As the 82nd session of the Texas legislature convened on January 11, 2011, featuring a State House of Representatives containing 101 Republicans, by far the most in history, the political class in Austin was abuzz that an expansive budget shortfall was going to make for a somber and contentious legislative session. Revenue projections had already confirmed a shortfall of at least $15 billion, as much as $27 billion to maintain present services to the State's expanded population. With the Governor and Republican leadership having pledged that there would be no tax increases, many observers predicted massive cuts in the provision of State services.

Those fears became a reality when the Chairman of the House Committee on Appropriations introduced to that body the House's "starting point" budget proposal, providing a total State budget of $156.4 billion in state and federal monies, a decrease of nearly 17 percent from the current budget. A companion Senate budget released days later was only slightly less painful, a 15.4 percent decrease from the budget of the current biennium.

Both proposals slash almost $10 billion from what is currently needed to cover funding formulas for the State's public education system which will see over 170,000 additional students entering the public school system during the next budget cycle. Local school officials in Houston have estimated that this approximate 10 percent across the board funding cut will mean a cut to the Houston Independent School District of as much as $348 million, a full 20 percent of the District's entire budget. Teacher and staff layoffs, increased class sizes, reduced busing services, and perhaps even the possibility of being forced to ask Harris County voters to approve a higher property tax rate are all possible outcomes for HISD officials.

Likewise, the University of Houston which has been so successful of late in efforts towards making itself into a "Tier One" University in Texas, is also likely to feel monetary pain from the State budget. Only weeks ago the University had reveled in the announcement by the prestigious Carnegie Foundation for the Advancement of Teaching that it was now categorized as a "research university with very high research activity," the equivalent of "Tier One" status for such an institution. Only the University of Texas and Texas A&M University enjoy that status in the State. Now, however, additional State investment in the University's efforts may be questionable under the proposed budgets, which produce cuts to UH which may reach the $100 million level. Of course, other area public institutions of higher learning will also be dramatically affected. Indeed, the State House budget proposed the elimination of State funding for four community colleges, including Brazosport Community College located near Lake Jackson.

While the budget debate will be complicated and time consuming, nearly certain to extend for the entire session and perhaps even to result in the calling by the Governor of special sessions during the summer to finally resolve all outstanding issues, it is certain that the budgetary debate will profoundly impact the economics of the City of Houston. Public education and local institutions of higher education will be immediately affected but there is also no question that expected cuts in State Medicare and Medicaid reimbursements will severely impact the health care industry in the City and the Texas Medical Center in particular. Of course, all local infrastructure projects which rely to any extent on State funding – such as the building of roads and other large expenditure facilities – will be impaired as well.

Next to the budget shortfall, immigration and border enforcement are hot topics this legislative session and legislation to be considered will have a direct impact on Houston employers and the City itself. In barely the first month of legislator bill filing, over 50 separate bills were filed on these topics, including voter identification legislation, proposals that require local enforcement of federal immigration laws and bills that prevent the state from printing documents in Spanish. Additional bills authorize law enforcement officials to inquire into the immigration status of any person under arrest and prohibit undocumented residents from bringing a claim in state court. Still others deny citizenship to children born in the United States to illegal immigrants, require school districts to determine the citizenship of enrolled students, end entitlements to illegal aliens and their children, and prevent illegal immigrants from getting professional licenses in Texas.

Hanging over any immigration law is the pending legal challenge of Arizona's controversial immigration measures. These measures have been temporarily blocked by a federal judge who deemed immigration enforcement within the federal government's jurisdiction leaving states uncertain of their authority. Texas Democrats are united in their opposition to Arizona-style immigration laws and many in the Texas business community, especially in the hospitality, agriculture and construction industries, which rely heavily on immigrant labor, also oppose certain of these immigration bills.

Notwithstanding any opposition, the Governor made good on promises during his election campaign by declaring legislation dealing with "sanctuary cities" and voter identification as emergency measures, meaning this legislation can be considered by the Legislature during the session's first 60 days. Indeed, voter identification bills became the first legislation to be considered by either house of the Legislature when brought to the Senate floor and quickly passed to the House the third week of the session.

Redistricting, the bugaboo of legislative sessions the last decade, also looms. Due to its increasing population growth, Texas will receive four additional congressional seats and it is thought by many observers that one of those seats will be a suburban Houston area seat. State Senate and State House seats are also likely to be reconfigured in the Houston area. Map drawers will be confronted with a loss of population in many Panhandle and West Texas districts, requiring district lines to tilt eastward across the state. Additionally, on the House side, with 101 Republican districts to try to protect, the Republican majority in the House will be confronted with attempting to draw as many safe Republican seats as possible while, at the same time, not running afoul of the federal Voting Rights Act which mandates that minority voting not be diluted. Thus, while they are dealing with the budget crisis and sparring over immigration reform, Legislators will be looking over their shoulders at the maps being considered for redistricting to insure the safety of their individual seats.

Even with all of these high profile issues confronting the Legislature, the business of the State will move forward and thousands of individual pieces of legislation will be considered during the 140 day session. Governor Perry has already made property rights legislation an emergency item and it is a certainty that legislation further restricting the governmental use of eminent domain will be debated during the session.

Proponents of legalized gambling in Texas were hopeful throughout the legislative interim that the State's budget woes might make the ability of the State to enhance its revenue stream through casino-style gambling more attractive, but the November election of so many Republicans from the most conservative wing of their party have stifled to some degree those proponents' hopes. Still, gambling legislation will be filed and considered during the session.

While the legislative leadership has pledged that taxes will not be raised, it is a certainty that the present tax structure in the State will be closely examined. Some sales tax exceptions may be eliminated and the Statewide franchise tax, which resulted in far less revenue than was originally anticipated, is also likely to be modified to some degree. Every legislative session is unique but the 2011 session –with an unprecedented budget crisis and extremely contentious issues directly on the surface of legislative consideration –will be one of a kind.

Author's Note
Val Perkins, with 30 years experience in representing clients before the Texas Legislature, joined the Government Affairs Group of Gardere Wynne Sewell LLP in 2010. He practices in both the firm's Houston and Austin offices..