The third called special session of the Texas legislature will officially conclude tomorrow with only two items on the Governor’s call passing:

• PASSED as Senate Bill 7 - Consider and act upon legislation prohibiting COVID-19 vaccine mandates by private employers.

• PASSED as Senate Bill 4 - Consider and act upon legislation to impede illegal entry into Texas by increasing the penalties for certain criminal conduct involving the smuggling of persons or the operation of a stash house.

• DID NOT PASS - Consider and act upon legislation relating to primary and secondary education, including the establishment of an education savings account program, the certification, compensation, and health coverage of certain public school employees, the public school finance system, special education in public schools, measures to support the education of public school students that include certain educational grant programs, reading instruction, and early childhood education, the provision of virtual education, and public school accountability. Legislation related to school safety measures and related state funding mechanisms.

• DID NOT PASS - Consider and act upon legislation to do more to reduce illegal immigration by creating a criminal offense for illegal entry into this state from a foreign nation and authorizing all licensed peace officers to remove illegal immigrants from Texas.

• DID NOT PASS - Consider and act upon legislation to do more to reduce illegal immigration by creating criminal offenses for illegal entry into this state from a foreign nation and illegal reentry or presence following denial of admission, exclusion, deportation, or removal; authorizing all licensed peace officers to remove illegal immigrants from Texas; and providing indemnification of public officials, employees, or contractors in connection with the foregoing.

• DID NOT PASS – Consider and act upon legislation to impede illegal entry into Texas by providing more funding for the construction, operation, and maintenance of border barrier infrastructure.

• DID NOT PASS - Consider and act upon legislation concerning public safety, security, environmental quality, and property ownership in areas like the Colony Ridge development in Liberty County, Texas.

Once it was clear this weekend there would be no deal between the House and Senate on most items on the Governor’s call, the Lt. Governor and Speaker began to trade barbs in social media and through press releases.

Last night, Speaker Phelan issued the following statement after the Texas Senate refused to act on the House’s border security bill, House Bill 4:

“The Texas Senate's decision to convene without passing House Bill 4, the strongest border security legislation ever passed by the Texas House, is extremely disappointing. HB 4 put forth a comprehensive and robust plan to better secure the Texas border and was widely supported by those who know the issue best: our local officials and border law enforcement who stand on the front lines of this crisis every single day. The security of the border and the safety of Texans is far too important to be caught up in the Senate’s gears of political machinations. This bill was a priority of Governor Abbott’s, and the House met that priority with decisive action. We did our part, and when the fourth called special session convenes, we will do so again. It is time for the Senate to fulfill its responsibility to the people of Texas — we cannot afford to wait any longer."

This morning, Lt. Governor Patrick released the following statement under the headline “Phelan Fails to Deliver Again”:

“The Texas House, under the failed leadership of Dade Phelan, has again failed to advance meaningful legislation to secure the Texas border. The Texas Senate has repeatedly passed tough, no-nonsense border security bills to the House, SB 6 and SB 11, which were never given a vote in committee or on the House floor.

SB 1 (school choice) and SB 2 (teacher pay raises) never even received a House committee hearing or a vote on the House floor. Speaker Phelan, beholden only to the Democrats who put him in office and maintain his position, has refused to admit that border security is a priority for every Texan. Human trafficking, drug trafficking, and cartel activity threaten public safety every day.

Real leaders in Texas demand substantial legislative action, not small-minded hyperbole. Phelan’s tough talk after another failed special session is nothing but a fig leaf to cover up two regular sessions and six special sessions of lackluster leadership and an utter failure to deliver what Texans demand from their Legislature.

The Texas Senate will return for the fourth special session, caused by Dade Phelan’s failures, to again advance serious legislation to address the concerns of the conservative majority of Texans – and wait for the Texas House to join the effort.”

The Governor previously stated that if a school choice proposal didn’t pass during the third called special session, he’ll call more special sessions to pass such a proposal and said, “if that doesn’t work, it’s time to make it an issue in primaries.”

We will alert you once the Governor makes his plans for a fourth called special session official.

Tomorrow (Nov. 7^th) is Election Day for Texas’ Constitutional Amendment Election

Friendly reminder that tomorrow is election day regarding 14 amendments to the Texas Constitution:

Proposition 1 – HJR 126 "The constitutional amendment protecting the right to engage in farming, ranching, timber production, horticulture, and wildlife management."

Proposition 2 – SJR 64 "The constitutional amendment authorizing a local option exemption from ad valorem taxation by a county or municipality of all or part of the appraised value of real property used to operate a child-care facility."

Proposition 3 – HJR 132 "The constitutional amendment prohibiting the imposition of an individual wealth or net worth tax, including a tax on the difference between the assets and liabilities of an individual or family."

Proposition 4 – HJR 2 (from the second special session) "The constitutional amendment to authorize the legislature to establish a temporary limit on the maximum appraised value of real property other than a residence homestead for ad valorem tax purposes; to increase the amount of the exemption from ad valorem taxation by a school district applicable to residence homesteads from $40,000 to $100,000; to adjust the amount of the limitation on school district ad valorem taxes imposed on the residence homesteads of the elderly or disabled to reflect increases in certain exemption amounts; to except certain appropriations to pay for ad valorem tax relief from the constitutional limitation on the rate of growth of appropriations; and to authorize the legislature to provide for a four-year term of office for a member of the board of directors of certain appraisal districts."

Note: In the General Appropriations Act for the state fiscal biennium beginning September 1, 2023, the legislature appropriated a total of $17.6 billion for school district property tax relief, of which nearly $12.3 billion is contingent on voter approval of this constitutional amendment excepting these amounts from the spending limit.

Proposition 5 – HJR 3 "The constitutional amendment relating to the Texas University Fund, which provides funding to certain institutions of higher education to achieve national prominence as major research universities and drive the state economy." Note: The proposed amendment provides for a dedicated source of revenue for the Texas University Fund from the interest income, dividends, and investment earnings attributable to the state’s economic stabilization fund (“rainy day fund”), not to exceed $100 million per state fiscal year, as adjusted for inflation up to two percent per state fiscal year after the 2024 state fiscal year.

Proposition 6 – SJR 75 "The constitutional amendment creating the Texas water fund to assist in financing water projects in this state." Note: If the constitutional amendment is approved, $1 billion in appropriations from the state’s

general revenue fund will be deposited to the Texas water fund.

Proposition 7 – SJR 93 "The constitutional amendment providing for the creation of the Texas energy fund to support the construction, maintenance, modernization, and operation of electric generating facilities." Note: If this amendment is approved by the voters, the legislature has provided initial funding of $5 billion and enacted enabling legislation to begin providing loans and grants from the fund.

Proposition 8 – HJR 125 "The constitutional amendment creating the broadband infrastructure fund to expand high-speed broadband access and assist in the financing of connectivity projects." Note: The legislature has appropriated $1.5 billion to the proposed fund contingent on voter approval of the proposed amendment.

Proposition 9 – HJR 2, regular session "The constitutional amendment authorizing the 88th Legislature to provide a cost-of-living adjustment to certain annuitants of the Teacher Retirement System of Texas." Note: The legislature has appropriated $3.355 billion to fund the cost-of-living adjustment contingent on voter approval of the proposed amendment.

Proposition 10 – SJR 87 "The constitutional amendment to authorize the legislature to exempt from ad valorem taxation equipment or inventory held by a manufacturer of medical or biomedical products to protect the Texas healthcare network and strengthen our medical supply chain."

Proposition 11 – SJR 32 "The constitutional amendment authorizing the legislature to permit conservation and reclamation districts in El Paso County to issue bonds supported by ad valorem taxes to fund the development and maintenance of parks and recreational facilities."

Proposition 12 – HJR 134 "The constitutional amendment providing for the abolition of the office of county treasurer in Galveston County."

Proposition 13 – HJR 107 "The constitutional amendment to increase the mandatory age of retirement for state justices and judges."

Proposition 14 – SJR 74 "The constitutional amendment providing for the creation of the centennial parks conservation fund to be used for the creation and improvement of state parks." Note: The 2023 General Appropriations Act appropriates $1 billion to the Parks and Wildlife Department for the centennial parks conservation fund for the state fiscal year ending August 1, 2024, contingent on voter approval of this constitutional amendment.

Texas Legislative Council Analyses of Proposed Constitutional Amendments for the November 7, 2023, election.

There is also a special election being held November 7 for Texas House District 2 to replace former Rep. Bryan Slaton who was expelled from the Texas House earlier this year.

State Revenue Outlook

Texas Comptroller Glenn Hegar said state sales tax revenue totaled $3.81 billion in October, down 0.3 percent from October 2022. The majority of October sales tax revenue is based on sales made in September and remitted to the agency in October.

“For the first time in 31 months following the end of pandemic restrictions, monthly state sales tax collections failed to grow on an annual basis,” Hegar said. “October sales tax collections are in line with our recent Certification Revenue Estimate, which predicted slower economic growth in the months ahead. Contributing to the year-over-year decline was erratic refund activity this month, as well as notable declines in receipts from some sectors which could indicate a slowing economy.

“Receipts from the larger business spending-driven sectors — manufacturing and wholesale trade — declined significantly from a year ago, and receipts from the construction sector barely surpassed the previous year. This could be due to declines in business input prices, but it could also indicate slowing production. Receipts from the oil and gas mining sector continued to exceed those of the previous year.

“Among consumer-dependent retail trade sectors, receipts from home improvement centers and furniture stores dropped sharply from a year ago. Receipts from electronics and appliance stores, big-box general merchandisers, department stores and clothing stores were also down significantly. Receipts from online merchants and gasoline stations were up slightly, but at less than the rate of general price inflation. Declines in retail sales from a year ago may reflect numerous factors, including reallocation of household budgets away from goods to services and to higher debt-service costs, falling prices for some categories of goods such as electronics and depletion of excess savings that households had accumulated during the pandemic.

“Receipts from restaurants grew only modestly and at less than the rate of inflation for food away from home. But spending for live entertainment continued to boom, spurring double-digit growth in receipts from music, arts and sporting events.”

Total sales tax revenue for the three months ending in October 2023 was up 2.7 percent compared with the same period a year ago. Sales tax is the largest source of state funding for the state budget, accounting for 57 percent of all tax collections.

Texas collected the following revenue from other major taxes:

• motor vehicle sales and rental taxes — $606 million, up 3 percent from October 2022.
• motor fuel taxes — $316 million, up 1 percent from October 2022.
• oil production tax — $586 million, up 8 percent from October 2022.
• natural gas production tax — $192 million, down 53 percent from October 2022.
• hotel occupancy tax — $67 million, up 2 percent from October 2022; and,
• alcoholic beverages taxes — $154 million, up 2 percent from October 2022.

TDLR Executive Director Resigns

Mike Arismendez, Executive Director of the Texas Department of Licensing and Regulation (TDLR) resigned last week. Arismendez has served as TDLR’s executive director since last year and TDLR did not give a reason for the resignation.

Christina Kaiser, TDLR Senior Deputy Executive Director, has been temporarily designated as Acting Executive Director of the agency which manages 38 license programs.

Campaign News

• Following Congresswoman Kay Granger’s retirement announcement, State Rep. Rep. Craig Goldman announced he will run for Congress to replace Granger.

• Rep. Rhetta Bowers who previously announced her plans to run for Congress has instead decided to seek re-election to the Texas House.

• Former Harris County GOP Chairman Jared Woodfill announced a challenge to Rep. Lacey Hull and also said in his announcement that should he win that he intends to run for Speaker of the Texas House.

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