Texas will likely receive roughly $40 billion in taxpayer money provided by Congress through the American Rescue Plan Act (ARPA) for a number of budget areas: roughly $12 billion to public schools, $10 billion to local governments, and $4 billion to infrastructure projects (i.e., water, sewage, and broadband). Texas looks to also receive $17 billion in more flexible funding to state government.
Approach Depends on Restrictions
There are restrictions on how state and local governments can use the ARPA funds, but we will not know details on these restrictions until the U.S. Treasury issues guidance. Generally, these restrictions include using the funds for direct or indirect cuts to state taxes or deposits into pension funds. Given these restrictions, if the state is going to accept these funds, the best approach would be to follow a pro-growth, long-term strategy to provide relief to Texans from the struggles imposed by COVID-19 and shutdowns.
The chosen strategy should keep taxes lower than otherwise, reduce government debt obligations, fund only one-time expenditures, and reject all or most funds with strings attached to avoid expanding government and to reduce the impact on the country’s high spending and debt burdening America. Doing so will help provide relief from the effects of the pandemic and associated shutdowns. Using this strategy would help Texas recover faster and better withstand the onerous policies by the Biden administration to Keep Texas Texan by considering the following options for the $17 billion in more flexible funding.
- Given ARPA’s restrictions and requirements for using the funds that could create fiscal cliffs in subsequent sessions, eliminate tax relief opportunities through December 31, 2024, generate school finance problems, and more, Texas should strongly consider rejecting some or all funds.
If Texas accepts some or all the funds, the following uses should be considered:
Support Key Priorities
- $5 billion: Construction of unbuilt border wall and border security infrastructure.
- Education freedom through expanded microgrants created during COVID.
- Market-based healthcare reform through direct primary care and other options.
Reduce Future Burdens
- $7 billion: Pay off loans to the federal unemployment insurance trust fund.
- Fund Other Post-Employment Benefits (OPEB) with reforms for sustainability.
- Pay down state debt that has a high interest rate.
Make Needed Reforms Though Potentially Restricted
- $5 billion remaining: Use with other GR/RDF to buy down school M&O property taxes & business margins.
- Funds & Reform Pension: Deposit one-time contribution to ERS pension so it is funded appropriately and then do a soft freeze (new employees) to move it to a reliable account.
Provide Accountability and Transparency With Federal Funds
- No use of funds for ongoing expenses to avoid fiscal cliffs (e.g., pub ed “cuts” after ARRA).
- Place funds in separate Article from base budget like TPPF’s Conservative TX Budget
- Publish receipts and outlays of funds on Comptroller’s or LBB’s website.
- Replace GR with federal funds for only one-time items and replenish Rainy Day Fund.