January 17th, 2017
It’s that time of year again. The air is crisp, the days are short, and here in Austin the leaves are FINALLY starting to change! That’s right…
It’s Legislative Session Time! Last week, On January 9th, I delivered to the Legislature my Biennial Revenue Estimate (BRE) and the following day, the 85th Legislature was officially gaveled into session.
To date, over 1,500 bills have already been filed and I have been working hand in hand with lawmakers to help them better understand the costs and benefits associated with specific issues. My team has testified before a number of key committees and my revenue estimating team has been hard at work looking at the potential costs of individual bills to assist the Legislative Budget Board with their fiscal notes system.
My own office has several key issues we will be focusing on and I will be updating you on those as the legislative session progresses. One issue that I pay very close attention to regardless of the time of year is our state’s credit ratings. Texas is fortunate to benefit from AAA ratings from all the major ratings agencies, which saves Texas taxpayers millions of dollars in debt service. Our sound, conservative fiscal management coupled with a robust rainy day fund and a willingness to tackle long term economic challenges has created an environment in which the world sees Texas as a sound investment.
It’s my job to make sure Texas remains a sound investment for generations to come.
To accomplish that I must highlight long-term obligations and items on the State’s balance sheet that require our attention. I recently sent a letter to Governor Abbott, Lieutenant Governor Patrick, and Speaker Straus outlining some of the most pressing of these obligations. Since all of us serve you, the Texas taxpayers, I think you should know about them as well.
Ratings agencies pay close attention to the State’s pension obligations. Each firm has recognized the positive action taken by the 84th Legislature to shore up the state Employee Retirement System. However some of the ratings firms have begun to emphasize the importance of not only meeting required contribution levels, but also reducing the overall long-term pension liabilities. Over the past several years we have seen Texas’ score reduced in categories affected by this new emphasis. Thus far, our ratings have not been negatively impacted. But we must act soon to ensure Texas has the flexibility to address this issue and prevent our state pension from negatively impacting our rating, as we’ve seen in other states like Illinois and New Jersey.
While not a legal liability of the State, our retired teachers, as well as those currently serving in the classroom deserve peace of mind regarding the availability of their future healthcare. A recent report from the legislature indicates an inadequate funding structure will lead to a projected shortfall of $1.3 to $1.5 billion for the coming biennium. The shortfall grows to between $4 to $6 billion in the 2020-2021 biennium. The status quo is no longer sustainable and we must act to ensure the long-term stability and sustainability of the fund.
Texas Tomorrow Fund:
The Texas Guaranteed Tuition Plan was the state’s old tuition savings program. That fund has closed and been replaced by sound and sustainable savings programs like the Texas Tuition Promise Fund which my office administers. However, our obligations under the old fund remain and are constitutionally guaranteed. As of August 31st 2016, the Plan had an unfunded liability of over $600 million. Acting now could not only prevent negative impacts to our credit rating but also save taxpayers nearly $60 million.
I continue to applaud our State leadership for the positive actions taken on deferred maintenance issues during the 84th Legislative Session. The progress made on ensuring our State-owned properties are sufficiently maintained is an important, yet often overlooked, aspect of the Legislature’s duty to Texans across the State. I urge lawmakers to continue to make this a priority in the next budget cycle and further demonstrate to taxpayers that the State is a responsible steward of the public assets entrusted to us.
I hope all of you will take the time to examine these issues. I know that legislators are already hard at work fighting for Texans and our state’s economic future. Addressing these issues is part of that fight and I know we will do what we always do. We will face down challenges and tackle issues with the courage and grit that has made us the greatest state in the Union.
I hope this note has been both informative and engaging. Texas faces a challenging budget season ahead and I intend to update you from time to time about some of our state’s most pressing financial issues.
If you know of a friend or family member who might also want to get these updates, please forward this along and let them know they can sign up here to get these notes sent to them directly.
Thank you for your time and God bless.
Yours in service,