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On December 4 the House Committee on Appropriations met to hear invited testimony regarding the State Spending Limit, an overview of the revenue estimate, and budget drivers for the 84th Legislative Session.

Ursula Parks, LBB, Spending Limit Discussion

  • Reviewed various Constitutional limits on appropriations
    • Debt and Welfare are well below limits
    • Pay as you go- can’t deficit spend
  • Not all appropriations are subject to the limit for example State Lottery proceeds are GR but not tax revenue
  • Current estimated rate of growth set and will not change but the base amount that growth is applied to could be adjusted (ie supplemental spending bill)
  • LBB staff estimated appropriations will be $263.4 million below limit for 2014-15
  • Currently about $837 million below spending for current biennium due to increased revenues which have been robust this biennium and certain changes to estimated appropriated which translates to a little over $1 billion spending capacity for 2014-15

Cost Drivers handout

LBB Staff, Foundation School Program (FSP)

  • Reviewed handouts:
    • FSP Drivers include: student enrollment, school district property values (DPV), settle-up costs, Austin ISD Yield Growth, other regular cost
    • FSP methods of finance come from 4 revenue streams
  • Rep. McClendon asked about changes in students populations
    • Still working through estimates and fiscal impact of what changes in English Language Learner program will be; staff is waiting on estimations from TEA
    • Implications of School Finance Lawsuit
      • Unknown at this time
  • Rep. Donna Howard noted property taxes have increased and asked how it would change pie chart
    • Do not know right now – LBB still working on this calculation
    • Estimate for 2014 was anticipated 4.03% and now estimating 8.06%
    • Howard – twice the amount so is it reasonable to expect the amount coming in would be twice as much and offset GR?
    • Not direct correlation but there will be more
    • Howard – local property taxes are actually offsetting what the state owes

LBB Staff, Medicaid

  • Reviewed handouts:
    • Caseload and Cost reviewed
  • FMAP was 60.22% in 2004 and been declining since 2008
  • Rep. Munoz inquires on concrete information of possible savings on managed care expansion
    • More challenges with managed care than analysis on fee-for-service (FFS)
    • Munoz also wants LBB to get him information how many vendors have come back to increase rates, etc since managed care roll-out
  • Rep. Howard asked about long-term care decline on bar graph
    • Star Plus services roll-out – caseload numbers did not actually reduce; many clients receive LTC services from HHSC
  • Rep. Zerwas on child acute care caseload cost – are there any improvements on long term care cost? Enrollment on CHIP – CHIP transition to Medicaid?
    • Caseload about ¾ children and ¼ LTC
    • Cost issues mostly long term care cost 
    • Cost is driven by caseload expansions in long term care – cost being driven by number of people receiving services
    • CHIP growth has been impacted by ACA and there was a FMAP change as a result of ACA
    • Absent transition of Medicaid (transition slightly delayed but about 200K) but CHIP caseloads have been increasing and state could continue to qualify for federal match as long as funds are available
  • Rep. Marquez pilot program in 6 counties with deadline to enroll in March 1 – dual demonstration  program mandated by SB 7
    • That sounds correct
    • State federal partnership to try to achieve savings but there is a disconnect between the two programs but effort to integrate care 
    • It will be implemented March 2015 but rates have not been finalized so savings not yet calculated but it is being built into the rates

LBB Staff, Mental Health

  • Reviewed handouts
  • Rep. King asked to be sent amounts of 18 agencies within 5 articles and inquired on waitlist
    • 5,321 adults & 194 children offered services that were on the waitlist last biennium
    • Waitlist was cleared and new one started for both adults and children
      • Now 367 adults &children currently on interest list
    • King asked about housing those with mental health needs
      • Rental assistance program over 1k people served
      • State planned amendment submitted and the thought is it was approved
      • Will continue to ramp up in 2015 
      • Agency has an exceptional item in regards to this – same level of funding as last session
  • Rep. Zerwas would like to know how the 2011-2015 waiver affected mental health care funds and what it added to the numbers in the presentation
    • District projects allotted $2.3 billion for four year projects (federal and non-federal share)
  • Rep. Howard inquired about a North Texas campus renovation and requested details
    • The campus being renovated is Victory Field Campus in North Texas; it will house adolescents and construction will cost $4 million in GR
  • Rep. Bonnen expressed concern that private sector managed care was advocated to control costs and create transparency; instead it has created an opaque system, making it difficult to monitor the movement of money
  • Rep. Bell concerned how well we project savings without some form of benchmark

 
LBB Staff, ERS

  • Reviewed handouts
    • Graphical depictions of expenditures
    • Employee group benefit program
    • Health care claims reviewed and benefit cost trend (8.5%)
  • In regards to a question about what caused the increase from $2.5 million to $3.1 million in Group Benefits Program Expenditures between 2013-2015
    • Per capita increases

LBB Staff, TRS

  • Reviewed handouts
  • Payroll growth in 2014 – 14.3% on public education
  • General overview of fund – it is defined benefit
  • Current net assets 132.8 billion; funded ratio 80.2%; approximately 29 years remaining until amoritization
  • Fund is depleting – balance at end of FY 2015 $170.6 million
  • Rep. Otto asked about federal source of funding and its stability
    • It is growing as a revenue source – has to do with retiree and some related to ACA

John Heleman, Chief Revenue Estimator for Comptroller of Public Accounts

  • Reviewed material presented during recent LBB hearing on the State Fiscal and Economic Conditions
    • Unemployment rate down to 5.1% and is projected to fall below 5% next year
    • Reviewed: income and gross product increases in Texas, Housing permits increasing, both new and existing home prices are increasing, production of oil has more than doubled since 2007 (2/3 of growth due to Eagle Ford Shale),  and anticipated economic trends
  • Rep. Howard in regards to the franchise tax history
    • $14 billion was what state would need for the compression
    • Amount of revenue going into property tax relief fund is $6 billion per biennial period
    • Does not know the cost of compression right now but there will need to be approximately $8 billion, likely from surplus,  to maintain the compression as has been done in last bienniums