During the third special session, the Legislature was tasked with appropriating $15.8 billion in State Fiscal Recovery Funds (SFR Funds) and the $500.5 million in Coronavirus Capital Projects Funds, totaling $16.3 billion in American Rescue Plan Act (ARPA) Funds. Show The $16.3 billion in ARPA funding provided an opportunity for Texas because the state rarely has all the resources to, all at once, address major structural problems. The massive investment of ARPA funding combined with decades of vibrant economic growth provided the state the necessary resources to maintain Texas’ economic recovery — but also prepare for the state’s future in a way that benefits the next generation of Texans. This opportunity for the Legislature to address major problems aligned with significant public demand for action. In September 2021, Texas 2036 released its Texas Voter Poll and found that Texas voters were increasingly concerned about the state’s future and they overwhelmingly wanted leaders to take advantage of the billions of federal stimulus dollars. Voters ranked critical infrastructure projects as their top area for appropriations followed by cybersecurity and technology services. In advance of the third special session, Texas 2036 released a Federal Funds Playbook, which laid out opportunities to leverage the federal stimulus funds to make generational investments. The Federal Funds Playbook provided options for addressing issues such as strengthening our energy infrastructure, modernizing our informational technology, expanding broadband, and many others. Texas 2036 also encouraged the Texas Legislature to consider the following principles in deciding how to deploy the $16.3 billion federal funds, which included:
Senate Bill 8 Appropriates $13.3 Billion in ARPA Funding With a unanimous vote in both chambers, the Texas Legislature passed Senate Bill 8, which appropriates $13.3 billion of the available $16.3 billion in ARPA Funding. Future Legislatures will have an opportunity to appropriate the $3.0 billion remaining, as the deadline to obligate these funds is December 31, 2024. Texas must expend all funding by December 31, 2026, or it could be subject to rescission. Throughout the special session, the Legislature considered many worthwhile items for funding, many of which were included in our Federal Funds Playbook. It was reported that the Legislature received upwards of a trillion dollars in funding requests across a wide range of initiatives. As shown below, Senate Bill 8 makes significant investments in areas that will impact jobs, broadband, IT modernization, and mental health infrastructure. These investments will address immediate state needs while also setting the state up for improved economic growth and government services. Texas Appropriation of American Rescue Plan Act Funds A Deep Dive into Senate Bill 8 Senate Bill 8 appropriates a total of $13.3 billion in ARPA funding towards multiple categories of uses, with the bulk going toward addressing the state’s unemployment insurance deficit and COVID-related healthcare and response costs. Unemployment Compensation $7.2 billion, more than half of the $13.3 billion in ARPA funding, was appropriated to replenish the Unemployment Compensation Fund. This appropriation helps employers avoid future cost increases and addresses the shortfall in the state’s Unemployment Compensation Fund which was hit hard by the job losses Texans experienced in 2020. As noted in our Federal Funds Playbook, appropriating $7 billion to replenish the state’s Unemployment Compensation Fund was supported by 58% of Texans. And according to testimony received during the legislative process, this appropriation should prevent the state from increasing taxes on Texas employers by as much as an estimated 266 percent increase in their unemployment taxes. Healthcare and COVID-19 Response The $2.8 billion appropriated for healthcare and COVID-19 response addresses issues caused by the pandemic since March 2021. Highlights include:
Justice and Public Safety The $656.6 million appropriated for justice and public safety went to shore up court fee and sexual assault program shortfalls, crime victims grant funding streams and salaries at Texas Department of Criminal Justice.
Broadband and Emergency Communications The $650.5 million appropriated for broadband and emergency communications builds off the work completed during the regular legislative session with the passage of House Bill 5 (87R) and House Bill 2911 (87R).
Education and Workforce The bulk of the $467.2 million appropriated for education and workforce went toward debt service on bonds for capital projects as well as institutional enhancements at two universities.
Texas 2036 supported the passage and implementation of the TRUE initiative (SB 1102, 87-R) and continues to work through the Aim Hire Texas coalition to ensure that educational investments lead to high-value workforce outcomes, both for students and employers. However, the $325 million appropriation for university construction may not be within allowable uses according to interim final rules at the U.S. Treasury Department, to the extent the funding is used to pay for debt associated with tuition revenue bonds. Section 51 of the bill notes that these funds are categorized as “government services” under applicable Treasury guidelines, meaning that they have the broadest allowable uses under ARPA (subject to a $12.2 billion limit). That said, despite the broad allowable uses, Treasury’s interim final rule states that “government services would not include interest or principal on any outstanding debt instrument, including, for example, short-term revenue or tax anticipation notes, or fees or issuance costs associated with the issuance of new debt.” Section 10(b) of Senate Bill 8 provides that the state will backfill this appropriation with general revenue if ARPA funding is disallowed. Mental Health The $405.9 million appropriated for mental health will help expand Texas’ physical infrastructure as well as access to services.
In previous posts we’ve highlighted the fact that Dallas is a key metropolitan area with many health care systems and medical school resources, but it does not have a state hospital. Using ARPA funds to construct this facility will increase access to necessary care and offset future planned state general revenue expenses. The Legislature will need to monitor the on-going non-infrastructure costs for these new mental health services and their impact on future state budgets. Emergency Infrastructure and Resiliency The $306.5 million appropriated for emergency infrastructure and resiliency will bolster our ability in responding to extreme weather events.
Texas’ future depends on how we prepare for more extreme weather, a point we’ve made before in our work with State Climatologist Dr. Nielsen-Gammon. Appropriations to improve flood prevention capabilities were supported by 79% of Texans, including 88% of Houstonians. Economic Recovery The $280 million appropriated related to Texas’ economic recovery will provide support to the tourism industry, which was hit hard by the pandemic, as well as provide critical funding for food pantries.
Information Technology and Cybersecurity The $226.2 million appropriated for IT and Cybersecurity items will build off the work completed during the regular legislative session with the passage of House Bill 4018 (87R).
This funding will improve our state’s ability to deliver services and improve our cybersecurity posture by updating IT resources and preventing future costs, a topic that we’ve discussed in the past. The Texas 2036 voter poll showed overwhelming support from Texas voters for modernizing state information technology, with 80% support. Government Facilities $175.5 million was appropriated for deferred maintenance and new construction at state-owned facilities.
Funding maintenance needs with ARPA funds will save the state general revenue dollars for other items in the future and ensure Texans have up-to-date facilities. However, the $100 million allocated on behalf of the Bullock Museum may not be within allowable ARPA uses according to interim final rules issued by the U.S. Department of Treasury. Section 51 of the bill notes that these funds are categorized as “government services” under applicable Treasury guidelines, meaning that they have the broadest allowable uses under ARPA (subject to a $12.2 billion limit). That said, despite the broad allowable uses, Treasury’s interim final rule states that “replenishing financial reserves (e.g., rainy day or other reserve funds) would not be considered provision of a government service, since such expenses do not directly relate to the provision of government services.” Recognizing this risk, Senate Bill 8 provides that if the funding is not allowable, the state will backfill this appropriation with general revenue. State Parks and Historic Sites The $63 million appropriated for state parks and historic sites will fund grant programs and facilities’ needs at the Texas Parks and Wildlife Department as well as the Texas Historical Commission.
Improved Transparency and Accountability Budgets represent priorities, and while increased funding is important, being able to track outcomes tied to funding increases is ideal. As the bill passed the House, it would have required public-facing reporting on all federal coronavirus funds. The final version requires the Legislative Budget Board in consultation with the Comptroller to publicly report on a quarterly basis how federal funds appropriated under Senate Bill 8 were spent through 2028. How often does the Texas Legislature meet?The Texas Legislature meets in Regular Session for about five months every other year. Regular Sessions begin at noon on the second Tuesday in January of odd numbered years and can last no more than 140 days, ending during the last week of May or the first week of June.
What might happen to legislative districts in Texas following a federal census?Section 28, Article III, Texas Constitution, requires the legislature to redistrict state senate districts during the first regular session following publication of the decennial census. If the legislature fails to do so, the redistricting task falls temporarily to the Legislative Redistricting Board.
What is the purpose of a conference committee in the Texas Legislature?Conference Committee—A committee composed of five members from each chamber appointed by the respective presiding officers to resolve the differences between the house and senate versions of a measure when the originating chamber refuses to concur in the changes made by the opposite chamber.
What is the structure of the Texas Legislature?Texas Legislature utilizes a bicameral (two branches or chambers) system with the Texas Senate being the upper house, and the Texas House of Representatives the lower house. Every other state has a bicameral legislature except for Nebraska.
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