A Week of Senate Finance Action

Under the leadership of Senate Finance Chairman Steve Ogden and Vice Chairman Juan “Chuy” Hinojosa, this past week witnessed some watershed moments in the legislative process. After three months of testimony, hearings, member discussions and searches for new revenue, the Senate Finance Committee (SFC) pulled together a comprehensive state budget that recommends some $10 billion more in budget expenditures than does House Bill 1 approved two weeks ago.

 

The Senate’s approach to education and health and human services has resulted in a more “favorable” allocation of state funds than recommendations from the House. Yes, there are still a number of painful reductions, but fewer than those proposed in the other chamber. Ogden also called for members to address the structural deficit in the budget — an important step toward a permanent solution to recurring shortfalls.

 

Among the decisions affecting UTMB was the Senate’s proposal last week that funding be restored to the criminal justice health care programs, along with major restructuring of that health care contracting system. The Senate recommendations included:

 

-        Restoring almost $200 million of base funding to the program (from $707 million to $903 million) for the biennium. Although this is still 10 percent lower than funding in the 2011 biennium, it is a far less drastic reduction than prior recommendations.

-        The recommendation calls for letting the monies appropriated drive the amount of care delivered rather than vice versa. In other words, the health care vendors (UTMB and Texas Tech) would NOT be called upon to provide more care than the state appropriation proposed. The responsibility for the prison’s health care budget would fall squarely on the shoulders of the Texas Department of Criminal Justice, not upon the two university providers.

-        The proposal also de-funds the staffing of the Correctional Managed Health Care Committee and calls for the contracting for care to occur directly between the university providers and TDCJ.           

-        Budget allocations were recommended specifically for unit-based care, for hospital care, and for pharmacy inventory and operations.

-        TDCJ was authorized to move monies among strategies with prior Legislative Budget Board approval to fund additional services should TDCJ deem them necessary.

-        Reasonable reporting requirements related to oversight, quality, costs, utilization, acuity and other benchmarked measures were outlined.

 

The SFC recommendation received broad support among its members and was approved unanimously. Senator Robert Duncan told the Austin American Statesman, “We’re doing that so the care isn’t driving the budget, the budget is driving the care.”

 

During discussions related to university funding in Article III of the budget process, Senators Ogden and Tommy Williams offered up a provision for the approval of $11 million in FY13 funding for the debt service of the Tuition Revenue Bond approved by the 81st Legislature. This recommendation was approved in the Senate Finance Committee’s overall budget recommendation.

 

Last week also saw some other interesting proposals designed to allocate funding to the state’s health-related institutions (HRIs). Senator Judith Zaffirini chaired a newly formed Senate sub-committee on fiscal matters, which was charged with identifying funds for the HRIs. 

 

Since there were no general revenue funds available for distribution, the sub-committee proposed liquidating the Permanent Health Fund for Higher Education − the $430 million endowment from the decades-old tobacco settlement set aside for the state’s health-related institutions. The endowment produces about $45 million in revenue each biennium, which is allocated to the HRIs.  The sub-committee recommended that distribution of those funds occur on a formula basis for each of the 10 institutions. In turn, the institutions have the option of directing their portion of the funds to immediate budget needs this next biennium or placing the funds in a continuing endowment under their system’s direct management.

 

Senator Zaffirini opposed the recommendation because, rather than providing the institutions with new monies, it simply distributed to them revenue that had already been set aside for their use. Others joined her, citing the intent of the endowment to provide a perpetual source of revenue to the state’s HRIs. The Senate Finance Committee voted 10 to 5 to recommend the action to the full Senate.

 

House Appropriations Committee Chairman Jim Pitts told the media, “I don’t favor it, and I would speak against it.” He added that, “Once it’s gone, it’s gone.” Pitts did not rule out the fact that he may be persuaded otherwise.

 

UTMB currently receives $5 to $6 million each biennium from the endowment. If it is fully liquidated and distributed, UTMB’s portion of the proceeds using the current distribution formula would be about $47 million.  Like everything in the budget, details of this are still in flux, even if the idea is ultimately accepted in the conference committee. A number of things may change depending on decisions about how much of the fund to liquidate (all or part of it), how to distribute the proceeds, and how much flexibility each institution would have regarding use of the proceeds. 

 

A quick re-cap of funding for health-related institutions, with the Senate version of HB1 compared to the House version:

 

Senate Finance Version

 House Version

5% formula reduction and no American Recovery and Reinvestment Act (ARRA)

10% formula reduction and no ARRA

15% hospital reduction

25% hospital reduction

25% special items reduction

25% special items reduction

$11 million TRB debt service for proposed UTMB hospital tower

No debt service added in bill, but $13.2 million TRB debt service on wish list

$51 million GR to restore ARRA for all health-related institutions (on wish list)

N / A

 

Both bills make substantial reductions in Medicaid, CHIP and other health care funding, but the versions differ in amounts and types of reductions. 

 

Next Steps

 

The Senate plans to complete its work with approval of the fiscal matters bills this week and pass them from the Senate Finance Committee for action by the Senate as a whole after the Easter break. Their agreements later this week have resulted in significant additions to public education ($6 billion), along with a revenue increase of $5.5 billion through fast-tracking collection of fees and taxes, eliminating various exemptions, and selling public lands not being utilized.

 

After the Senate presumably approves the Senate Finance Committee’s recommendations, the House and Senate budgets will move to the Conference Committee.

 

The Speaker and Lt. Governor will each appoint five members to a joint budget resolution committee. These deliberations will likely take members into mid- to late May. If a consensus can be reached, the conference bill goes back for concurrence to each house and if accepted in both bodies, it goes to the Governor.  The Governor can veto specific line items in the budget, veto the whole budget, or sign the budget within 20 days of its arrival on his desk indicating his concurrence. Or, he can do nothing within the 20-day veto period and  the budget will be enacted without his formal approval.

 

If anything in these steps prevents a budget from being enacted by the end of the session on May 30, the Governor will have to call a special session (or two . . . or three) this summer to adopt a budget before the September 1 start of the new fiscal year.

 

After a brief respite for the Easter break, legislators will return to a schedule of non-stop activities . . . and the House will take up discussion of redistricting!

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