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TG's Legislative Report

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TG Congressional and Legislative Relations
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Round Rock, TX 78683-3100

December 29, 2008

First Session of the 111th Congress and the 81st Regular Session of the Texas Legislature Previews

As a new Congress and new Administration prepare to begin governing, Democratic congressional leadership have been in discussions with President-elect Barack Obama's transition team since before the November election to identify priority legislation both want passed and signed into law within the first weeks after Congress convenes on January 6, 2009.

Both groups agree that the first bill signed into law by President Obama will be a massive economic recovery package that congressional leaders hope to have ready and waiting for Obama's signature on Inauguration Day — January 20, 2009. This $600 billion - $1 trillion bill is being drafted by the House and Senate Appropriations, Senate Finance and House Ways and Means committees.

While the dollar amount of the economic stimulus package is still undetermined, possibilities for elements of the plan have been mentioned. These include funding for public works projects to rebuild the country's infrastructure; increases in funding for food stamps and state Medicaid assistance; along with several proposals that were a part of the National Democratic Platform and are considered by congressional leaders to be "low hanging fruit" — priority items that they expect will garner bipartisan support in both chambers, most importantly a filibuster-proof 60 votes in the Senate. These may be a part of the stimulus legislation, or considered separately as a package, and include:

  • expanding the Children's' Health Insurance Program (passed by the 107th Congress 3 times and vetoed);
  • allowing the importation of less expensive prescription drugs (also passed by the 107th Congress and vetoed);
  • broadening eligibility for unemployment benefits (also passed by the 107th Congress and vetoed);
  • providing federal funding for stem cell research (also passed by the 107th Congress twice and vetoed);
  • providing tax reductions for middle and low-income wage earners that may include a proposal to provide, and pay for, a universal and fully refundable tax credit to fund the first $4,000 of the cost of tuition and fees for a college education in exchange for 100 hours of community service;
  • providing federal funding to develop and implement technology to provide for the establishment and maintenance of electronic medical records; and,
  • expanding the provisions of the Federal Family and Medical Leave Act.

After passage of the stimulus bill, House and Senate Appropriations Committees plan to complete the work on the unfinished fiscal 2009 spending bills, with the plan being to also have those ready for the new President's signature on January 20th. Appropriators only passed fiscal 2009 spending bills for Defense, Veterans Affairs and Homeland Security in 2008. As a result, nine spending measures were not completed and those agencies were funded at fiscal 2008 levels through March 6.

Democrats decided early in 2008 to delay most of the spending bills until a new administration was in place rather than face vetoes from President George W. Bush, who promised to reject any bill that exceeded his spending request. Democrats adopted a budget this year that exceeded the Bush administration's $991.6 billion request by $24.5 billion for 12 bills.

The congressional leadership and incoming Administration have stated their intention of passing and signing into law all 12 spending bills for FY 2010 well before the scheduled adjournment date of October 30, 2009 of the First Session of the 111th Congress.

Spending questions, including the Democrats' adherence to pay-as-you-go rules and the possibility of a $1 trillion deficit next year, will add pressure to keep spending in check and to find savings through a budget reconciliation process (which could include further amendments to the federal student loan programs) as well as through the annual appropriations process.

In addition to the early, six day congressional agenda, it is expected that the new President will enact some of the above mentioned measures, e.g., federal funding for stem cell research, through Executive Orders, with congressional Democrats following up with legislation, thus curbing the ability of a future president to reverse course.

In addition to their own pro-active agenda, Democratic leaders will have to address some issues left over from the 110th Congress.

Look for the Democrats in early January to introduce shell bills to serve as placeholders for later action to overhaul the nation's health care and financial services systems, combat climate change, boost alternative energy and deal with education issues such as the No Child Left Behind Act and college affordability.

With respect to the federal student financial assistance programs and student loan programs, look for recommendations for restructuring the Title IV programs submitted to the new Congress by the National Association of Student Financial Aid Administrators (NASFAA), the National Forum on Educational Loans, the College Board, American Council on Education, the outgoing Department of Education administration, and others to garner serious consideration by Members as they search for more effective, efficient, and less complicated and costly ways to deliver federal student financial aid and loans to students and institutions. This could happen quickly or slowly through committee hearings and study, depending on the larger congressional agenda.

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Higher Education Topics Likely To Be Considered By the 81st Regular Session of the Texas Legislature

The Texas Legislature will consider a wide variety of topics when it convenes in regular session on January 13, 2009. Funding public and higher education, health and human services, criminal justice, and other state priorities will command the attention of state lawmakers, as well as dealing with the aftermath of the devastation from Hurricane Ike. Also, 27 state agencies and programs, including those concerned with transportation, public safety, youth offenders, insurance regulation, agriculture, and parks and wildlife, will be subject to review under the Sunset process. Many other issues, such as revisions to the property tax appraisal system and the business margins tax, enforcement of immigration laws, and the public school accountability system, also will be considered.

While many states recently have faced economic difficulties that have caused serious fiscal shortfalls requiring substantial spending cuts, the downturn has not yet hit Texas hard enough to require significant adjustments to the fiscal 2008-09 budget. In adopting the current budget, the 80th Legislature left an unencumbered surplus of $2 billion in general revenue. It also required that $3 billion be transferred to the property tax rate relief fund as a down payment on the general revenue that will be required in fiscal 2010-11 to replace local tax revenue as a result of school district property-tax rate reductions mandated in 2006. Because state revenue from the business margins tax earmarked for school property tax revenue replacement has been smaller than anticipated, more general revenue will have to be spent to maintain lower school property taxes. Also, higher-than-anticipated oil and gas tax revenues and other surpluses totaling $6.9 billion have been transferred to the economic stabilization, or "rainy day," fund. These reserves built into the current budget are expected to be sufficient to meet supplemental and emergency spending needs, such as those resulting from Hurricane Ike, for the current biennium.

The challenge for the 81st Legislature will be to meet state spending needs for fiscal 2010-11 during a period of economic uncertainty. On October 13, the governor directed all executive branch state agencies to take immediate steps to prepare for a slowing economy. He asked them to curtail taxpayer-funded travel, to look for other ways to rein in agency expenditures, and to re-examine their Legislative Appropriations Requests for fiscal 2010-11 to be prepared in the event economic circumstances worsen.

The state leadership asked agencies to submit their fiscal 2010-11 spending requests at no more than the amount spent in fiscal 2008 and budgeted in fiscal 2009, plus the amount needed to cover in future years the two percent pay raise granted to state employees in 2008. Agencies also were required to submit a plan showing how they would reduce their baseline requests by ten percent. Exceptions to baseline request limits were amounts necessary to maintain public education funding, satisfy debt service requirements for existing bond obligations, maintain caseloads for federal entitlement services, satisfy employer contribution requirements for state pension systems, and maintain adult prison populations.

On November 14, the Legislative Budget Board adopted a projected state personal income growth rate of 9.14 percent for fiscal 2010-11, the lowest growth rate ever adopted. Under the constitutional spending cap, state spending not constitutionally dedicated to particular purposes, cannot increase from one biennium to the next beyond the growth limit set by the LBB; unless the cap is waived by a majority vote of both houses.

Beyond new demands on state spending for fiscal 2010-11, legislators may consider a pay raise for state employees. The Legislature may decide to grant an across-the-board increase or targeted raises to employees in certain areas, such as prisons or health and human services.

  • Tuition deregulation. Legislators likely will review tuition deregulation and debate whether to continue allowing institutions to set their own designated tuition. Lawmakers also may consider freezing or lowering the cost of higher education tuition.
  • Top Ten Percent Law. To increase flexibility in admissions at Texas universities, some lawmakers may propose amending the Top Ten Percent Law by capping the number of students automatically admitted under the law in each entering freshman class or revising how the top 10 percent of high school graduates is calculated. Others may propose repealing the law altogether.
  • National research universities. Some legislators may propose establishing at least one more tier-one university, also known as a "flagship institution," to join the ranks of the state's two public, tier-one research universities, the University of Texas at Austin and Texas A&M University. One strategy for establishing more tier-one institutions could be to select one or more of the state's seven "emerging research universities" — Texas Tech, the University of Houston, the University of North Texas, UT-Arlington, UT-Dallas, UT-El Paso, or UT-San Antonio — using incentive funding that rewards attributes critical to tier-one success.
  • Financial aid. Lawmakers may consider increasing state aid to students overall, but especially to students attending community colleges and other two-year institutions. The Texas Educational Opportunity Grant (TEOG), a purely need-based financial aid program for community college students, currently funds only four percent of eligible students. Some may propose increasing TEOG funding to assist at least 33 percent of eligible students. TEXAS Grants, the state's premier grant program, awards grants with preference to the neediest students. Current funding provides assistance to about 50 percent of eligible students, and lawmakers may consider increasing state funding to assist at least 67 percent of eligible students. Some may recommend adding merit criteria to the program in order to target needy students with the strongest academic credentials. Other proposals may include stacking the TEXAS Grants and B-On-Time loan programs, which would award eligible students grant money for the first two years of college and a loan for the final two years, and establishing a merit-based academic scholarship fund that would aid students from middle-income families.
  • Financial Literacy. Legislation to mandate a personal financial literacy curriculum to be offered by the state's public institutions of higher education will be considered as a way to encourage students to learn how to better manage their financial resources and educational debt. The Texas Higher Education Coordinating Board would be responsible for ensuring implementation of the curriculum and for determining the topics, which may include budgeting, credit cards, spending and saving, loan repayment and consolidation, taxes, and retirement planning.
  • Proportionality. In 2007, Gov. Perry vetoed $154 million in fiscal 2009 funding for community college employee group insurance contributions. General revenue funding for the contributions has since been provided, but the budgetary principle known as "proportionality," or the cost-sharing between the state and the institutions for employee benefits, likely will be reviewed during the 2009 session. The Legislature could address whether to apply proportionality and whether the state is responsible for providing group health care insurance benefits to all community college employees involved with educational programs.
  • Incentive funding. The 80th Legislature established the Higher Education Performance Incentive Initiative and appropriated $100 million to the Texas Higher Education Coordinating Board (THECB) for this purpose. The incentive-based performance funding is to be awarded to specified higher education institutions and will be based on student and institutional outcomes that are aligned with state and regional priorities. The Legislature may consider recommendations of the THECB and a governor's task force on how to structure and implement the incentive funding.
  • Medical school. Legislators may debate establishing a four-year medical school in the Rio Grande Valley to address a shortage of health care professionals in South Texas. Other proposals could include establishing a medical school in the Austin area.
  • Veterans' tuition. The 81st Legislature may consider waiving out-of-state tuition rates for non-resident veterans and their spouses and children, allowing them to pay in-state rates. Currently, veterans and their qualified dependents who are Texas residents or who were Texas residents when they entered the service are exempt from paying tuition and fees through the Hazlewood Exemption. Non-resident veterans are not eligible to have their tuition and fees exempted and must pay out-of-state tuition rates, which are not fully covered by G.I. Bill benefits.

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