The Texas Legislature will consider a wide variety of topics during this regular session. Public education and health care are expected to top the agenda, with a variety of other important topics, such as tax policy, corrections management, and the financing of transportation and water planning projects, expected to feature prominently in discussions. A total of 24 agencies will be under Sunset review in such areas as public and higher education, criminal justice, energy resources, and public utilities. This report highlights many, although by no means all, of the issues the 83rd Legislature may consider during its 2013 regular session.
Part One of this series, which appeared in our March issue, covered appropriations and spending, taxes and revenue, and criminal justice and public safety. Following please find the remainder of this legislative report.
Health and Human Services
Budget issues will dominate much of the discussion in health and human services. Cost containment strategies could be considered for programs such as Medicaid and the Children’s Health Insurance Program (CHIP). Lawmakers will be balancing budget pressures with maintaining state services, given population growth and inflation. State implementation of the federal health care law also will be discussed.
Federal health care reform issues. The implementation of the 2010 federal health care law, the Patient Protection and Affordable Care Act (ACA), will be an issue for the 83rd Legislature. In June 2012, the U.S. Supreme Court largely upheld the constitutionality of the ACA, including the mandate that certain individuals have health insurance. The court also upheld the law’s Medicaid expansion provisions but limited the federal government’s ability to enforce the expansion. Implementation of the law has begun, while the federal government continues to issue information and guidance to the states.
Medicaid expansion. Lawmakers may discuss whether to expand the Medicaid program beginning in 2014 to parents and childless adults under age 65 with incomes below 133 percent of the federal poverty level. In Texas, Medicaid now is generally limited to low-income children, seniors, the disabled, and pregnant women, and more than two-thirds of Texas Medicaid recipients are children. The court ruled that if a state declined the Medicaid expansion under the ACA, the federal government could not withhold all of the state’s federal matching funds for the current program. It said that the federal government is limited to withholding the matching funds for people made newly eligible under the proposed expansion.
Under the ACA, from 2014 to 2016 the federal government would cover 100 percent of the Medicaid costs of newly eligible persons. This would drop to 90 percent by 2020. States would be responsible for the administrative costs of the expansion. There is no deadline for states to decide whether and when to expand Medicaid, and states that expand the program can later reverse that decision, according to the federal Centers for Medicare and Medicaid Services (CMS).
Gov. Rick Perry said in a June 2012 letter to U.S. Secretary of Health and Human Services Kathleen Sebelius that he opposed the Medicaid expansion. If the state does not expand the statewide Medicaid program as proposed by the ACA, the possibility of counties, regions, or local hospital districts expanding Medicaid in their areas could be explored by the 83rd Legislature.
The ACA could trigger growth in the state’s current Medicaid program if, as many experts predict, individuals who currently qualify for Medicaid choose to enroll either because of enhanced outreach or because they believe they must do so as a result of the ACA’s mandate for individuals to buy health insurance. The law contains exemptions from the mandate for low-income individuals. Options for handling increased enrollment in Medicaid could include pursuing block grants of federal money.
State health care insurance exchange. The creation of a state insurance exchange, as authorized by the ACA, could be discussed by the 83rd Legislature. The exchanges are designed to be online marketplaces for individuals and small businesses to shop for health insurance by comparing plans. States may establish their own exchanges, work with the federal government to run an exchange, or contract with other states for a regional exchange. If a state does not create an exchange, the federal government will establish and operate one in the state.
The Dec. 14 deadline for states to give federal officials a letter of intent and an application to run state-based exchanges has passed without such a response from Texas. States had until Feb. 15, 2013, to apply to partner with the federal government to operate an exchange. All exchanges are supposed to begin operating Oct. 1, 2013, with coverage starting on Jan. 1, 2014.
Medicaid. State general revenue funding for Medicaid is expected to fall short in fiscal 2012-13 by about $4.7 billion from the amount estimated to be required, due in part to growth in costs and caseloads and because the Legislature did not fully fund Medicaid for the current biennium. General revenue funds for Medicaid were expected to run out in March 2013. Because Medicaid is an entitlement program that must cover all qualifying individuals, the 83rd Legislature will have to fund any shortfall with a supplemental appropriation in 2013. Lawmakers may discuss whether funds for the shortfall should come from general revenue or the state’s Rainy Day Fund.
Lawmakers also may debate the rate the state should pay Medicaid providers. After cutting rates in fiscal 2010-11 and 2012-13, lawmakers may consider changing these rates. Proposals may include the restoration of payments for patients who are eligible for both Medicare and Medicaid, known as the “Medicare Equalization” cut.
The 82nd Legislature expanded Medicaid managed care to all areas of the state, but the program does not include all populations. The 83rd Legislature could discuss including populations such as children with disabilities and nursing home residents in the managed care program. Another proposal could shift mental health services for Medicaid patients into managed care.
Lawmakers may examine the reimbursement arrangement for pharmacies filling prescriptions for the more than 3 million Medicaid participants. In March 2012, the state shifted the Medicaid vendor drug program into a managed care model, with Medicaid prescription drug benefits being administered by pharmacy benefit managers acting as subcontractors for managed care organizations. The reimbursement rates set by the pharmacy benefit managers and their impact on pharmacies’ finances and on patient access could be discussed.
Proposals may emerge to pursue greater flexibility in the Medicaid program, including the ability to tailor benefits and to implement nominal copayments.
Medicaid cost containment may continue to be an issue this session. Legislators may consider ways to reduce Medicaid fraud, waste, and abuse, as well as expenditures related to medical transportation, orthodontia treatment, and therapies.
Hospital funding. Hospital funding also could be discussed by the 83rd Legislature. The expansion of Medicaid managed care as authorized by the 82nd Legislature and federal approval of Texas’ Medicaid “1115 Transformation Waiver” have affected funding streams for Texas hospitals. Legislative committees have been discussing these funding streams, including the former Upper Payment Limit (UPL) program and the Disproportionate Share (DSH) payment program.
The UPL program provided supplemental payments to hospitals to make up for low Medicaid reimbursement rates. In general, the payments were based on the difference between Medicaid rates and the usually higher Medicare rates for the same services, but could be based on other factors such as actual charges. Historically, state-owned or local governmental entities, mostly public hospitals, contributed the non-federal share to the state through intergovernmental transfers that were then used to draw down federal funds for the UPL program. In fiscal 2011, UPL payments to hospitals were about $2.8 billion.
With the 1115 Transformation Waiver, the UPL has been eliminated and historic UPL funds and new funds are being distributed to hospitals and other providers through two new funding streams: the Uncompensated Care pool and the Delivery System Reform Incentive Payments pool. Payments from these funding streams are calculated differently than the payments they replaced. Legislators could discuss whether the system of intergovernmental transfers will continue and whether state regulations should be put in place if it does.
DSH funding goes to hospitals that serve a disproportionately large number of Medicaid and low-income patients. Texas’ large public hospitals provide intergovernmental transfers of funds that are used to draw down federal funds for the program. It is unclear to what extent the large public hospitals will continue to contribute to DSH, which distributed about $1.6 billion to hospitals in fiscal 2012. Other ways to fund the program, including with general revenue, could be proposed.
Women’s Health Program. Issues related to the Texas Medicaid Women’s Health Program (WHP), which provides family planning services and related health screenings for low-income women, will be raised during the regular session of the 83rd Legislature. Discussions could include how to fund the program and at what level, whom it will serve, and who will provide services.
WHP is available to women whose income and family size places them at or below 185 percent of federal poverty guidelines (the level at which they would be eligible for Medicaid if they were pregnant). In fiscal 2011, the program served some 115,000 women with a total budget of about $40 million. The state traditionally has provided 10 percent of the funding and the federal government 90 percent.
In 2011, during the first called session, the 82nd Legislature enacted SB 7 by Nelson, which required the Health and Human Services Commission (HHSC) to ensure that state money for the WHP or a successor program not be used to contract with entities or affiliated organizations that perform or promote abortions. After rules developed under the bill barred Planned Parenthood from participating in the program, several Planned Parenthood associations filed court challenges.
In November, a Travis County district court issued a temporary injunction allowing Planned Parenthood to continue to participate in the WHP. The state appealed the injunction, saying that it plans to continue the program, with Planned Parenthood participating, until federal money runs out or final court action. The Texas program, which the state had planned to start operating on Nov. 1 using only state funds, is ready to begin at any time, according to HHSC.
The federal government has told the state that the rule banning Planned Parenthood is inconsistent with federal law and that it would stop funding the program Dec. 31, 2012, if Texas continued to restrict women’s choice of family planning providers. In December, two additional lawsuits – one in state court and one in federal court – were filed in efforts to keep Planned Parenthood in the WHP program.
Abortion. Lawmakers could seek to define at what stage of development a fetus can feel pain and propose legislation banning some mid-term abortions. Some other states have enacted fetal pain laws to ban abortions after 20 weeks. Proposals also may emerge to increase regulations on facilities that perform abortions and on physicians dispensing abortion-inducing drugs.
Drug testing and work requirements. Legislators may consider new requirements, including drug testing, for recipients of Temporary Assistance for Needy Families (TANF) benefits. Under these proposals, applicants who test positive for controlled substances not prescribed by a physician could be denied benefits. Lawmakers also may discuss strengthening work and job training requirements and additional ways to ensure that benefits are not used for tobacco, alcohol, lottery tickets, or firearms. In October 2012, about 101,000 single-parent families received an average of $174 monthly in TANF benefits, and about 4,000 two-parent families received an average of $298 in monthly payments.
Health care workforce. The size, composition, and role of Texas’ health care workforce could be discussed by the 83rd Legislature. Topics could include how to ensure adequate numbers of health care professionals are educated in Texas and working in all parts of the state and whether to expand the scope of practice for health professionals such as physician assistants and advanced practice nurses.
Privatization of state hospitals. The 83rd Legislature could consider whether to privatize state mental health hospitals. In 2011, the Legislature directed the Department of State Health Services (DSHS) to develop a request for proposal to privatize one state hospital and to present a plan on privatization to the LBB and the governor. An approved privatization contract had to result in savings of at least 10 percent annually over at least a four-year period. In October 2012, DSHS announced that it could not recommend contracting with the one applicant that responded to the state’s request for proposal. GEO Care had proposed privatizing Kerrville State Hospital, but DSHS Commissioner David Lakey said the savings in the proposal would come mainly from staffing and benefit reductions that would put patients and the state at risk.
Foster care redesign. An ongoing redesign of the state’s foster care system that began in 2010 could be evaluated this session. The redesign is changing how the state obtains, contracts, and pays for services for about 28,000 children under state supervision. Under the changes, the state will outsource the provision of services to private contractors who will focus on foster children in certain geographical regions. The Texas Department of Family and Protective Services (DFPS) expected to sign a contract in January for foster care in parts of West Texas, with the first children being referred to the contractor in July. DFPS has put on hold awarding contracts in other areas. Debate over the redesign could include whether private contractors will be adequately monitored and how they can be held accountable for children under their care.
State-supported living facilities. State-supported living centers, formerly called state schools, are state-run facilities that provide residential care and treatment for people with cognitive or developmental disabilities. In 2009, the Legislature made major revisions to these facilities in response to allegations and incidents of abuse and neglect within them that had prompted investigation by the U.S. Department of Justice (DOJ). Implementation of a settlement agreement reached with the DOJ could be discussed, as could the long-term structure and size of the state system, including downsizing or privatization. Proposals may emerge to move residents into community care settings or to provide services in the community, as well as to develop ways to recruit and retain staff.
Public Education
Lawmakers will be monitoring the latest court case on school funding as they consider policies for 
educating the state’s 5 million school children. A decision by the district court judge hearing the lawsuit, expected in early 2013, could affect the discussion, although that ruling is likely to be appealed to the Texas Supreme Court. In addition, the state’s newest testing requirements and school discipline practices could be reviewed. The Legislature also may consider proposals to expand school choice, including the use of vouchers to pay private school tuition for some Texas students. The Texas Education Agency (TEA) will undergo Sunset review this session.
School finance. Depending on the outcome and timing of ongoing state court litigation, the Legislature may consider altering how Texas public schools are funded.
Plaintiffs in lawsuits against the state argue that:
the Legislature has underfunded public schools to the point that the education offered is no longer constitutionally adequate;
the current funding systems redistribute funds in a non-equitable way; and
school districts no longer have meaningful discretion in setting local tax rates because so many are taxing at the maximum rate allowed under state law, which some say has resulted in an unconstitutional statewide property tax.
Proposals could include replacing the current system-funded largely through the collection, recapture, and redistribution of local property tax revenue-with a statewide property tax, authorized through a constitutional amendment approved by voters.
In addition, lawmakers may propose tapping the Rainy Day Fund or using other newly available revenue to restore state funding for public education, which the 82nd Legislature cut by $5.4 billion for fiscal 2012-13. Similar proposals may seek to fund voluntary full-day pre-kindergarten programs by the same means.
Public school accountability and test security. Lawmakers may consider altering or removing the requirement that students’ end-of-course exam scores account for 15 percent of their final course grade. They also could discuss scaling back the newest state-mandated testing requirements under the State of Texas Assessments of Academic Readiness (STAAR) program. In addition, lawmakers may consider revising the high school curriculum to allow more career and technical classes to count toward graduation requirements.
TEA is revising the state’s public school accountability rating system, which will be based on STAAR results and other performance indicators. Lawmakers may propose changes to the system, including assigning a letter grade annually to schools and districts ranging from “A” to “F” in place of the current performance labels.
Legislators could debate measures to enhance protections for public school district employees who report wrongdoing in the administration of state-mandated tests and expand TEA’s authority to investigate complaints of inaccurate or fraudulent assessment data reported to the state.
School choice and vouchers. The 83rd Legislature may consider introducing school vouchers, including using public money to pay private school tuition for some Texas school children. Such a program could be targeted to low-income or special-needs students or those who attend low-performing schools. A related issue for debate could be providing tax credits for businesses that contribute scholarships for certain students to attend qualifying private schools. Proposals may impose state testing and accountability requirements on private schools receiving public money.
Lawmakers may consider proposals to expand open enrollment policies within and between school districts, which could make it easier for a student to attend a school other than the one assigned by the district based on where the student lives.
Charter schools. The Legislature may consider proposals to raise the cap on the total number of charter schools allowed to operate in Texas. A group of charter schools is a party in the ongoing school finance lawsuit, arguing they should be eligible to receive state funding assistance for facilities construction. Lawmakers could discuss a funding mechanism to help charter schools improve and construct facilities.
School security. Proposals may emerge to increase security at Texas public schools in the aftermath of December’s elementary school shooting in Newtown, Conn. While Penal Code sec. 46.03(1) prohibits individuals from taking firearms onto the premises of schools and educational institutions, districts may permit exceptions through written regulations or authorizations. Proposals may include allowing certain school personnel or school board members statewide to possess guns on district property or allowing weapons at schools by removing restrictions on where concealed handgun licensees may carry them.
Lawmakers also may consider creating penalties for school districts that fail to enact required school safety plans.
Religious displays at public schools. Members may debate proposals to allow school districts to display copies of the Ten Commandments in classrooms. Other debate may center on the rights of students to display religious messages, including Bible verses, at public school events.
School discipline. Legislators may discuss discipline practices in Texas schools. Current law allowing, and in some cases requiring, student suspensions and expulsions and the use of alternative education programs could be debated. Proposals to encourage alternative ways of disciplining students to keep them in school, rather than suspend or expel them, may be considered.
Lawmakers may discuss whether to limit the ability of police officers to issue class C misdemeanor tickets to students for violating rules and for relatively minor disciplinary infractions, such as disorderly conduct. Other proposals may emerge to allow deferred prosecution of these tickets or to allow the tickets and violations to be handled informally.
Uniform school start date. Proposals may emerge to repeal the state law that prohibits most school districts from beginning the school year earlier than the fourth Monday in August. Debate on this issue will likely weigh cost savings to school districts and increased economic activity associated with a later start date against local autonomy and the need of districts to begin classes earlier to prepare students to meet state-mandated testing requirements.
Texas Education Agency Sunset review. TEA will undergo Sunset review this session. Sunset staff have recommended several changes that the Legislature may consider. Proposals include:
transferring adult education funds oversight from TEA to the Texas Workforce Commission;
transferring regulation of the private driver training industry to the Texas Department of Licensing and Regulation;
granting TEA greater authority to merge insolvent school districts;
granting TEA greater authority over low-performing charter schools;
implementing a ban on nepotism hires at charter schools; and
abolishing the State Board for Educator Certification and transferring its powers and duties to the commissioner of education.
In addition, lawmakers may debate whether the State Board of Education should be subject to periodic Sunset review.
Transportation
The state’s growing population and aging transportation infrastructure may spur proposals to finance repairs and maintenance of existing state roads and bridges, as well as proposals to finance new highway projects and a statewide rail system. In addition, lawmakers may explore ways for state and local authorities to recoup the costs for damages to roads associated with significant oil and gas production. Other proposals may seek to increase enforcement for driving on toll roads without payment and focus on ways to curb unsafe driving.
Highway finance. Proposals may emerge to secure revenue for state roads and bridges in light of the fact that the state transportation program must rely more heavily on fuel tax and registration revenues as a temporary spike from bond funds and toll projects comes to an end. One proposal might reduce diversions of motor fuels tax revenue (Fund 6) for purposes other than building and maintaining roadways. This could include providing alternative funding for the Department of Public Safety (DPS), which received about $1.3 billion in Fund 6 revenue in fiscal 2012-13.
Lawmakers could consider how to increase revenue to Fund 6, including proposing a constitutional amendment to approve an increase in the 20-cent-per-gallon tax on gasoline and diesel fuel to pay off debt service for previously issued highway bonds. Another constitutional amendment that may be proposed would dedicate the sales tax on new and used vehicle purchases to expanding and maintaining the state highway system and to paying off transportation-related debt.
Allowing local-option elections on local increases in the motor fuels tax, with the revenue going to fund local highway improvements, also could be proposed. Lawmakers may consider authorizing an additional sales tax for transit or allowing more counties to impose vehicle-related fees, such as registration fees, within their jurisdictions.
Proposals to fund highway projects could include enabling local entities to establish transportation finance zones by means other than tolling agreements with the Texas Department of Transportation (TxDOT), the method to which they currently are limited.
Lawmakers may consider giving TxDOT public-private partnership authority to help fund a new statewide rail system and to fund repairs and maintenance work on roadways. They also may consider using money from the Rainy Day Fund to create a transportation infrastructure development bank.
Damage to roads from increased oil and gas production. Lawmakers may offer proposals for state and local authorities to recoup the costs for damages to roads associated with the significant oil and gas production in the Permian Basin, Eagle Ford Shale, and Barnett Shale areas, including involving industry in the repairs and maintenance. One proposal could require that a portion of the state oil severance tax, which goes directly to the Rainy Day Fund and the Permanent School Fund, be allocated to the counties or cities where the oil was produced to improve and repair the roads. Another proposal may include adjusting the fee structure for oversized and overweight vehicles.
Unsafe driving. Lawmakers may consider legislation to reduce distracted driving, including behaviors such as using cell phones and text messaging behind the wheel. Proposals could include punishing such behavior with a criminal or civil penalty.
Lawmakers may debate the merits of the Driver Responsibility Program, which was established to discourage unsafe driving and to raise revenue for the state by levying annual surcharges on drivers who violate certain laws. Under the program, drivers whose traffic violations resulted in six or more points on their driving records are required to pay a surcharge in addition to fines and court fees already associated with each offense. Some who were convicted for the first time of certain traffic offenses, such as DWI, driving without insurance, or driving with an invalid license, are subject to the same penalty. Nonpayment of a surcharge results in the suspension of a driver’s license. Some lawmakers may seek to repeal the program due to concerns about its fairness or effectiveness in keeping unsafe drivers off the road.
Toll scofflaws. Lawmakers may propose more stringent enforcement tools to pursue motorists who drive on Texas toll roads without paying for their use. Proposals may include blocking serial toll violators from registering motor vehicles until they settle delinquent toll accounts.
Government Organization
As a result of court rulings on redistricting maps and the voter identification law enacted in 2011, the 83rd Legislature may revisit those issues. Other subjects for possible discussion could include changes to state employee retirement and health benefit plans. In addition, the Texas Ethics Commission will undergo Sunset review in 2013.
Elections. The 83rd Legislature may consider proposals to amend the law requiring all voters to present government-issued photo identification at polling places before being permitted to vote. A law enacted by the 82nd Legislature that included such a requirement was blocked by a panel of federal judges who said the new restrictions would place an unfair burden on Latinos, racial minorities, and the economically disadvantaged and would have retrogressive effects.
Proposals to amend the law could include waiving photo ID fees for low-income Texans, expanding or increasing the types of photo IDs that would be acceptable at a polling station, and increasing the hours and days DPS offices are open to allow more access for potential voters to secure the necessary identification, especially for those who would have to travel to a different county to visit a DPS office.
Lawmakers also may propose legislation to change how a residence address for voter registration purposes is defined and to place restrictions on the use of mobile voting stations. Proposals also may emerge to eliminate the practice of straight-party voting, specifically in elections for judicial offices.
Redistricting. Lawmakers may revisit the state legislative and congressional maps drawn by the 82nd Legislature and various courts to address issues identified during ongoing court challenges to the maps.
State employee retirement. Lawmakers may consider proposals to address long-term issues identified by the Employees Retirement System. Proposals could include shoring up the system with more state or employee contributions, reducing retirement benefits, or replacing the current defined benefit plan with a defined contribution plan or a hybrid system.
State employee health benefits. Proposals to address the rising cost of employee health benefits may include those to require employees to cover 10 percent of the cost of insurance or to impose or increase deductibles and copays, as well as other cost-shifting methods.
Government efficiency. Eliminating some state agency rules and procedures related to occupational licensing programs could be a topic for lawmakers. Texas licenses about 500 occupations, and legislators may consider whether regulations are necessary to protect public health and safety. The use of a state website instead of local newspaper ads for government public notices also could be discussed.
Texas Ethics Commission Sunset review. The Texas Ethics Commission will undergo Sunset review in 2013. The Legislature may examine the agency’s ethics enforcement process, information and technology management, and filing requirements.
Judiciary
Tort reform and proposals that emerge from the Sunset review of State Commission on Judicial Conduct are expected to feature prominently in lawmakers’ discussions.
Tort reform. The Legislature may consider proposals to prevent judges from recognizing causes of action and other rights and remedies unless they are created explicitly by statute. Proposals also may emerge to shift burdens of evidence in medical malpractice and asbestos litigation.
State Commission on Judicial Conduct Sunset review. The State Commission on Judicial Conduct will undergo Sunset review in 2013. The Legislature may consider proposals to:
constitutionally authorize the commission to use its full range of sanctions at the conclusion of formal proceedings;
allow a court of review to hear appeals of commission sanctions in the same manner as it hears appeals of commission censures; and
require the commission to report to the Supreme Court as needed on suggested changes to update its procedural rules.
This excerpt was reprinted with permission from the House Research Organization, a nonpartisan department of the Texas House of Representatives that examines state issues and analyzes legislation being considered by the Texas Legislature. To view the online report, go to: http://www.hro.house.state.tx.us/pdf/focus/Topics83-1.pdf