Lawmakers face $1 billion shortfall; Revenue shortage much better than state officials had expected

Tuesday, January 12, 2021

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Seguin, TX, USA / Seguin Today

Darren Dunn


Seguin) — State lawmakers are facing a significant budget shortfall this year. How to overcome a decline in revenues will be one of the key issues facing the new legislative session that begins today in Austin. The budget shortfall is approximately one billion dollars. That’s a big number, but the Biennial Revenue Estimate (BRE) — released on Monday by State Comptroller Glenn Hegar — is actually much better than what most state lawmakers had expected.

State Representative John Kuempel, in a recent interview with KWED Radio and the Seguin Daily News, said they could have potentially seen double digit shortfalls this year.

“We knew that we were going to be short coming in and that was even before the pandemic. We knew that we were going to have a challenge of a budget deficit. The comptroller comes out (Monday) with the BRE which is the Biennial Revenue Estimate and I think he anticipates that we will be upside down $8 billion — somewhere in that ballpark. Hopefully, it’s not double digits and as the Texas Legislature, we are constitutionally obligated to pass a balanced budget so knowing that we are going to be upside down that much money, we’ve started sharpening pencils and seeing what we have to do. Obviously, the budget is the most important thing really of every legislature and certainly, this session with the challenges of a deficit, we are going to really have to work hard to be able to leave and have that thing balanced,” said Kuempel.

Kuempel says a number of bills were being filed to begin looking at some new revenue streams. That still will likely happen, but the rosier revenue estimate means that the legislature may not need to lean so heavily on some of those new ideas.

“We have taxes and we have oil and gas production, sales taxes and property taxes and it always (comes up when you are talking about a deficit — you think of legalization of marijuana. People have introduced that bill already. You think of expanding casino gambling in the state of Texas which could bring $4 to $5 billion dollars a year. So, those things will be looked at whether they get passed or even introduced, we’ll see. But, there are different ideas that have been introduced that are live bills sitting in the house clerk’s office right now,” said Kuempel.

Even when the revenue projection was expected to be above $8 billion, Kuempel says he wasn’t sure that the new revenue streams, like casinos or marijuana legalization was going to become a reality. All of it will be sorted out during this session, but Kuempel says lawmakers have shown in the past that they are able to present a balanced budget even during the most difficult financial times.

“And we’ve done it in the past. We’ve balanced budgets without any extra revenue stream so I kind of look at it that way before we really lean on that crutch of something else that isn’t legal right now in the state of Texas. Let’s see if we can get it done the way we have over the last 180 years before we have to introduce something new,” said Kuempel.

The shortfall is smaller than expected, but it still means that the legislature is going to have to find ways to provide services to Texans, while have less money to do that. COVID-19 has hurt the state’s economy, and it has also put additional strains on state resources. Kuempel says the COVID impact would have been even worse if not for some support from the federal government that has helped the state provide much needs services to people and businesses during this crisis.

“The federal government has been a good partner over the last year just with aid, so that helps a lot as far as the folks that you have mentioned, the need — that may have lost their work and may have lost business — so a bunch of that is from the federal government’s help. The state is helping on the same sense but yes, it’s an unbelievable challenge. I’ve served with a deficit before but nobody has ever served during a deficit and a pandemic and that’s a challenge. So, how it shakes out? We don’t know. It’s never happened,” said Kuempel.

There will be several other key issues decided during the new session. Kuempel says many of the issues that face the legisature each session, are once again back on the table this year. Kuempel jokingly says the things that drive Texas politics haven’t changed much over the years.

“You look at election posters from the last 100 years and it’s the same thing. It’s budget. It’s border security. It’s public ed and it’s infrastructure and I don’t care if you were running in 1915 or 2015, it’s the same thing every time,” said Kuempel.

Public eduction will likely come up, but for the first time in decades, the funding formula has largely been decided thanks to what many consider to be a major legislative achievement two years ago. HB3 from the last legislative session provided for funds for public schools in Texas, and Kuempel says he’s certain that they will find the adequate funding this year to make sure that money is available for schools for the next two years.

“We passed historical legislation in the 86th, the last session the HB 3, which totally rewrote the funding formula for public education. We were really proud of the legislation. We had unwavering support from every pub ed advocate, every teacher, every administrator, every school board — wide range all across the state and we knew that we were going to have a bit of a budget deficit and that coming back so on top of everything else, it’s going to be a challenge but it’s not gong to change the way HB 3 was written or how it was funded. We are just going to have to pull up our sleeves and figure out how to fund it because we do owe it to the school districts. We did it. It was the first significant formula re-write that we’ve had in 30 years but it’s made it more fair and equitable. It’s just going to be challenge of how we fund it but we’ll get it done,” said Kuempel.

Funding schools in Texas has long been a sore spot for legislators, who often saw the issue tied up in Texas courts. Kuempel says the success of HB3 should prevent that from being the same kind of challenge for this session.

“This was if not one of the most significant formula rewrites that we’ve ever had in the state of Texas and that’s a fact. At the same time, you look at fund balance across the state and I’ve talked to some of my superintendents about that too and I say what’s your fund balance? And if they tell me they have 100 percent or 115 percent of state requirements of what they should have, I say well, we are partners in this too. You’ve got to realize that. The state did what ya’ll wanted. Now, ya’ll may have to step up and help too because that is still taxpayer money and if we could put that back in or need to put it back in the formula around different school districts, well, we are going to have to think about that as well,” said Kuempel.

Texas has a long history of provided large of amounts of funding for highways, roads and other infrastructure projects. Kuempel says he thinks they’ll have to look at what can be funded this year, but he says the state continues to grow, and that means they’ll have to continue to invest in its infrastructure.

“Believe me, I’m a big proponent of infrastructure and as much as we can put in it till we need to put in it because as we continue to grow at 1,200 people a day and that’s been the case for the last 10 years so that means more people and we’ve got to get infrastructure to them. We have to maintain roads. We have to maintain mobility. It’s one of those things you have to look at. Are we going to put as much in it as we did the last session? Maybe, it will be a challenge if we do but some of the legislation that we’ve passed that is based on sales tax receipts so automobiles and then oil and gas production with those two – you know sale of vehicles going down a little bit and oil and gas production not being as high as it was, there’s some money that is being lost their too that was directly dedicated for infrastructure as well so like I said, it’s going to be challenge. My first session when I came in, we had a budget deficit of $17 to $20 billion and we got through it,” said Kuempel.

This session comes at the end of a U.S. Census. The federal population count normally results in a huge fight over redistricting. Kuempel says that fight is still coming, but lawmakers are unlikely to be able to take that up during the regular 140-day legislative period.

“Everybody knows the census was delayed this time and we won’t get the numbers back and again, every 10 years, we have two constitutional requirements, the budget and redistricting. So, this session, with redistricting and the delay with the census numbers, we are just going to have to come back this summer and that’s just the bottom line and we understand that and there is nothing you can do about it. We just go out there and address it. But you know redistricting is contentious as anything there is. Just to have that as the only thing in the room, it will be interesting to see,” said Kuempel.

The state is growing and will likely pick up some congressional seats on the federal level. Those congressional lines and state voting districts will all have to be redrawn.

“The thing about redistricting just Texas House and Senate seats, you just simply take the population of the state and divide it by 31 in the Senate and 150 in the House and that’s your medium number and then you have a five percent variance off of that. So, in my seat for example, Guadalupe and Wilson Counties, we’d be too big. Let’s say the variance is 200,000 people, you combine those and it’s over that plus five percent. So, Guadalupe is not big enough to be by itself. I’ll have to pick up something else whether it be Gonzales County and you can’t split a county if it’s not big enough by itself,” said Kuempel.

As we mentioned in our story yesterday, there are not a number of hot button issues facing lawmakers this year. Kuempel says he’s thankful that they are getting a bit of a break from some of the divisive social issues that have dominated the talk headed into each session.

“This is the first time that I’ve served that we are coming in and you haven’t heard one thing about a social issue, not one thing whether it was sanctuary cities or bathrooms are whatever it may have been. You have not heard one thing. It’s kind of refreshing,” said Kuempel.

Kuempel says those social issues can sometimes seem very important, but he says if you look back on some of the past issues, they don’t seem to be nearly as important today.

“You can look back historically or even as long as I’ve served, there’s been different things that we’ve done and they are politically motivated and when you look back, did they really change anything? ‘No!’ They may have made a certain group really happy and made a certain group really mad but in the end game, nothing really changed. I mean people can go back and look and think what they thought was important six years ago and now, probably, they don’t even remember what they were mad at,” said Kuempel.

Kuempel says he eager to get back to work and to help solve some of the challenges facing Texans. There will be new leadership in the Texas House. Representative Dade Phelan, of Beaumont, is expected to be sworn-in today as the new speaker of the house. COVID-19 is expected to have an impact on the number of bills filed this year. Kuempel says they will have significantly fewer bills to consider this year. The virus will also impact how the legislature does its business this year. The state capitol is usually a busy place during legislative years. That will still be the case, but access to the building will be limited to help reduce the potential spread of the virus.

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