87th Legislature – Week 2

• It will be a quiet week inside the Capitol … although maybe not so quiet outside. Both the House and the Senate adjourned last week until the afternoon of Tuesday, January 26, deferring any business at all this week. There are likely two reasons for the long pause … the planned protests during inauguration week and the still elevated COVID-19 cases; one legislator tested positive at the end of last week. Some members have opted to self-quarantine for 10-days following the positive test of their colleague.

• Both chambers pass updated rules packages; changes to deal with COVID-19 pandemic. Both chambers passed rules packages with the biggest changes outlining protocols in light of the ongoing pandemic. The Texas House will require members to wear masks on the floor unless speaking at the front or back microphone, but are not requiring members or visitors to be tested. Each office will decide whether to see un-tested visitors. The Senate is not requiring masks at individual desks, but is requiring members and guests alike to test in order to enter the chamber or a committee meeting. The House is also allowing some invited virtual testimony, but uninvited testimony from the public will not have a virtual option.

• The Texas Senate votes to soften its supermajority requirement to bring a bill to the floor. As noted last week, the Senate did consider whether to soften its traditional supermajority requirement to bring a bill to the floor and opted to do so. The threshold to bring bills to the floor moves from 19 Senators to 18 Senators … the number of current GOP Senators.

• The Lt. Governor issues committee assignments. At the end of the week, Lt. Governor Patrick gave committee assignments. Those assignments can be found here.

What to watch …

• Governor Abbott travels to Houston for a roundtable discussion and press conference at Houston Methodist hospital midday on Tuesday, January 19, and will discuss legislative priorities for this session, likely related to healthcare. We expect more such travel around the state in the lead-up to the Governor’s state of the state.

Prevailing political winds …

• The Capitol and grounds have been closed at least through Wednesday amid the potential for armed protests. Some protests occurred over the weekend, but have been uneventful.

• Texas became the first state to vaccinate 1 million people. Texas is also at the head of the class for states in terms of the number of vaccines that have been administered of those that have been allocated to Texas. This efficiency is important as Secretary Azar announced last week that vaccine allocations would prioritize states administering vaccines quickly and efficiently.

87th Legislature – Biennial Revenue Estimate

As expected, the Comptroller released his Biennial Revenue Estimate on Monday … The estimate projects the amount of revenue that will be available for appropriators to craft a budget for FY2022-2023.

Here are the key things to know …

1. The Good news.

• The projected shortfall is shrinking. For the CURRENT budget cycle, the deficit is now estimated to be only ~$1 billion … this number is significantly less than the ~$4.5 billion deficit that was projected in July 2020. Moreover, this projection does NOT include savings due to the budget cuts implemented in June 2020. Nor does the estimated deficit “incorporate the effects of substituting federal funds provided as pandemic-related assistance for some GR-R pandemic-related expenditures.” In our assessment, the combined effect of these two unincorporated factors may eliminate the deficit entirely.

• The Rainy Day Fund remains robust. The Comptroller projects that at the end of the next budget cycle Texas will have more than $11.5 billion in its Rainy Day Fund … that assumes appropriators do not tap the fund to help with the current budget cycle. Appropriators utilized the Rainy Day Fund in a big way in the aftermath of Hurricane Harvey and we expect a similar discussion to take place this session.

2. The Bad news.

• Appropriators will have LESS to spend. When the Comptroller certified the current budget, he estimated the legislature had $121.76 billion available for general-purpose spending. By contrast, the Comptroller is estimating that the legislature will have $112.5 billion available for general-purpose spending for the next budget. Appropriators will have to be creative.

3. What they are saying …

• Governor Greg Abbott: “I think we have the tools and strategies to deal w/ budgetary challenges … for the next 2-year cycle, we should be … in great shape.”

• Lt. Governor Dan Patrick: “"The Comptroller’s Biennial Revenue Estimate today is welcome news considering the economic challenges our state has faced. We believe that with a continuing healthy economy, a growing Economic Stabilization Fund and federal COVID-19 relief, we will be able to move forward on our budget priorities this session and balance the budget …”

• Speaker Dade Phelan: “I will say we have a challenge ahead of us, there’s no doubt about it. … We have to look at everything.”

• Senator Jane Nelson (Chair, Senate Finance): “Tough decisions remain, but I am confident we can pass a budget that meets our essential needs, maintains our commitment to education and follows the principles of fiscal responsibility that put us in a stronger position than other states to withstand this unprecedented pandemic.”

87th Legislature – Week 1 Preview

And so it begins …

1. On Tap …

• The 87th Legislature will officially kick-off Tuesday. Both the House of Representatives and the Senate will convene at 12:00 pm on Tuesday, where members will be sworn-in to office. The only substantive actions expected to occur this week will be the discussion, and likely adoption, of rules. Many expect both chambers to adjourn by Thursday and to stay adjourn for a week or more due to still-elevated COVID-19 case counts.

• One Senate rule to watch ... In the Senate, we will be watching to see whether the Texas Senate will choose to further erode its traditional super-majority requirement to bring a bill up for a floor vote. The rule was historically referred to as the “2/3s Rule”, which required 21 Senators to coalesce to bring a bill to the floor. In 2015, that number was reduced to 19 … With the net loss of 2 GOP Senators over the last two election cycles, the Lt. Governor has suggested he may move to reduce that number even further … to 18.

• A change in vaccine distribution strategy. Last Monday, we mentioned that we expect vaccine distribution to be a major political football over the next few weeks. To wit, last week dozens of Democratic legislators sent a letter requesting changes to the distribution process. Also last week, the Department of State Health Services decided to shift its vaccine distribution strategy to emphasize larger providers. This has resulted in a larger number of vaccines being distributed to a smaller number of providers. The Governor tomorrow will visit one such large provider in Tarrant County, where he will get a briefing, tour the operation, and host a press conference. The Governor will be joined by Dr. John Hellerstedt (DSHS), Chief Nim Kidd (Texas Department of Emergency Management), and Texas Health Resources’ CEO Barclay Berdan among others.

• Expect the Comptroller to release his Biennial Revenue Estimate. The Biennial Revenue Estimate is typically released the day before the Legislature convenes (which would be today). The budget situation is much improved since he updated his 2019 BRE in July 2020 during the height of COVID-19. The July Update to the BRE forecasted a $4.5 billion deficit for the CURRENT budget cycle. Discussion in Austin recently suggests this number may be much smaller (~$1 billion) due to the influx of federal relief dollars, emergency budget cuts, and higher than expected revenue. All eyes are on the Comptroller as he will now project how quickly state revenues will return to normal during the 2022-2023 budget cycle – the budget legislators must write this session.

2. What to watch this week …

• An interview with incoming Speaker of the House Dade Phelan. The Speaker discusses Capitol protocols and session logistics, the tough budget environment, the desire to fully fund public education and more.

• The Sunset Commission Meeting, where the Commission will consider and take possible action on recommendations related to the Texas Department of Licensing and Regulation, the Texas Racing Commission, the San Jacinto River Authority and other state boards currently under sunset review. Full Agenda.

3. Prevailing political winds …

• The legislature will begin with no shortage of tension after last week’s unrest in Washington, DC. In the aftermath of the disturbances, the Texas Capitol was temporarily shut down, only two days after it reopened after being closed for months. It’s back open again, but the fallout also saw harsh rebukes from elected leaders on both sides of the aisle in Austin. Including some finger-pointing directly at Texas leaders.

• The riots in DC have also refueled another discussion that is likely to get significant attention this session: law enforcement and policing. The Governor is considering legislation to establish a special district in the aftermath of the City of Austin’s movement to defund the police. And this week the Texas Municipal Police Association launched a new campaign to help shape the discussion: TexasPoliceFacts.com.