
  • Would provide a local match for Army Core of Engineer projects
• Walle – Beaumont, Port Arthur, Houston, Freeport, Corpus Christi and Brownsville could tap into those dollars
• Walle – Airports projects deleted riders? Do not expect them to come back for more funds?
  • Stephen Stewart, CFO TxDOT – Yes projects are expected to be completed; and correct
  • McKinney and Edinburg to be completed soon; Ector County declined to receive funds
• Walle – Project for rail crossing in Presidio? Will increase revenue? Financial implications?
  • Progressing with U.S. Customs and Border Protection; will use Federal grant programs
  • Has been interest in Class 1 railroads to use that cross-border crossing
  • Makes state more competitive with inflow of trade products
• Walle – Are a large trading partner; what type of product expected?
  • Wide range of things including aggregate, sand, pipe, grain stock, etc.
  • Making connection with Western Mexico Port opens things up
• Martinez Fischer – Could come back with us appropriate capitalization for Fund 306?
  • Will work with the committee
• Walle – Need more funds for Galveston ferry?
  • Yes; is an important part of exceptional item FTE request

 

Texas Workforce Commission

Lyle Blanco, LBB Staff

• LBB presentation here
• Total funding $5.1b; recommend 4,905 FTEs
• $4.2b decrease due to federal funding decreases
• 13 exceptional items totaling $78.4m
• Walle – Child Care Development Block Grant historic funding? Concerned about the decrease
  • $400m this biennium and will return to pre-COVID levels
• Walle – Have not seen that type of infusion of dollars in this agency’s history?
  • Correct

 

Ed Serna, Executive Director TWC

• Requested all funds of $2.5b each year this upcoming biennium
• Exceptional item 1 $35m in GR to draw down $52m in Federal Funds for the Child Care and Development Block Grant
• Exceptional item 2 one-time GR funding to for the Civil Rights Division to clear an Equal Employment Opportunities complaint backlog
• Exceptional item 3 funding for pre-apprenticeship program
• Exceptional item 4 $25m each year for Skills Development Fund
• Exceptional items 5 to replace agency’s case management system
• Exceptional item 6 capital budget authority to begin a project to replace the agency’s legacy the Cash Draw and Expenditure Reporting
• Exceptional item 7 Federal Funds with capital budget authority to develop/implement an eligibility screening tool across multiple early childhood programs; working with TEA
• Seeking additional funds for Unemployment Insurance Fund; receive flat amounts of Federal Funds

• Ed Thompson – What qualifies an individual for childcare program?

• • Primarily based on income qualification; need to be starting a new job or in training
  • Did provide support particular groups during COVID like service industry and medical professionals

• Ed Thompson – Can have more information on pre-apprenticeships? Is a great connection with high schools and community colleges
• Ed Thompson – Flat Federal Funds for the UI fund?

• • Amount of funds to administrate the program is flat; use same funds to support other processes

• Ed Thompson – Discusses UI fraud during COVID; pursuing those?

• • Yes; those are typically the easiest to trace back
  • Less than 1% of UI payouts during the peak were fraudulent

• Walle and Serna discuss the childcare program changes
• Walle – UI rate now?

• • UI is back to pre-pandemic levels

• Walle – Had to borrow funds for UI payouts?

• • Legislature provided us funds to pay off federal debt and brought trust fund above floor; returned $266m
  • Discusses JET grant and Skills Development Fund

• Thompson and Serna discuss TWC’s Customer Care Division supported in the base bill

 

Reimbursement to the Unemployment Compensation Benefit Account

Lyle Blanco, LBB Staff

• LBB presentation here
• Total funds $41.8m; decrease of $5.4m
• Decrease in the State’s unemployment compensation reimbursement due to an anticipated decrease in unemployment benefits

 

Public Testimony

Lauren Rose, Texas Network of Youth Services

• Need to deepen funds for youth who experience homelessness; request creation of a new $40m grant for providers to help provide assistance

 

Ronald Smith, Self

• Need to invest in help for youth services to aid those experiencing homelessness
• Walle – Aged out of the foster care system?
  • Yes; currently experiencing homelessness right now

 

Susan McDowell, CEO LifeWorks

• Support increasing funds for youth who experience homelessness through TDHCA

 

Kim Jefferies, CEO Haven for Hope

• HHSP funding has decreased and see increased need; need to increase to $11.5m

 

Cyrus Reed, Lonestar Chapter of the Sierra Club

• Texas does not have any energy assistance funding at a state level; pleased there are Federal Funds coming in
• PUC has an idea to have agencies to form an Energy Efficiency Council to help with payment assistance/weatherization

 

Ray Himmel, Texas Public Employees Association

• Support the pay raises under the base bill

 

Kristin Hoyt, Tax Assessor Collector

• Discusses issues with the Registration and Titling System; support modernization

 

Kim Kofron, Children at Risk

• Need to increase investment in childcare industry

 

Maria Dominguez, Self

• Formed a Spanish immersion pre-school
• Need increased state funding for childcare centers

 

Renzo Soto, Texas 2036

• Support TWC apprenticeships and pre-apprenticeships exceptional items
• Tri Agency Workforce creation was transformational, but cannot measure whether they are leading Texans to jobs due to the lack of occupational data
• Ask the committee to support efforts to implement advanced workforce data pilot in HB 3767
• Toth – What percentage of children know about these initiatives?
  • Apprenticeship programs are there, but participation is low

 

David Feigen, Texas Care for Children

• Current lack of state investment in childcare is a crisis; need to increase funding
• Need $2b to continue stabilization grants, recruitment/retention bonuses for childcare providers

 

Kelsey Erickson Streufert, Texas Restaurant Association

• Restaurant industry is facing workforce shortages
• Request an additional rider to increase amount to JET grant program and Texas ProStart
• Childcare is a huge challenge for our industry; workforce needs it
• Toth – Experiencing as drastic workforce shortage before the pandemic?
  • Was a challenge before the pandemic, inflation is pushing people back into workforce
• Toth – Notes it is harder to find employees post-Covid rather than pre-Covid
  • Are a lot of different solutions

 

Tim Kaminski, Self

• Importance to support early child education programs; need increased investment

 

Cody Summerville, Texas Association for the Education of Young Children

• Need increased salaries for childcare workers; need to provide stabilization grants

 

Reshaun Webb, Self

• Operate a childcare center; ask committee to fund stabilization grants and bonuses for staff