Texas’s three top leaders — all Republicans who generally operate in lockstep — don’t see eye to eye on Governor Greg Abbott’s plan to devote a major piece of the state’s newly announced budget surplus to cutting property taxes.
(Bloomberg) — Texas’s three top leaders — all Republicans who generally operate in lockstep — don’t see eye to eye on Governor Greg Abbott’s plan to devote a major piece of the state’s newly announced budget surplus to cutting property taxes.
Abbott wants half of the $32.7 billion to go to reducing the burden on homeowners, a centerpiece of his re-election campaign. Lieutenant Governor Dan Patrick says Abbott’s plan would bust the state’s spending cap and would rather prioritize shoring up the state’s troubled electric grid — which Abbott thinks is in good condition after fixes were made last year. And House Speaker Dade Phelan has emphasized the need to improve other infrastructure like roads and broadband.
The winner will drive the direction of the state’s legislative session starting Tuesday, where lawmakers will negotiate which priorities to fund. Texas Comptroller Glenn Hegar announced Monday that the state is expected to carry over a record $32.7 billion of revenue into the next two-year budget cycle, bolstering its projected funds for general-purpose spending to $188.2 billion. The surplus comes amid a recent surge in energy prices and inflation-boosted tax revenue.
But all that newfound cash has leaders at odds over how best to spend it.
“This is a once-in-a-lifetime opportunity to use some of these resources for infrastructure,” Phelan said during a speech before the local Transportation Advocacy Group in Houston in November. “We want to be competitive and we want to attract new companies.”
The surplus, the biggest in Texas history, stands in contrast to New York and California which are expecting budget gaps in the coming fiscal year.
The 88th Texas legislative session kicks off with a vote for the Speaker of the House. During the first couple weeks, the speaker and lieutenant governor will appoint committees and committee chairs and Abbott will make his state of the state address listing his priorities.
Here’s how the three leaders are looking to spend the extra cash.
Abbott
The governor was re-elected for a third term in November. During his campaign, Abbott spoke frequently about strengthening border security and providing property tax relief. His priorities are:
- Lowering property taxes
- Securing the border
- Ensuring parents have more say in schools’ curriculum
The Lone Star State relies on property taxes for its revenue given there’s no personal income tax. And with people moving to Texas in droves over the past couple of years, real estate prices have surged, further increasing the tax burden. Property taxes were 1.6% of home values in 2019.
Since property taxes are levied at the local level, the state would have to come up with indirect ways to provide relief, which could include sending stimulus payments to property owners or allocating more money to schools so those jurisdictions could reduce the local tax burden.
Even with the surplus, the state limits how much legislators can spend in each cycle. That makes the governor’s promise of giving half of that windfall back to taxpayers unrealistic unless lawmakers find alternate ways to accomplish it.
While Patrick also supports lowering property taxes, he hasn’t pushed the idea as aggressively as Abbott.
“The public says be smart with the money, don’t spend all the money and address the needs,” Patrick said during a press conference in November.
Patrick
The lieutenant governor was first elected in 2014 and is also in his third term. He was previously elected to the Texas Senate and spent over 40 years as a television anchor. His priorities include:
- Reinforcing the state’s electric grid
- Lowering property taxes
- Setting up endowments and scholarships for law enforcement officers and teachers
Patrick announced fortifying the grid as one of his top priorities last month, saying the state needs to invest in more natural gas plants.
“Electric grid — this is to me the most important thing this session besides managing our money,” Patrick said in December.
Patrick’s remarks stand in contrast to Abbott, who has said the reforms made to the grid during the last legislative session are sufficient. In 2021, the legislature passed two bills to address the failure of the electric grid during Winter Storm Uri, after nearly 250 people died. The legislation requires power plants to winterize their equipment to make sure pipes and transmission lines don’t freeze.
Phelan
Phelan, the 76th speaker of the Texas House, is expected to be voted in for a second session after which he’ll broadly outline his legislative priorities. His priorities include:
- Investing in the state’s infrastructure like roads and broadband
- Expanding postpartum coverage for new moms to 12 months
- Finding ways to better develop workforce pipelines
Texas reported robust population growth over the past decade, fueled by migration from outside the state, with the number of residents surpassing 30 million as of July, according to the US Census Bureau. The influx of newcomers hit the state’s aging infrastructure, straining airports, water facilities and roads.
Last year, the Austin airport, which is undergoing a 20-year expansion plan, didn’t have enough fuel for the number of flights, which have increased with more people flying in and out of the capital.
Interstate 35, which cuts through central Texas, is undergoing a major expansion to accommodate the number of people moving through the area. And last year, there were more than 2,450 boil-water notices across the state — including a high-profile outage in Houston — in a sign of the state’s aging water infrastructure.
Border Security
One thing all three Republicans agree on is border security, which is a popular political message among Republicans and Texans more broadly. Polls have shown border security and immigration also are top issues among Texas voters. Both Patrick and Abbott have publicly vowed to continue funding enhanced border security in the absence of a federal immigration plan from President Joe Biden’s administration.
In 2021, Abbott sent thousands of Texas National Guard members to the border to assist with arrests for border-related crimes. And last year, he launched a program to transport unauthorized migrants via bus from the border to sanctuary cities such as New York, Washington and Chicago.
Separately, Patrick is a big advocate for law enforcement and wants money allocated to provide more officers in rural areas. He also wants money invested in attracting and retaining the best teachers in Texas and making sure they are adequately paid.
Phelan has said he will push for bill that provides a full year of health care coverage for new mothers after failing to get one passed in 2021. Currently, new mothers in Texas have just two months of post-partum coverage from Medicaid.
The speaker has also talked about the importance of finding job opportunities for individuals who may not want to pursue a traditional four-year college path. He has pushed for colleges to provide more technical training and skills certificates.
“The biggest issue is what to do with all the money we have above prior appropriation levels,” state senator Nathan Johnson, a Democrat who represents a district in Dallas, said. “That presents the problem of the political process figuring out how much to spend, how much to save, how much of it to devote to tax reduction, how much to invest in long term projects, how much of it to set aside to fund future efforts.”
–With assistance from Danielle Moran.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
