The 85th Texas Legislature ended on May 29. Over 10,000 bills were filed this session with only 4,389 passing both the House and Senate. Governor Abbott has signed 334 bills into law and 28 will become law without his signature. Of the bills, 78 proposed new laws would take effect immediately while 121 will take effect on September 1. No vetoes have yet been filed.

Every two years, the Texas Legislature convenes to discuss the state budget and programs that impact the lives of millions of Texans. So, how did we do this session? Below is a recap.

State Budget
The state budget, which awaits the Governor's signature, plans to spend approximately $217 billion in the next two years. Thank you to Sen. Schwertner and Rep. Gonzales, who were budget conferees. The main components related to Metro Austin businesses include:

• Transportation and Infrastructure: The Texas Legislature fulfilled its commitment to voters by appropriating promised dollars and using a $1 billion budget trick to delay transportation spending one day into the next fiscal year (FY20-21). The Chamber will work with coalitions to ensure Texas lawmakers fulfill this promise in the next budget.
  
• Economic Development and Job Recruitment: Central Texas lacks the natural resources, a major international airport, and must focus on emerging technologies to grow our private sector economy. The Texas Legislature helped improve growth opportunities by supporting the following economic incentive programs:
  
• Texas Enterprise Fund: The Texas Legislature rolled $86 million in unexpended TEF funds (a 20 percent reduction over the current biennium) to secure additional work projects with export-oriented companies considering to locate or expand in Texas.
  
• Moving Image Incentive Fund: If the comptroller identifies unexpended funds, Texas lawmakers allocated $22 million to attract more creative media job projects. This is down 25 percent from the current biennium and 75 percent from the FY 2014-2015 biennium.
  
• The Big Picture: Due to significant leadership from Gov. Abbott, the Texas Legislature added $100 million to invest in the Governor's University Research Initiative, the Moving Image Incentive Program, the Texas Enterprise Fund and three other programs on an as needed basis. Depending on how the funds are allocated, this makes the analysis of economic growth much better.
  
• K-12 and Long-Term Talent: The Texas Legislature cut per-pupil state support to school districts by $1.5 billion. Districts will backfill cuts with mandated local property tax increases (estimated to be 7 percent each over the next two years). Despite Governor Abbott and Speaker of the House Straus stating that "Robin Hood" must be addressed this session, the budget doesn't stop the state from taking $1.3 billion from Central Texas school property taxpayers in the next two budget years. Austin ISD taxpayers alone will shoulder 25 percent of the $2 billion in Robin Hood payments to the state next year, despite educating only 1.6 percent of all Texas students. The Chamber strongly encourages Texas lawmakers to identify solutions now to reduce school property taxes.
  
• Higher Education and Mid-Term Talent: After large state investments in capital, research, and the adoption of the 60x30TX higher education strategy two years ago, community colleges and universities received a negligible increase in per-student funding this year. Community colleges received $10 million more for student success performance while the flexibility of universities setting tuition was not formally curtailed. Significant pressure on higher education leaders to keep tuition flat continues from state elected officials and the Texas legislature.
  
• TEXAS Grant: Last session, the Legislature changed the public university grant for college-ready students with financial needs from a guarantee of free tuition and fees to a $5,500 scholarship. Although more eligible students can receive the grant, it limits its effectiveness. This session, the Legislature appropriated $800 million for TEXAS Grants for eligible students.
  
• National Research University Fund: The fund took a 12 percent cut to create more top-tier research universities and improve innovation of our state.
  
• The UT-Austin Dell Medical School: Last fall, the school became eligible for state and graduate medical education funding. This is a big win for the UT-Austin Dell Medical School.
  
• Economic Stabilization Fund: The Texas Legislature used $1 billion from the state's so-called "Rainy Day Fund" for one-time expenditures. The state estimates $11 billion will be in the fund at the end of FY 2019. This money could be used in a school finance restructure to reduce the state's reliance on Central Texas school property taxes.
  
• A look to FY 2020: The Legislature deferred major costs into the next biennium to include deferred payments for transportation and Medicaid obligations. The budget is predicated upon approximately 3 percent growth in Gross State Product in each of the next two fiscal years, local school property tax increases of at least 7 percent each of the next two fiscal years, and middling job creation continuing at approximately 1.7 to 1.9 percent over the next two fiscal years. The Chamber encourages the state during the interim to pursue a state economic development strategy which will accelerate job creation and ensure dominance in emerging industries.

Texas has a two-year budget cycle that begins in September of the first of every odd number year.

Economic Development
This session, the Texas legislature showed little concern to improve or deteriorate the state’s economic development policy. Texas lawmakers not passing the “bathroom” legislation was the best outcome as it would have tarnished the state’s reputation. Other positives include:

• Good: All major anti-economic development legislation was defeated.
  
• Good: Anti-large capital investment legislation defeated: The Senate economic development committee heard SB 600 to end the Texas Economic Development Act (Chapter 313). Dozens of business organizations testified against the legislation; the Senate took no further action.
  
• Good: Data center eligibility improved: HB 4038 (Bohac) advances the staffing qualifications for a data center project, a key Texas industry. The bill is on its way to the Governor. HB 108 (Alvarado), supported by the Chamber, champions support from the Governor's office on workforce training to attract employers interested in expanding operations in Texas.

Transportation
Central Texas is among the most congested areas in the United States. The Texas legislature fulfilling its transportation funding commitments is a major positive. However, several resources to fund additional infrastructure improvements were weakened including:

• Good: Nearly All Anti-Toll Bills were Defeated.
  
• Not Good: End Future State Grants for Toll Equity: The TXDOT Sunset bill, now in front of the Governor, requires regional mobility authorities to pay back state grants on projects which started the environmental review process after January 1, 2014. The effect could have been much worse—without Rep. Gonzales, Sen. Watson, Brian Cassidy, and the Transportation Advocates of Texas (of which the Chamber is a member)—creating the "grandfathering" clause which exempted existing critical projects like Mopac South, 183 North, and Oak Hill Parkway.
  
• Bad: End Comprehensive Development Agreements: All current discussions about a bipartisan federal infrastructure bill –a key priority for the United States President and Congress—contemplate public-private partnerships (P3s) as a pre-requisite. The Senate took no action and the House voted down HB 2861 (Phillips) to extend local government authority to create P3s. Thank you to Central Texas House members who voted to pass the bill including Reps. Workman, Rodriguez, Israel and Howard.

Education, Talent, and Workforce
Central Texas has a 3.5 percent unemployment rate, one of the lowest amongst the Top 50 U.S. Metros. Of our 37,000 open positions, half require at least a bachelor degree and another 10 percent require an associate degree. This session, Texas lawmakers looked into policy that impacts our education, talent, and workforce the following ways:

K-12

• Education Savings Accounts: The Senate passed SB3; the House did not schedule a hearing on the bill. The Senate Education Committee put a limited special education voucher on the school finance bill, HB 21, late last week but the House refused to compromise.
  
• Elementary and Middle School Expectations: The Senate Education Committee, which includes Sen. Donna Campbell, has attempted to maintain expectations for elementary and middle school students. Ultimately, HB 515, which the Chamber opposed, would have lowered the writing, social studies, and science expectations of students. The bill failed.
  
• High School Graduation Expectations: The Chamber Board consistently opposes lower graduation expectations. SB 1005 (Campbell), which the Chamber supported, has been sent to the Governor for his signature. The bill allows students to substitute adequate ACT, SAT or TSI scores for end-of-the-year graduation tests. Furthermore, Texas lawmakers approved SB 463 (Seliger) to lower high school graduation expectations for an additional two years. The bill will study the impact of 9,000 students who received a diploma despite inadequate performance.
  
• Accountability: The Lege, thanks to Sen. Larry Taylor, Lt Gov Dan Patrick, and key Senators, passed HB 22 and preserved credible public school accountability. The Lege provided current Education Commissioner Mike Morath significant authority to craft a clearer, fairer system that allows for potential development of local accountability systems if approved by the Commissioner. While campus A-F ratings were delayed two years at the request of the House, district ratings will begin fall 2018. Clearly, TEA will need a sustained thorough public engagement campaign to ensure clear understanding of the new system and strong attention to mischief in Section 15.
  
• School Finance: The House identified HB 21 as their school finance bill; tweaking the law to increase Austin ISD funds by 1 to 2.5 percent (interpretations vary). The Senate Education Committee added a special education voucher to HB 21, which the House rejected. Hence, additional per pupil funding died. SB 1360 (Watson), which would require local school property tax notices to tell taxpayers how much of their money was being taken by the state, died in the House. Thank you to Sen. Watson for your efforts.

Workforce

• P-Tech: SB 22 (Taylor) formalizes partnerships between K-12, higher education, and businesses. The Chamber has provided support and testimony for the legislation. Governor Abbott has signed the bill. Austin ISD will unveil three replicas of the Pathways Early College High School, or P-Tech model.
  
• Nursing: SB 2118 (Seliger) would allow community colleges like ACC to authorize a Bachelor of Science degree in nursing. The bill is on its way to the Governor. The Austin Chamber in partnership with the Austin Community College supported SB 2118. Thank you to Sens. Kel Seliger, Kirk Watson, and Rep. Donna Howard.
  
• Computer Science: Several bills are headed to the Governor to provide new resources for improved computer science instruction. HB 3593 (Bernal & Taylor) creates high school cyber security and advanced computer science coursework. HB 728 (Guerra) allows access to open source content, additional ways to build the pipeline for Austin's biggest talent needs, and offers professional development of computer science teachers. Thank you to Reps. Bohac, Donna Howard, TechNet, Texas Computer Educators Association, CS4TX, and the San Antonio Chamber for their support of this effort.

Local
Pundits remarked the Lege targeted many and unraveled recent Austin City Council actions. What if leading up to the 86^th Legislature Austin City Council and business leaders commit to collaborate, compromise, and pass legislation together? Here's what happened when we didn't.

• Ride Sharing: HB 100 (Paddie) overturned Austin's ride sharing ordinance and created a statewide framework. The bill was approved overwhelmingly in both the House and Senate. Governor Greg Abbott signed the bill on May 29. The chamber supported this policy.

• Linkage Fees: HB 1449 (Simmons) passed both chambers and was signed by Governor Abbott. The bill limits local government’s ability to create new linkage fees or taxes tied to new developments. The City of Austin was considering such legislation. Many local businesses supported this legislation.
  
• Fair Chance Hiring: Rep. Workman secured 76 House sponsors in support of HB 577. The bill would have overturned Austin's ordinance controlling private hiring. The bill was ultimately unsuccessful. The Chamber supported Rep. Workman's efforts.
  
• Short-Term Rentals: SB 451 (Hancock) would have created statewide regulations that would overturn the City of Austin’s 2016 intrusion into short-term rentals, a business model offered by companies like HomeAway. The Chamber supported Sen. Hancock's effort which died at the very end of the session.

One Final Thought

• Franchise and Local School Property Taxes: Major out-year franchise tax cuts were discussed by the high-powered Senate Finance Chair Jane Nelson (SB 17) and House Ways & Means chair Dennis Bonnen (HB 28). Since local school property taxes are skyrocketing on Central Texas business and residential property taxpayers, in part because of the state school finance system, the Chamber encourages the legislature to undertake a careful study on the impact of changes to both taxes over the Interim to answer key questions about how to grow jobs and improve the state’s competitiveness.

The Texas Legislature will convene in January 2019. Sign up for the advocacy newsletter or more policy updates here. If you have questions, please contact Drew Scheberle, SVP of Policy and Advocacy.