texas budget highlights: fiscal 2012-13 - house research

HOUSERESEARCHORGANIZATION

HOUSERESEARCHORGANIZATIONTexas House of Representatives State Finance Report No. 82-5 December 6, 2011

Fiscal 2012-13H IGHLIGHTST E X A SBUDGET

This report highlights keyprovisionsofHB1byPitts, the generalappropriations act forfiscal 2012-13;HB4byPitts, the supplementalappropriations act; andSB2byOgden,first called session.Forinformationon the rules, laws, and constitutional provisionsgoverningthebudget process, seeHouseResearchOrganizationStateFinanceReportNumber82-1,Writing the State Budget, February3, 2011.Formore informationon specificbudget issues, seeHROStateFinanceReportNumber82-2,Fiscal 2012-13State Budget: Background on the Issues, February23, 2011, andHROStateFinanceReportNumber82-4,CSHB 1: The House Appropriations Committee’s Proposed Budget for Fiscal 2012-13,March31, 2011.

Overview.............................................................................................2General government...........................................................................5Health andhuman services................................................................6Public education.................................................................................8Higher education..............................................................................10Judiciary............................................................................................11Criminal justice................................................................................12Natural resources..............................................................................13Transportation and economicdevelopment.....................................14Regulatory agencies.........................................................................15

http://www.hro.house.state.tx.us/pdf/focus/writing82.pdf

http://www.hro.house.state.tx.us/pdf/focus/2Budget82-2.pdf

http://www.hro.house.state.tx.us/pdf/focus/2Budget82-2.pdf

http://www.hro.house.state.tx.us/pdf/focus/CSHB1_82.pdf

http://www.hro.house.state.tx.us/pdf/focus/CSHB1_82.pdf

House Research Organization

Overview of the fiscal 2012-13 budget

All budget areas except natural resources andbusiness and economicdevelopment saw reductionsfromfiscal 2010-11 spending levels in totalappropriations forfiscal 2012-13.Health andhumanservices had the largest all-funds reductionof $10billionbut received an increaseof $1.2billion ingeneral revenue andgeneral revenue-dedicated funds.General revenue andgeneral revenue-dedicated fundsappropriations for business and economicdevelopmentincreased slightly, less than1percent,withgeneralrevenue andgeneral revenue-dedicated appropriationsfor all other budget areas reduced.

Fiscal 2012-13 appropriations include a decrease infederal fundsof about 25percent.Thebudget reducesappropriations in federal funds to the state by$17.9billion, largelydue to a decrease in federalRecoveryAct funds fromfiscal 2010-11,when$12.1billionwas appropriated.

State Spending by Government Function(All funds in millions)

Budgeted Appropriated Fiscal Fiscal Biennial Percent 2010-11 2012-13 change* change*

Art. 1 General government $5,026.3 $4,469.0 ($557.3) (11.1)%Art. 2 Health and human services 65,464.2 55,426.4 (10,037.8) (15.3)Art. 3 Education 76,416.0 72,871.3 (3,544.7) (4.6)Art. 4 Judiciary 672.9 643.1 (29.8) (4.4)Art. 5 Public safety/criminal justice 12,072.9 11,507.4 (565.5) (4.7)Art. 6 Natural resources 3,562.2 3,888.3 326.1 9.2Art. 7 Business/economic development 23,196.6 23,660.8 464.2 2.0Art. 8 Regulatory 736.1 677.8 (58.2) (7.9)Art. 9 General provisions 0 0 0 N/AArt. 10 Legislature 369.2 339.9 (29.3) (7.9)

TOTAL $187,516.5 $173,484.2 ($14,032.3) (7.5)%

*compares Estimated/Budgeted Fiscal 2010-11 with Appropriated Fiscal 2012-13

Note: Totals may vary because of rounding.

Source: Legislative Budget Board

The state budget forfiscal 2012-13 authorizes totalspendingof $173.5billion in all funds, a decreaseof $14billion, or 7.5 percent, fromfiscal 2010-11spending levels, according to theLegislativeBudgetBoard (LBB).Appropriationsof general revenue andgeneral revenue-dedicated funds total $87.7billion forfiscal 2012-13, a reductionof $566.5million, or 0.6percent, fromfiscal 2010-11.

Comparisons in this report to amounts from thepreviousbienniumcome from theLBB’s calculationsof appropriations forfiscal 2012-13 andof estimated/budgeted amounts forfiscal 2010-11.Estimated/budgeted amounts reflect appropriations, supplementalappropriations, and reductions to agencybudgetsin response to state leaders’ requests for 5 percentspending cuts in January2010 and instructions inDecember2010 to cut another 2.5 percent fromoriginalgeneral revenueandgeneral revenue-dedicatedappropriations.


All Funds Appropriations by Function, Fiscal 2012-13(in millions)

Health and Human Services $55,426.4 (32.0%)

Public Education50,780.2 (29.3%)

Higher Education$22,091.2 (12.7%)

Judiciary$643.1 (0.4%)

Public Safetyand Criminal Justice$11,507.4 (6.6%)

General Government$4,469 (2.6%)

Legislature$339.9 (0.2%)

Regulatory$677.8 (0.4%)

Business andEconomic Development$23,660.8 (13.6%) Natural Resources

$3,888.3 (2.2%)

The82ndLegislature appropriated funds in threebills:HB1byPitts, the general appropriationsact, enactedduring the regular session;SB2byOgden, revisions toHB1, enactedduring thefirstcalled session; andHB4byPitts, a supplementalappropriationsbillwith spending forfiscal 2011,fiscal2012, andfiscal 2013.Spending inHB1was reducedby line-itemvetoes by thegovernor, all ofwhicheliminated contingent riders for bills thatwerenotenacted.

Rainy day fund.No funds from theEconomicStabilization (“rainyday”)Fundwere appropriated forfiscal 2012-13, butHB275byPitts appropriated$3.2billion froman expected$9.4billion in the rainydayfund to partially cover thefiscal 2010-11 shortfall.According to theComptroller’sOffice, the fundhad$6.1billion at the endofNovember2011, afterconstitutionallymandated transfers to the fund.TheTexasConstitution and state law require that half ofanyunencumberedbalance remaining in theGeneralRevenueFund at the endof afiscal bienniumand75percent of anyoil or natural gas production taxrevenue that exceeds the amount collected infiscal

1987be transferred to the rainyday fund.The stateendedfiscal 2011with$2.6billion in unspent generalrevenue andgeneral revenue-dedicated funds.

Medicaid deferral.Thefiscal 2012-13budgetforMedicaid includes$40.6billion in all funds and$17.1billion in general revenue andgeneral revenue-dedicated funds.Thenumberof people eligible forMedicaid and the costs associatedwith running theprogramare expected to rise during thebiennium.Thebudget doesnot include funding to cover this growth,falling short by an estimated$4.8billion in generalrevenueof the amount expected to beneeded forMedicaid (see “Health andhuman services,”page6).BecauseMedicaid is an entitlementprogram thatmust cover all qualifying individuals, asupplemental appropriation in 2013will benecessaryto address this shortfall.

Public education funding.Thefiscal 2012-13budget appropriates $50.8billion in all fundsto public education agencies, including theTexasEducationAgency (TEA), theTeacherRetirementSystem (TRS), theSchool for theBlind andVisually


State Spending by Government Function(General revenue and general revenue-dedicated funds in millions)

Budgeted Appropriated Fiscal Fiscal Biennial Percent 2010-11 2012-13 change* change*

Art. 1 General government $3,033.6 $2,911.9 ($121.7) (4.0%)Art. 2 Health and human services 22,650.7 23,867.6 1,216.9 5.4Art. 3 Education 49,285.3 48,412.2 (873.1) (1.8)Art. 4 Judiciary 482.2 466.3 (15.9) (3.3)Art. 5 Public safety/criminal justice 8,694.8 8,374.7 (320.2) (3.7)Art. 6 Natural resources 2,083.1 1,685.3 (397.8) (19.1)Art. 7 Business/economic development 962.0 964.6 2.7 0.3Art. 8 Regulatory 676.6 648.5 (28.1) (4.2)Art. 9 General provisions 0 0 0 N/AArt. 10 Legislature 368.6 339.4 (29.2) (7.9)

TOTAL 88,236.9 87,670.4 (566.5) (0.6)

*compares Estimated/Budgeted Fiscal 2010-11 with Appropriated Fiscal 2012-13

Note: Totals may vary because of rounding.


Impaired, and theSchool for theDeaf.This is adecreaseof 5.6 percent, about $3billion, fromfiscal2010-11 spending.Thedecrease results largely fromstatutory changes to thepublic education fundingformulas that determine the amount towhich a publicschool or open-enrollment charter school is entitled. Thedecrease also results from reduced appropriationstoTRS.

State employee reductions.HB1, thegeneralappropriations act enactedduring the regular session,decreased thenumberof full-time equivalent (FTE)positions in state employment forfiscal 2013by5,727 from the2011budgeted levels, according to theLBB’s summaryof the conference committee reportonHB1, for a total of 235,135FTEs.

Spending limits. Thefiscal 2012-13budgetmeets all spending limits imposedby theTexasConstitution and state law.Art. 3, sec. 49aof theConstitution limits spending to the amount of revenuethat the comptroller estimateswill be available

during the two-year budget period.The comptrollerhas certified that the statewill have enough revenueto cover the appropriations approvedby the82ndLegislature.

Another constitutional spending limit,Art. 8,sec. 22, prohibits thegrowthof state spending fromrevenuenot dedicatedby theConstitution fromexceeding thegrowth rate of theTexas economy,defined as thegrowth in statewidepersonal income.OnNovember15, 2010, theLBBadopted anestimatedgrowth rate of 8.92percent,which limitsspending fromnondedicated tax revenue infiscal2012-13 to $78.1billion, subject to the comptrollerrevising the revenue estimate.According to theLBB,fiscal 2012-13 spendingwill not exceed this limit.

Unspent dedicated account balances used for budget certification. According to theComptroller’sOffice, 213 accounts containgeneralrevenuededicated to spending for aparticularpurpose.TheLegislature chosenot to appropriatemost of the


Percent change from fiscal 2010-11 spending levels

The82ndLegislature appropriated$4.5billionin all funds forfiscal 2012-13 for nearly twodozenagencies that perform someof the core operationsofstate government.This is a decreaseof $557.3million,or 11.1percent, fromfiscal 2010-11 spendingof $5billion.General revenue andgeneral revenue-dedicatedfundsdecreaseby4percent to $2.9billion.Theagencies towhich these funds are appropriated includegeneral administrative agencies, agencies chargedwithoperationof state buildings andbond issues,

General government

and agencies that administer state employeebenefits,pensions, andworkers’ compensationpayments.

Economic development funds.HB1appropriates $150million in general revenue funds fortheTexasEnterpriseFund (TEF) and$140.5millionin general revenue funds for theEmergingTechnologyFund (ETF).Neither appropriation includesnew funds,butHB1 allowsboth theTEFand theETF to retainand spendunused funds fromfiscal 2010-11.

State employee health insurance benefits.Thefiscal 2012-13 state budget appropriates $2.7billion in all funds for state employeegrouphealthinsurancebenefits, including$1.7billion in generalrevenue andgeneral revenue-dedicated funds.This isan increaseof $236.5million in all funds fromfiscal2010-11 spending levels and an increaseof $123.8million in general revenue andgeneral revenue-dedicated funds.This funding levelwill avoid changesto employee contributionsor benefits andmaintain thecurrent benefit structure at least throughfiscal 2012. State employee retirement.Thebudgetappropriates $814.6million in all funds for statecontributions to state employee retirement plans, anincrease from the$806.5million thatwasbudgeted forfiscal 2010-11.SB2, enacted in the82ndLegislature’sfirst called session, appropriates another $7.5million

money in thesegeneral revenue-dedicated accounts,whichby the endoffiscal 2012-13will total nearly$5billion.Unspent balances in thegeneral revenue-dedicated accounts range from$1,000 in theAmericanLegion licenseplate account to $851million in theSystemBenefitFund,which is dedicated to providingassistance to certain low-incomeelectric ratepayers (seepage15).Other accountswith sizable, unspent balancesinclude theEmissionsReductionPlan (about $654million) and theDesignatedTraumaFacility andEMSaccount (about $388million).Leaving these fundsunspent for their specifiedpurposesmade thismoneyavailable for the comptroller to certify that thefiscal2012-13budgetwasbalanced.

All funds (%) General revenue and general revenue-dedicated funds (%)

General government (11.1%) (4.0%) Health and human services (15.3) 5.4 Education (4.6) (1.8) Judiciary (4.4) (3.3) Public safety and criminal justice (4.7) (3.7) Natural resources 9.2 (19.1) Business and economic development 2.0 0.3 Regulatory (7.9) (4.2) Legislature (7.9) (7.9)

Total (7.5) (0.6)



Thefiscal 2012-13budget forMedicaid includes$40.6billion in all funds and$17.1billion in generalrevenue andgeneral revenue-dedicated funds.This isa decrease in all fundsof about $8.8billion, or 18percent, fromfiscal 2010-11.HB1maintains the2percent rate cuts imposedduringfiscal 2010-11onphysicians, dentists, andorthodontistswho acceptMedicaidorCHIP and implements additional cutsof 5 percent in reimbursements to otherMedicaidproviders, 8 percent in reimbursements to otherCHIPproviders, and8percent for certainMedicaidhospitalservices.

HB1doesnot include funding for increasesinMedicaid cases and costs anticipatedover thebiennium.TheLegislativeBudgetBoard (LBB)estimates that about 200,000new individuals areexpected to qualify for acute careMedicaid servicesby2013.HB1 falls short by about $4.8billion ingeneral revenue from the amount estimated to berequired to fund anticipated caseload and cost growth.BecauseMedicaid is an entitlement program thatmustcover all qualifying individuals, thenextLegislaturewill have to fund any shortfallwith a supplementalappropriation in 2013.

Thefiscal 2012-13budget alsodecreases fundingfor programs such asTemporaryAssistance forNeedyFamilies (TANF), aswell as services for familyplanning and for children andmedicallyneedy riskgroups.

Mental health funding. Thebudget includes$1.9billion in all funds to theDepartment ofStateHealthServices (DSHS) formental health servicesstrategies. Itmaintainsfiscal 2010-11 service levelsfor communitymental health crisis services andincreases funding for children’smental health services.Adultmental health services,which treat about50,000Texanspermonth, are cut by about 4 percent.Funding for state and communitymental healthhospitals is increasedby about 6 percent for thebiennium.

Thebudget directsDSHS to contractwith anindependent body to review thepublicmental healthsystemand report recommended improvements to theLBB, thegovernor, and theLegislaturebySeptember1, 2012.DSHSalsomust develop a request for a

Health and human services

Thefive agencies comprising theTexashealthandhuman services (HHS) systemconstituteTexas’second-largest sourceof expenditures after education.TheseHHSagencies are appropriated$55.4billionin all funds forfiscal 2012-13, a decreaseof 15.3percent fromfiscal 2010-11 spending levels.Thegeneral revenue andgeneral revenue-dedicatedfundsportion, $23.9billion, represents a 5.4 percentincrease.Thedecrease in all funds largely is due tothe loss of $5.7billion in one-time federal stimulusfundingused to supportHHSprograms infiscal 2010-11.

Medicaid, CHIP, and other funding cuts. Medicaid, the federal-state health insuranceprogramfor thepoor, elderly, anddisabled, is the state’slargestHHSprogram.About two-thirds ofMedicaidrecipients are children.Uninsured childrenwhodonotqualify forMedicaidbutwhose family incomes areat or below200percent of the federal poverty levelmay receivehealth care through theChildren’sHealthInsuranceProgram (CHIP).

for theLawEnforcement andCustodialOfficerSupplementalRetirementFund (LECOS).Thefiscal2012-13budget reflects a loweringof the statecontribution rate to state employee retirement accountsfrom6.95percent of payroll to 6 percent infiscal2012, theminimumcontribution allowedby theTexasConstitution, and to 6.5 percent infiscal 2013.Thestate employee contributionwill remain at 6.5 percentfor bothfiscal 2012 andfiscal 2013.

Pension plan changes study. InArt. 9,sec. 18.03ofHB1, theLegislature requires theEmployeesRetirementSystemandTeacherRetirementSystemeach to report on thefiscal and actuarialimpact of possible changes to the state-fundedpensionplans.Among thepotential changes to be studied arechanges in retirement eligibility,final average salary,and thebenefitmultiplier and creationof a hybridbenefit plan includingbothdefinedbenefit anddefinedcontribution features.The reportsmust be submittedto theLBBand thegovernor bySeptember1, 2012.


proposal to privatizeone statemental healthhospitalbySeptember1, 2012.

Family planning services. Funding forDSHSfamilyplanningprograms is reducedby about two-thirds fromfiscal 2010-11 spending levels.Theseprogramsprovide low-income individualswithbasichealth screenings, prescription contraception, andtreatment for sexually transmitteddiseases.Accordingto theLBB, the funding cutswill result in at least300,000people losing access to these services infiscal 2012-13.

Rider 62 in theHHSC sectionof thebudgetrequiresHHSC to continueproviding services undertheWomen’sHealthProgram (WHP),whichhadbeenscheduled to expireSeptember1, 2011.TheWHPprovides physical examinations, health screenings, andcontraceptives and familyplanning services towomenwhose incomeand family size place themat 185percent of the federal povertyguidelines, the levelatwhich theywouldbe eligible forMedicaid if theywerepregnant.

TheprimarydifferencebetweenWHPand theDSHS familyplanningprograms is thatWHP requiresrecipients to beU.S. citizens,while theDSHSprogramsdonot.

Community-based, long-term care. Thebudget allocates about $9.4billion in all funds, a 29percent decrease from2010-11 spending, for long-termcare services and supports administeredby theDepartment ofAging andDisabilityServices (DADS).Such services include theMedicallyDependentChildrenProgram,whichhelps familieswho careformedicallydependent children as an alternativeto nursing facilities, theProgramofAll-inclusiveCare for theElderly (PACE), homeand community-based services, hospice, and state-supported livingcenters.The agency expects to continue servingthe samenumberof people, in part because about80,000people in primaryhomecare, day activity,and community-based alternativeprograms currentlyadministeredbyDADSwill be transferred to thepurviewofHHSC for inclusion in theSTAR+PLUSmanaged care program.Thedecrease in funding

to theDADSprograms also reflects theMedicaidshortfall discussed above.But because rider 44 intheDADS sectionof thebudget andSec. 49 intheportion entitled “SpecialProvisionsRelating toAllHHSAgencies”direct the agency to continueserving the samenumberof clients inMedicaidprograms regardless of any shortfall, a supplementalappropriation in 2013 is expected.

Child Protective Services. HB1 appropriates$2.3billion in all funds toChildProtectiveServices(CPS). It funds foster care, adoption subsidy, andpermanence care assistance services atfiscal 2010-11 spending levels andmaintains current fundinglevels for the relative andother designated caregiverprogram (KinshipCare).

Thefiscal 2012-13budget doesnot include fundingfor growth in thenumberof clients expected to needprotectiveday care or relative care services duringfiscal 2012-13.Protectiveday care services allowchildren to stay in their homeswhile abuseor neglectis addressed andprevents their placement in fostercare.Relativeday care services allow relatives to carefor abusedor neglected children as an alternative toplacing the children in foster care. TheDepartment ofFamily andProtectiveServices(DFPS) estimates that not fundingprojected caseloadgrowth for theseprogramswillmean that thenumberof childrennot receivingprotectiveday care serviceswill be1,117permonth infiscal 2012 and1,281permonth infiscal 2013.Thenumberof childrennotreceiving relativeday care services eachmonthwillbe about 363 infiscal 2012 and565 infiscal 2013.

Child abuse prevention.Thebudget decreasesfunding for child abuseprevention andotherpreventionprograms administeredbyDFPSby about30percent fromfiscal 2010-11.Suchprogramsinclude theServices toAt-RiskYouth (STAR)programandother at-riskpreventionprograms.According toDFPS, not funding theseprogramswillmean that thenumberof families not receiving theseserviceswill be about 7,805 infiscal 2012 and7,781infiscal 2013.


Agencies overseeing the state’s public educationsystem set curriculum standards, approve instructionalmaterials, certify educators, provide school districtemployeehealth care, andmanage the retirementpension fund.Thefiscal 2012-13budget appropriates$50.8billion in all funds to public education agencies,including theTexasEducationAgency (TEA), theTeacherRetirementSystem (TRS), theSchool fortheBlind andVisually Impaired, and theSchoolfor theDeaf.Appropriations in all funds representa decreaseof about $3billion, or 5.6 percent, fromfiscal 2010-11 spending. Of the$50.8billion total appropriations, $33.7billion is general revenue funds,a 0.2 percent decrease fromfiscal 2010-11 spending,and$600,000 is general revenue-dedicated funds, a 50percent increase fromfiscal 2010-11 spending.

Of the$50.8billion in all funds, $47billion isappropriated toTEA, a $4.4billiondecrease fromfiscal 2010-11 appropriations.Thebudget appropriates$35.5billion in all funds to theFoundationSchoolProgram, a decreaseof $1billion fromfiscal 2010-11spending.

Thefiscal 2012-13budget appropriates $3.8billion to theTeacherRetirementSystem (TRS),an approximately$240.8milliondecrease fromfiscal 2010-11 spending.TheTRSpension fund isappropriated$3.2billion in all funds, a decreaseof$146.5million fromfiscal 2010-11 spending.Thestate’s contribution ratewill decrease from6.644percent to 6 percent of active employeepayroll infiscal 2012 and6.4percent infiscal 2013.The schoolemployee contribution ratewill remain6.4percent infiscal 2012 andfiscal 2013.

Foundation School Program. Thefiscal 2012-13budget appropriates $35.5billion in all funds fortheFoundationSchoolProgram (FSP), themechanismbywhich school districts receivemost of their totalstate funding.The appropriation is less than theestimated$42.6billionpublic schoolswouldhavebeen entitled to before statutory changesmade in the82ndLegislature’sfirst called session.

To legallypermit a decrease in the state’sappropriation to public schools, the82ndLegislature

in thefirst called session enactedSB1, amendingthe state’s schoolfinance formulas and target revenuehold-harmless provisions. Infiscal 2012-13, state aidto school districts through thepublic school fundingformulawill be reducedby$2.5billion. Infiscal2013, state aid to school districts through the targetrevenuehold-harmless provisionwill be reducedby$1.5billion, according to theEquityCenter.Stateaid to school districts for the2011-12 school year isprojected to be an averageof 5.2 percent less for eachdistrict than its current level of funding, accordingtoMoak,Casey&Associates. For the2012-13school year, the average reduction is projected to be5.8percent less than eachdistrict’s current level offunding.

SB1deferred theAugust 2013FSPpayment toschool districts until September2013,whichmeansthat a $2.3billionpayment thatwouldhavebeenmade infiscal 2012-13 insteadwill bemade infiscal2014-15,whichbegins onSeptember1, 2013.

Thefiscal 2012-13 state budget sets aside$41millionof the appropriation to theFSP for theStudentSuccess Initiative, a grant program that providesfunding to schoolswhose students are unlikely tomeet state assessment benchmarks.This is a decreaseof $263million fromfiscal 2010-11 appropriations.

Grants to school districts outside FSP. Thefiscal 2012-13budget appropriates $1.3billion less ingeneral revenue funds thanfiscal 2010-11 spending for public educationprograms fundedoutside theFoundationSchoolProgram (FSP).Someof theprograms appropriatedgeneral revenue funds in thefiscal 2012-13budget include:

• $20million toCommunities inSchools, amentoringprogram for students at riskofdroppingout;

• $1.3million to the statewide steroid testingprogram;

• $40million to theDistrictAwards forTeacherExcellence;

• $2.5million toAmachi, amentoringprogramfor at-risk students;

• $3million toAcademic Innovation andMentoring (AIM), a program for certainstudents at riskof droppingout;

Public education


• $7million toEarlyChildhoodReadinessPrograms

• $8million to theVirtualSchoolsNetwork;• $6million to theEarlyCollegeHighSchool

andT-STEMprograms;• $4million to theOnlineCollege andCareer

PreparationTechnicalAssistanceprogram;• $400,000 toMATHCOUNTS, and• $8million toTeach forAmerica, to be spent

onmath teachers.

Forfiscal 2012-13, theobjectivesof someoftheprograms that usually receive state fundingoutsideFSPpayments, such as virtual schoolsandprekindergarten, receive funding throughFSPpayments.

No appropriationwasmade to school districts tooffset the cost of disciplinary alternative educationprogramsor to theTexasHighSchoolCompletionSuccess Initiative,whichprovides instructionalsupport andprofessional development for teacherswith students at riskof droppingout of school.Othermajor programs and initiativesnot funded include:

• new instructional facilities;• teachermentor programs;• certaindropout preventionprograms;• prekindergartengrants;• the extended school day and extended school

year programs;• life skills classes for teenparents;• science labs;• background checks for school personnel; and• the arts educationgrant.

Instructional materials. Thefiscal 2012-13budget appropriates $608.1million in general revenuefunds to the InstructionalMaterialsFund, a decreasein general revenue fundsof $104.1million fromfiscal 2010-11 spending. In accordancewith changesmade to chapter 31of theTexasEducationCode, allinstructionalmaterialswill bepurchasedby schooldistrictswith appropriations from the InstructionalMaterialsFund in an amount determinedby thecommissioner of educationbasedon the schooldistrict’s enrollment over theprevious threeyears.

From the$608.1million, the commissionermayset asideup to $2.5million for the continued supportanddeliveryof online college readinessmaterialsinEnglish language arts and reading,mathematics,science, and social studies.

Decreased state contribution rate to TRS-Care. Thefiscal 2012-13 state budget appropriates$401million in general revenue funds forTRS-Care,thepublic education retireehealth insuranceprogram.This is a decreaseof $120million fromfiscal 2010-11spending.Thefiscal 2012-13 appropriationmaintainsthe state’s contribution rate toTRS-Care at 1 percentof public education employeepayroll forfiscal 2012but includes a decreased contribution rate of 0.5percent forfiscal 2013.

Lowering the state’s contribution ratemeansthatmoreof thefinancial burden tomeet federalmaintenance-of-effort requirementsmay shift to schooldistricts.Thedecreased appropriation could triggeran increase in health insurancepremiums for retirees.The appropriationsbill specifies theLegislature’sintent that theTeacherRetirementSystemcontrol thecost of the retiree insuranceprogrambynot providingrate increases to health care providers andpharmacyproviders duringfiscal 2012-13without providing60daysnotice to theLegislativeBudgetBoard.

Texas School for the Blind and Visually Impaired. Thebudget appropriates $41.2millionin all funds for theTexasSchool for theBlind andVisually Impaired (TSBVI),which serves blind andvisually impaired students,manyofwhomhavemultiple disabilities, includingdeaf-blindness.Theappropriation forTSBVI is a decreaseof $52.6million fromfiscal 2010-11 spending, due largelyto the scheduledDecember2012 completionofcampus renovations that eliminates theneed for anappropriationof general obligationbondproceeds.

The appropriation toTSBVIwill fulfill thelegal entitlement under federal law to studentswithdisabilities bymaintaining the current scopeof educational programs, preventing staff layoffs,and allowing the school tomaintain current studentenrollment and serve incoming students. Itwill fundsummer school and short-termprograms for students


enrolled in local school districts, aswell as outreachprograms that are themain sourceof support to localdistricts.

Texas School for the Deaf.HB1 appropriates$52.7million in all funds to theTexasSchool fortheDeaf (TSD), a decreaseof $800,000 fromfiscal2010-11 spending.TSDprovides direct educationalservices to students ages 0 to 22who are deaf or hardof hearing andwhomayhavemultiple disabilities.The appropriation should allow the school tomaintainthe status quo andprevent staff layoffs. Itwill fundcurrent enrollment but not account for increasedenrollment.

Higher education Fiscal 2012-13 appropriations for institutions andagencies of higher education total $22.1billion in allfunds.This is a decreaseof $555.8million, or 2.5percent, fromfiscal 2010-11 spending.Thegeneralrevenue andgeneral revenue-dedicated fundsportionis $14.7billion, a 5.3 percent decrease.

HB1decreases formula funding,which is basedprimarilyon an institution’s enrollment numbersand the typesof courses offered, by$180milliondue to a 5 percent reduction to general academicinstitutions and a 10percent reduction to health-related institutions.HB1doesnot provide fundingfor enrollment growth at any institutionof highereducation and reduces appropriations for highereducationhealth insurance and retirement benefits.Special-item funding for higher education institutions,which supports specificprogramsor activities notpaid forwith formula funding, is reducedby about 25percent, or $215.2million.

HB1 also eliminates one-time,mostly hurricane-related fundingof $116.3million andmakes thefollowing cuts: $11.5million from theResearchDevelopmentFund; $51.1million fromhospital anddental clinic operations; and$32.5million fromvolunteerfire departments. It also reflects the lossof $227million in one-time federal stimulus fundingprovidedby theAmericanRecovery andReinvestmentAct (ARRA).

General academic institutions.Thefiscal2012-13 all-funds appropriation inHB1 for generalacademic institutions is $5.8billion, a decreaseof 6.9percent fromfiscal 2010-11 spending.General revenueandgeneral revenue-dedicated funds are $5.8billion,a decreaseof $305.6million, or 5 percent.Eachgeneral academic institutionwas “heldharmless,” sothat nogeneral academic institutionwill experiencea reductionofmore than15percent in total generalrevenue funds fromfiscal 2010-11 spending.Tuitionrevenuebonddebt servicewas excluded from thishold-harmless calculation.

Health-related institutions.HB1 appropriatesto public health-related institutions$8billion in allfunds, an increaseof 1.6 percent fromfiscal 2010-11 spending.The increase is due largely to increasedpatient income,which is revenue earnedbyhospitalsand clinics that conduct patient care activities,mostoftenmedical or dental activities.General revenue andgeneral revenue-dedicated fundsdecreasedby$308.3million, or 11.7percent.

Two-year institutions.HB1 appropriates totwo-year institutions$1.9billion in all funds, adecreaseof $74.3million, or 3.7 percent, fromfiscal2010-11 spending.This includespublic communityand junior colleges,LamarStateColleges, and theTexasStateTechnicalColleges.General revenueandgeneral revenue-dedicated fundsdecreasedby$53.4million, or 2.7 percent.The state’s contributionfor community college employeegroup insuranceis reducedby$113.5million, or 36.4percent,fromfiscal 2010-11 spending.HB1,Art. 9, sec.18.22 appropriates additional formula funding forcommunity and junior collegesof $34.6million ingeneral revenue funds forfiscal 2012-13.

Texas Higher Education Coordinating Board.TheTexasHigherEducationCoordinatingBoard is appropriated$1.3billion in all funds, a27.5percent reduction fromfiscal 2010-11 spending.Several programs receivedno funding, including theHigherEducationPerformance Incentive Initiative,theEducationalAideProgram, and college readinessgrants.


Student financial aid.According to thecoordinatingboard, studentfinancial aid programsare funded at $879.5million forfiscal 2012-13, adecrease in all fundsof $150.7million, or 15percent.HB1decreases the appropriation for theTEXASGrant program, the state’s largestfinancial aidprogram,by10percent.Thiswill allowaprogramthat served106,000 students infiscal 2010-11 to serveabout 30percent of those eligible—44,000 renewalstudents and33,000new students.Other reductionsinclude a 20percent decrease to theTuitionEqualizationGrant program that serves students inthe state’s independent universities; a 23percentdecrease to theTop10PercentScholarshipprogram,and a 29percent decrease to theB-on-Time loanprogram.Due to the20percent enrollment growth atthe state’s community colleges, theTexasEducationalOpportunityGrant programand thework-studyprogramwerenot reducedbutwere funded atfiscal2010-11 spending levels.

Other reductions. Other decreases include$17.9million fromcollege readiness programs; $17.1million from theProfessionalNursingShortageReductionProgram;$15.1million from theAdvancedResearchProgram;$14.6million from theFamilyResidencyProgram;$11.9million from theTexasResearch IncentiveProgram;$10.5million from theTeach forTexasLoanRepaymentProgram; and$17.7million from thePhysicianEducationLoanProgram.The remaining$65.1milliondecrease in generalrevenue andgeneral revenue-dedicated funds resultsfrom reductions to or eliminationof other programs.

Higher Education Employees Group Insurance (HEGI). Funding forHEGI totals $969million in all funds forfiscal 2012-13, a decreaseof$99.3million, or 9.3 percent.The reductionmainlyreflects reducedpremiumcontribution rates from thestate for higher education employees.This fundingwill cover 86percent of employeepremiumcosts forhigher education employeeswhoparticipate in thestate groupbenefits program through theEmployeeRetirementSystemand83percent of premiumcostsforUniversity ofTexas andTexasA&MUniversitySystememployees. Itwill cover 42percent of thepremiumcosts for community college employees.

Supplemental appropriations. SB2, enactedduring thefirst called session, appropriates additionalfunding for varioushigher education institutions forfiscal 2012-13, the largest amount being$40millioninfiscal 2012 for theTexasForestService, an agencyof theTexasA&MUniversitySystem, for combatingwildfires.

SB2 also appropriates $5.4million to theTexasHigherEducationCoordinatingBoard for theTexasArmedServicesScholarshipProgramand$1.6millionforTexasStateUniversitySystemoperations.

SB2 alsodirects theDepartment ofStateHealthServices to spend$2,250,000per year to supportSB7 (82ndLegislature,first called session),whichcreates theTexasEmergency andTraumaCareEducationPartnershipProgram for administrationby the coordinatingboard.The coordinatingboardis required tomakegrants to emergency and traumaeducationpartnerships to assist them inofferingone-year or two-year residency fellowships to studentsenrolled in graduateprofessional nursingor graduatemedical educationprograms.

Judiciary Total funding for the judiciary infiscal 2012-13is $643.1million, a decreaseof $29.8million, or 4.4percent fromfiscal 2010-11 spending.Appropriationsfromgeneral revenue andgeneral revenue-dedicatedfundsdecreaseby$15.9million, or 3.3 percent, fromfiscal 2010-11 to $466.3million infiscal 2012-13.

Article 4 appropriations support theTexasSupremeCourt and theCourt ofCriminalAppeals, paythe salaries of appellate anddistrict court judges,and fund theOfficeofCourtAdministration, theStateLawLibrary, andother judicial agencies andfunctions.

Civil legal aid.Thefiscal 2012-13budgetincludes$17.6million in general revenue, addedbySB2, enactedduring thefirst called session, for civillegal aid,whichprovides emergency legal servicestoTexanswho fall below125percent of thepovertyline.Family law issuesmakeup about half the civillegal aid caseload.Civil legal aid normally is funded


by the Interest onLawyers’TrustAccounts (IOLTA)outsideof the appropriationsprocess through theTexasAccess to JusticeFoundation, overseenby theTexasSupremeCourt.Attorneys inTexas turnoverthe short-term interest on fundsheldonbehalf ofclients to the foundation.Historically lowbenchmarkinterest rates diminished funding for the IOLTAprogram from$20million in 2007 to $5.5million in2010.

Infiscal 2012-13, civil legal aid programs areprojected to receive$171.2million fromall revenuesources.This amount includes the$17.6millionappropriation fromSB2, an anticipated$8.8million from the IOLTAprogram,$22.2millionfromother state dedicated funds, such as a fee onattorneys, $87.6million from federal grants, and$35million fromgrants anddonations fromcharitablefoundations.

Criminal justice

Spending fromall fundson criminal justice andpublic safety agencies forfiscal 2012-13decreasesby about 4.7 percent fromfiscal 2010-11 to $11.5billion.General revenue andgeneral revenue-dedicatedfunding is $8.4billion, a 3.7 percent decrease fromfiscal 2010-11.

Correctional capacity.As requiredbyHB1, inSeptember2011, theTexasDepartment ofCriminalJustice (TDCJ) closed theCentralPrisonUnit inSugarLand,whichhoused about 1,060 inmates.Theclosure reducesTDCJ’s fundingby$25.2million,and290positions are eliminated.Theunit and itsproperty,which couldbe sold, have an appraisedvalue estimated at $33.5million.

TDCJ’s funding for privatelyoperated correctionalbeds in prisons, state jails, and residential pre-parolefacilities ismaintained at about thefiscal 2010-11level, funding about 14,800beds.The agency alsoreceives$15million to contract for temporarybeds ifneeded.

Funding for treatment, diversion, rehabilitation programs. Formost ofTDCJ’streatment anddiversionprograms established in 2007,HB1 continues funding at the levels theseprogramsreceived infiscal 2010-11.Theprogramswerepart ofan initiativeby theLegislature to address a growingadult offender populationby increasing the state’scorrectional capacity and expanding treatment anddiversionprograms.

HB1 includes$184.7million for substanceabuse felonypunishment facilities (SAFP) and in-prison treatment facilities (IPTC), $51.7millionfor intermediate-sanction (ISF) facilities, and$47.1million for halfwayhouse facilities.Thiswill keep inoperation3,954SAFPbeds, 1,537 IPTCbeds, 2,265ISFbeds, and1,607halfwayhousebeds, according toTDCJ.

Funding for the agency’s sexoffender treatmentprogram, the chaplaincyprogram, and reentry andtransition coordinatorswasmaintained at totalfiscal2010-11 levels of about $38million.

Decreased funding for prison health care.HB1decreases general revenue funding for healthandpsychiatric care for adult offenders in statecustodyby$75million, about 8 percent, from thefiscal 2010-11base funding level of about $929.8million.Reductionswill apply to unit-based andhospital care,mental health care, andpharmacyservices.

Juvenile offender capacity.HB1 limitsTexasYouthCommission (TYC) capacity for juvenileoffenders to 1,600beds, excludinghalfwayhousesand contract facilities, beginning January1, 2012.Current state capacity is 2,118, according to theLBB.HB1 also authorizesTYC to closeup to threefacilities and requires it to report to theLBBbyOctober 1, 2011, its plan to reduce capacity.

This limit on capacity applies to a new stateagency, theTexas Juvenile JusticeDepartment (TJJD),whichhas assumed theduties ofTYCand theTexasJuvenileProbationCommission (TJPC).TYCandTJPCwere abolishedbySB653byWhitmire, and asofDecember1, 2011, their powers anddutiesweretransferred to thenewTJJD.


HB1 also continuesfiscal 2010-11 fundingof $39million for local programs to divert youths from stateincarceration.Forfiscal 2010-11 and inHB1, thefiscal 2012-13general appropriations act, these fundsgo to theTexas JuvenileProbationCommissionbutwere transferred to thenewTJJD.

Border security.HB1 appropriates a total of$219.5million for border security, an increaseof$108.5million in all funds from spending infiscal2010-11, according to theLBB.TheDepartment ofPublicSafety (DPS) received$211.8million,most ofthe total border security appropriation inHB1.

HB1 requiresDPS to spend$38.9million forenhancedborder security operations, includingsalaries, training, operating costs, and equipment forcriminal investigations, highwaypatrol staff,TexasRangers, and aircraft operations.DPSmust spend$48.8millionon local border security.Themoneywill fundDPS troopers along theborder, aswell asTexasRangers, increasedpatrol and investigativecapacity, theTexasmilitary forces, andoperationsof theRioGrandeValleyBorderSecurity andTechnologyTrainingCenter, theBorderOperationsCenter, and the JointOperations and IntelligenceCenters.

HB1 appropriates $4million to the trusteedprograms in theGovernor’sOffice for borderprosecutions.These funds come from thegeneralrevenue-dedicatedOperators andChauffeursLicenseAccount 99. In addition,HB1 appropriates $3.8million to theTexasParks andWildlifeDepartment(TPWD) for enhancedborder security.About $1.1millionof the appropriations toTPWDwill comefromgeneral revenue and the rest from thegeneralrevenue-dedicatedOperators andChauffeursLicenseAccount 99.

SB2, enacted in thefirst called session,appropriates additional funds for border security,including$1.2million forfiscal 2012-13 for tacticalvessels,weaponry, and relatedoperations costs.It also appropriates about $909,000 toTPWD forborder security, including for safeboats,weaponry,ammunition, and relatedoperations costs.

Natural resources

Natural resources agencies inTexas are entrustedwithprotecting,managing, anddeveloping the state’sagricultural,wildlife, environmental,water, andoilandgas resources, aswell as state parks and lands.These agencies include theTexasCommissiononEnvironmentalQuality (TCEQ),TexasParks andWildlifeDepartment (TPWD),GeneralLandOffice(GLO),TexasWaterDevelopmentBoard (TWDB),TexasRailroadCommission (RRC),TexasDepartmentofAgriculture (TDA),TexasAnimalHealthCommission (TAHC),TexasStateSoil andWaterConservationBoard (TSSWCB), and river compactcommissions.

Forfiscal 2012-13, appropriations fromall fundsfor natural resources agencies total $3.9billion, anincreaseof $326.1million, or 9.2 percent, fromfiscal2010-11 spending levels.Thegeneral revenue andgeneral revenue-dedicated fundsportion, $1.7billion,is a decreaseof $397.8million, or 19.1percent, fromfiscal 2010-11.Significant changes includedecreasedfunding toTCEQ for emissions reductionsprograms,such as theTexasEmissionsReductionProgram(TERP) and theLow-IncomeRepairAssistanceProgram (LIRAP).Other noteworthy changes includedecreased funding toTPWD for state and local parks,eliminationof funding to theTSSWCB to improvedam safety, and limitednewdebt service for theTWDB forwater infrastructureplanning.

Decreased funding for emissions reductions programs. Thefiscal 2012-13budgetreduces appropriations from theTexasEmissionsReductionProgram (TERP) general revenue-dedicatedfund account by$114.3million, or 50percent,fromfiscal 2010-11 spending levels.A contingencyappropriationof $8millionper year is appropriatedto theTERP if revenue exceeds the comptroller’sbiennial revenue estimate (BRE).TheTERPprovidesfinancial incentives to eligible individuals, businesses,or local governments to reduce emissions frompollutingvehicles and equipment.


HB1 reduces funding forTCEQ’sLow-IncomeRepairAssistanceProgram (LIRAP) to $12.5millionin general revenue-dedicated funds forfiscal 2012-13.This is about an88percent reduction fromfiscal2010-11.LIRAP is afinancial assistance and incentiveprogram for qualifiedowners of vehicles that fail theemissions test orwhosevehicles are at least 10yearsold.

Reduced funding for state and local parks. Thefiscal 2012-13budgetwill decrease funding forstate and local parks by$63.4million in all funds.This includes a decrease in all funds toTPWDof$23.3million, including103.5 full-time equivalentpositions (FTEs), for parkoperations such asmaintenance,minor repair of state parks, andparkssupport, including regional offices.

Thebudget eliminates funding for grants todevelop and acquire new local parks projects,including for boating access, outreach, education,andhike-and-bike trail development.Administrationcosts for thegrants programalso are reducedby50percent, including6.5FTEs.Theoverall decrease tothis program is $40.1million in all funds fromfiscal2010-11.

Rider 27 inHB1will provideTPWDwithauthority to spend$6million in state parks accountfund64, including for 60.3FTEs, if the additionalfunds are raised and certified above the comptroller’sBRE.

Elimination of funding for dam safety. Thefiscal 2012-13budget eliminates all funding forTexasStateSoil andWaterConservationBoard (TSSWCB)grants to operate,maintain, repair, and rehabilitateabout 2,000 federallydesigned andbuiltflood-controldams inTexas.

Debt service for water infrastructure. Thefiscal 2012-13budgetwill partially fund theTWDB’srequest for general obligationbonds forStateWaterPlanprojects andprojects in economicallydistressedareas.Thebudget includes$14.8million in generalrevenue for debt serviceon additional generalobligationbond authorityup to $300million.

Transportation and economic development Thefiscal 2012-13budget increases fundingto agencies that support business and economicdevelopment, transportation, and communityinfrastructureby2percent, or $464.2million.

Transportation. Fiscal 2012-13 appropriations totheTexasDepartment ofTransportation (TxDOT) total$19.8billion in all funds, an increaseof $3.9billion,or about 24percent, fromfiscal 2010-11.The increaseprimarily stems froma$4.1billion appropriationofgeneral obligationbondproceeds for highwayprojectsand$256.5million for associateddebt service.Fiscal2012-13 appropriations also include an increaseof$1.3billion from theStateHighwayFund (Fund6)andnet decreases of about $241.5million in federalfunds, $278million inTexasMobilityFunds, and$396.2million inStateHighwayFundbondproceeds.

Funds appropriated for transportation arederivedprincipally from federal reimbursementsfor transportationprojects, statemotor fuel taxes,proceeds fromvariousbonds, andother taxesand fees assessedonmotorists.Estimated federalreimbursements toTxDOTaccount for $6.1billion,or 31percent, of totalfiscal 2012-13 appropriationsto the agency.Revenue fromFund6, not includingbondproceeds and toll project concessionpayments,accounts for $6billion, or 30percent, andappropriationsofTexasMobilityFund andFund6bondproceeds total about $1.4billion for this period.General revenue appropriations toTxDOT total $235.2million—about 1 percent of thedepartment’sfiscal2012-13 appropriations—almost all ofwhich isdedicated to payingdebt serviceongeneral obligationbonds.

General obligation bonds. Just over afifthofTxDOT’sfiscal 2012-13budget comes from$4.1billion in general obligationbondproceeds approvedbyvoters throughProposition12 inNovember2007. Thebondproceeds are dedicated to specificpurposesthat include:

• $1.4billion for highway rehabilitation andsafetyprojects;


• $1billion tomakepayments onhighwayprojects previously authorized infiscal 2010-11;

• $600million for urban andmetropolitanmobility projects;

• $500million for nine specificbridgeprojects;• $300million to developmobility projects

in the state’s fourmost congested regions(Dallas,Houston,SanAntonio, andAustin);

• $200million for statewide connectivityprojects as determinedby theTexasTransportationCommission; and

• $145million in unexpendedbalances fromfiscal 2010-11 for highwayprojects thatalreadyhavebeen authorized.

Each$1billionof general obligationbonddebtissuedwill require about $65million in debt serviceper year for the termof thebond, often30years.Thebudget includes$256.5million for debt servicepayments on thebonds forfiscal 2012-13.

Workforce programs.Thefiscal 2012-13budgetreduces funding for certainworkforcedevelopmentprograms. It reduces theTexasWorkforceCommission’sSkillsDevelopmentProgram to$48.5million from$81million infiscal 2010-11.TheSkillsDevelopmentProgramprovides grants to businessesto fundworkforce training.Thebudget also eliminatesfunding for theProjectReintegrationofOffenders(RIO)program,which received$21.5million infiscal2010-11 to provide employment and training servicesto recently releasedoffenders.

Thebudget also includesnodirect appropriationfor theTexasBack toWorkprogram,whichprovidesa $2,000 incentive for businesses that hirefirst-timeunemployment insurance claimants full time.Legislation enactedduring thefirst called sessionallows, but doesnot require, thegovernor to transferfrom theTexasEnterpriseFund$10million eachfor theTexasBack toWorkProgramand theTexasDepartment ofHousing andCommunityAffairs’housingprogram for thehomeless.

Regulatory agencies

A total of $677.8million in all funds isappropriated forfiscal 2012-13 to regulatory agencies,26 agencies that regulate business professionals andservice industries.This is a decreaseof $58.2million,or 7.9 percent, fromfiscal 2010-11 spending levels.Most of thedecrease reflects reductions to the low-incomediscount program for electricity customers.General revenue andgeneral revenue-dedicated fundsfor these agencies total $648.5million infiscal 2012-13, a decreaseof $28.1million, or 4.2 percent.

System Benefit Fund. The low-incomediscountprogram, accounting formost of thebudget decrease,provides utility discounts to low-incomeelectricitycustomers during the summermonths,May throughSeptember.Theprogram is fundedby theSystemBenefitFund, a general revenue-dedicated accountcontaining fees collected fromelectricity ratepayersin competitive areas of the state.Thefiscal 2012-13budget includes$167.4million for programs fundedwithSystemBenefitFundmoney, a $90.4milliondecrease fromfiscal 2010-11 spending levels.Thenet decrease results froma39.6percent reductionof$99.7million to thediscount program for low-incomecustomers, partially offset by a $9.3million increasein dedicated funding for electricmarket oversight.

TheComptroller’sOfficehas estimated that theSystemBenefitFundwill have anunspent balanceof $851million at the endoffiscal 2012-13.Theseunappropriated fundswereused to certify that thefiscal 2012-13budgetwasbalanced.


HOUSE RESEARCH ORGANIZATION

Steering Committee:

Bill Callegari, Chairman Jose Menendez, Vice Chairman Rafael Anchia Drew Darby Joe Deshotel Harold Dutton Susan King Tryon Lewis Eddie Lucio III Geanie Morrison Elliott Naishtat Rob Orr Joe Pickett Ralph Sheffield Todd Smith

John H. Reagan BuildingRoom 420P.O. Box 2910Austin, Texas 78768-2910

(512) 463-0752

www.hro.house.state.tx.us

Staff:Tom Whatley, Director; Laura Hendrickson, Editor; Elizabeth Paukstis, Associate Editor/Analyst;Rita Barr, Office Manager/Analyst; Catherine Dilger, Kellie Dworaczyk, Tom Howe, Andrei Lubomudrov, Blaire Parker, Research Analysts

texas budget highlights: fiscal 2012-13 - house research

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