TO:	Honorable Greg Bonnen, Chair, Senate Committee on Appropriations
FROM:	Jerry McGinty, Director, Legislative Budget Board
IN RE:	SB1 by Nelson (General Appropriations Bill.), As Engrossed

Senate Bill 1, As Engrossed, (SB 1) would appropriate $164,039.0 million from state funds during the 2022-23 biennium.  This represents a decrease of $1,319.4 million, or 0.8 percent, from the 2020-21 estimated/budgeted level.

As required under House Rule 4, Section 34 (a-1), the Legislative Budget Board has analyzed the dynamic economic impact of the bill. The effects on employment, personal income, GSP, and other economic variables, assuming appropriation changes under SB 1 were analyzed using the REMI Tax-PI model, a dynamic forecasting and policy analysis tool that applies a combination of econometric, input-output, and computable general equilibrium methodologies.
 
The analysis estimated the predicted impact on the number of state employees and the impact on employment by the private sector and local governments in Texas as a result of the changes in state expenditures resulting from the 2022-23 appropriation levels in SB 1 relative to a baseline scenario where 2022-23 state expenditures were held constant at 2020-21 estimated/budgeted levels. Adjustments were made to the state funding reduction entered into the model to account for the fact that a reduction in appropriations is not necessarily an equal reduction in state expenditures.  For instance, the Medicaid expenditures to cover projected caseload growth are included in the spending number to reflect the fact that Medicaid is an entitlement program and the expenditure will occur regardless of appropriations.  After adjustments, the 2022-23 level of state expenditures resulting from SB1 analyzed in the model were $166,039.0 million.
 
It is important to note that the numbers are not all new jobs; rather they are changes in employment levels relative to the baseline scenario where state government expenditures remained constant at previously adopted 2020-21 levels.  Further, note that the employment concept used in the analysis is non-farm payroll employment calculated using source data from the U.S. Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS), and differs from state FTE levels used in the General Appropriations Bill.  For instance, two halftime workers would be counted as 1 FTE in the GAB, but two jobs in the REMI employment data.  The state expenditures in the 2022-23 biennium are expected to increase private sector employment levels by 5,268, or 0.03 percent, during the 2022-23 biennium relative to the baseline scenario, while simultaneously increasing local government employment by 3,120, or 0.24 percent, and state government employment by 889, or 0.24 percent, during the 2022-23 biennium relative to the baseline scenario where government spending remained constant at previously adopted 2020-21 levels.