Texas State Government and Long-Term Obligations Introduction

The Texas economy is more broad-based than it was 30 years ago, when it relied much more heavily on the oil and gas sector, and thus is much more resilient in the face of periodic economic downturns. Even so, Texas state government faces certain significant, long-term financial challenges.

As the 2017 legislative session crafts the next state budget under tight financial constraints, policymakers should remain aware of these lingering long-term obligations, which could damage the state’s credit rating and limit the amount of revenue available for general spending.

In December 2016, Comptroller Glenn Hegar identified four such obligations in a letter to state leaders:

• state employee pension funding;
• health care coverage for public school teachers and employees (TRS-Care);
• the Texas Guaranteed Tuition Fund, a state-sponsored tuition savings plan; and
• deferred maintenance for state buildings.

These obligations differ in size, scope and urgency, but the potential consequences are similar: the longer the state waits to address them, the greater their ultimate costs will be. This report examines these obligations as well as policy options that could mitigate their effect on state finances.