Enlarge Illustration by Todd Wiseman

Texas House Speaker Joe Straus on Tuesday wrote of  “challenges on the horizon that will require significant resources from the state,” in a letter to his chamber’s budget writers that served as something as a sober-faced pep talk.

“Texas is fortunate to enjoy an economy that is, overall, performing ahead of most states, and, in many regards, the nation as a whole,” the San Antonio Republican wrote in a letter that state Rep. John Otto, R-Dayton, read aloud ahead at the beginning of a wide-ranging hearing of the Appropriations committee, which he chairs.

But Straus laid out a host of tough issues lawmakers must consider as they begin discussing the next budget: Plunging oil prices slowing revenues and the economy, a foster system in crisis that courts may require Texas to fix, a potentially costly ruling in long-winding school finance suit and the need for a long-term solution to fund health care for retiring teachers.

At Tuesday's hearing, committee members seemed to have more questions than concrete answers. They heard testimony from a several folks tracking the economy and revenue outlook, including Comptroller Glenn Hegar and Ursula Parks, director of the Legislative Budget Board.

The state's budget surplus sits at a projected $4.1 billion, Parks said, but only around $600 million is revenue that’s not tied to specific programs, suggesting that lawmakers have limited wiggle room next session.

Otto called for his colleagues to resist the urge to tap dedicated funds to pay for other needs.

*****

State Rep. Larry Gonzales, R-Round Rock, will lead the Sunset Commission, Speaker Straus announced late Monday.

Straus also appointed state Reps. Dan Flynn, R-Van, and Senfronia Thompson, D-Houston, to the Commission, along with William Meadows of Fort Worth as the House’s public appointee. In December, Lt. Gov. Dan Patrick raised eyebrows by tapping conservative firebrand Allen West as a public member to the commission.

The Sunset Commission is tasked with periodically reviewing the operation and efficiency of different state agencies. The Commission is reviewing more than a dozen agencies ahead of the 2017 session, including the Department of Transportation and the Texas Medical Board.

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Compared to other big states, Texas is best prepared to weather a recession — if one should arise, Moody’s Investors Service says in a report released Thursday.

The credit ratings agency put Texas, California, Florida and New York through a “fiscal stress test” and concluded that the Lone Star State came out on top.  

Among the findings that may leave Texas leaders slapping each other’s backs:

• Texas has “moderate” revenue volatility — even with risks related to oil prices;
• Texas has the healthiest cash reserves among the state;
• Texas finances are most flexible, meaning it can make some spending cuts without a broad legislative vote.

California fared worst among the big states.

The report also includes an index that compares conditions among the 20 most populous states. Of that larger group, Texas joined Missouri and Washington as most prepared.

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Despite woes in drilling country, the Texas economy has grown over the past year — albeit slower than before oil prices plunged.

The state added about 185,000 seasonally adjusted jobs over the past year, the Texas Workforce Commission announced Friday. Texas actually lost about 12,000 jobs in March estimate, but that followed 11 straight months of gains.

Meanwhile, the state’s seasonally adjusted unemployment rate of 4.3 percent stayed unchanged between February and March, hovering well below the national average of 5.0 percent, the commission said.

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The Teacher Retirement System of Texas now has a footprint in foggy London, a key player in the global financial market.

Seeking to “get boots on the ground” and circumvent fees from outside money managers, the state’s largest public pension system opened a London office in November.

“We’ve already generated a couple of deals, as a result of having folks there, that we believe will save us significantly on those fees,” Brian Guthrie, the ​agency's executive director, told the Senate Committee on State Affairs at a hearing Wednesday.

Lawmakers at the hearing expressed concerns that the state paid outside companies managing some of the system’s wealth $181 million in fees despite their investments having dropped in value last year.

Enlarge Bob Daemmrich

New state GOP Chairman Tom Mechler.

Texas GOP Chairman Tom Mechler has tapped the state party's parliamentarian to lead the committee that will select nearly a third of the 155 delegates the Lone Star State is sending to the Republican National Convention.

Lou "Butch" Davis will helm the National Nominations Committee, according to a list of state convention committee appointments shared with the Tribune on Saturday. When the panel meets at the state GOP convention in Dallas, which is being held May 12-14, the committee will pick 44 at-large delegates to the national convention, which are divided between Texas Sen. Ted Cruz and billionaire Donald Trump, based on the results of the March 1 primary.

*****

The Cruz campaign released a new web ad on Thursday. Entitled, “War Room,” it imagines a strategy session of Hillary Clinton and her advisors in which they discuss how they would attack Donald Trump in the November general election before coming to a realization that there’s one candidate out there they can’t stop… well, you can probably guess who.

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Campaign finance reports began coming in Wednesday in the presidential race. Here are some quick takeaways from the report for the Trusted Leadership PAC, the main super PAC supporting Cruz:

• The super PAC reported raising $4.5 million in March, spending $3.6 million and having $1.1 million cash on hand.
• The top contributors to the group were GOP megadonor Dick Uihlein, who gave $1 million, and Herzog Contracting Corp., which also donated $1 million. The construction company's chief executive is Stan Herzog.
• Trusted Leadership PAC was set up to consolidate other pro-Cruz fundraising efforts, and it appears that process is underway. It took in a total of $900,000 from two other pro-Cruz super PACs: Keep the Promise I ($800,000) and Stand for Truth ($100,000).

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File this under Texas leaders abroad… Lt. Gov. Dan Patrick was one of seven lieutenant governors who traveled last week to Israel.

The economic development trip was organized by the Republican Lieutenant Governors Association and sponsored by the State Government Leadership Foundation.

An RLGA press release quoted Patrick as saying, "Our trip gave me a great opportunity to find ways to increase business activity between Texas and Israel. Our already strong relationship will only expand as a result of my meetings with multiple companies and government officials during my visit."

In March, Patrick was named to the organization’s executive committee and will host the RLGA’s first meeting in Texas in June.

*****

Former U.S. Rep. Pete Gallego who is looking to win a rematch with U.S. Rep. Will Hurd, R-San Antonio, last week reported raising $312,354 in the first quarter of 2016 and having $619,713 cash on hand.

Gallego, who held the Congressional District 23 seat for one term, lost the seat to Hurd in the 2014 election. A statement from a spokesman said the Gallego campaign is “on track with where we want to be and momentum and enthusiasm just keeps growing.”

The CD-23 seat is widely seen as the only competitive congressional seat in Texas.

*****

Here’s a couple of items to mark on your calendar… Early voting ahead of the May 7 House District special elections in HD-120 (click here for a list of candidates) and HD-139 (click here for a list of candidates) starts Monday.

Monday is also the last day to register to vote in the May 24 party primary runoff elections. The Secretary of State reminds voters today that they do not have to be registered with a party to vote in the runoff elections. However, voters who voted in a party primary can only vote in that party’s runoff elections.

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Texas Supreme Court Building

A legal fight dating back to a 2012 Jim Landtroop fundraiser appeared settled last Friday, when the Texas Supreme Court ruled in two separate cases related to whether Salem Abraham could sue for libel over a post written on AgendaWise, a site linked to oilman Tim Dunn’s Empower Texans network.

Abraham had brought forth both lawsuits over a post on AgendaWise regarding Abraham’s appearance at a Landtroop fundraiser. (One of the opinions covers the back and forth between Abraham and Greer over the post which led to the lawsuit.)

In the cases, a key issue was whether Abraham, a member of a local school board, could claim there was actual malice in the post's characterization of his actions.

“Because we conclude actual malice was an element of the public official’s defamation claim, we reverse and remand to the court of appeals for it to consider other issues raised by the official, but not addressed by the court,” one of the opinions reads.

Empower Texans’ Michael Quinn Sullivan touted the rulings as a major free speech victory.

“Today's opinions further secure the First Amendment rights of Texans to be free to speak out about the conduct of public officials without fear of being litigated into bankruptcy,” Sullivan said in a statement.

*****

Battleground Texas, which has drawn flak from some Democrats for its approach to minority outreach, announced last week the launch of an effort to engage more Latinos in the electoral process. The Movimiento Texas campaign will kick off next month with a “statewide Latino organizing training,” according to the group’s announcement.

“Growing up in El Paso, there weren't many people talking about voting with Latino families like mine,” said Oscar Silva, Battleground Texas Political Director. “That's why Movimiento Texas is so important — we are doubling down on our mission to reach every Texan in the conversation and flip the script on voter registration and engagement in our communities."

*****

State Rep. Molly White, R-Belton, still has concerns about her narrow defeat to primary challenger Hugh Shine.

Last Wednesday, White emailed supporters a recent article in the Christian Reporter News that chronicled problems voters had in Bell County. After a recount last month, Shine was declared the winner of the election by 104 votes.

In a brief phone interview, White said the story's findings were concerning but conceded there is not much she can do at this point.

"There are a lot of questions raised by the story," she said. "What can be done at this late time? I don't know."
"I'm feeling it's kind of late but I just thought it was something that the voters — most voters — need to know," she added. 

*****

Five members of Austin's City Council gathered outside of Austin City Hall on Tuesday to accuse a group funded by Uber and Lyft for putting out deceptive ads aimed at encouraging voters to support an upcoming ballot initiative that will determine how the city regulate those companies.

"Please take time to study this issue," Austin Mayor Pro Tem Kathie Tovo said at the press conference. "Please don't be misled by skewed TV commercials and a multi-million-dollar advertising budget from corporations that want to regulate themselves."

Tovo was joined by council members Ora Houston, Delia Garza, Sabino Renteria and Ann Kitchen, all of whom urged voters to reject the ballot initiative that would rescind the ordinance approved by the council requiring drivers for companies like Uber and Lyft to undergo fingerprint-based background checks.

The council members expressed concern that advertising efforts by Ridesharing Works for Austin in support of the proposition were potentially misleading the public. They pointed as an example to ads from the group that assert that Prop 1 would "require Uber and Lyft to keep doing criminal background checks." The language brings up a false implication, they argued, that Prop 1's failure would mean Uber and Lyft drivers would stop undergoing background checks altogether.

Travis Considine, Ridesharing Works for Austin's spokesman, said city officials are the real source of confusion.

"Nothing is more misleading than the ballot language crafted by the city council, which is a powerful example of voter misinformation," Considine said. "It is because the ballot language was crafted to be misleading to voters that the vote for Prop. 1 campaign is necessary at all.'"

Uber has resisted fingerprint background check requirements in other cities across the state, ceasing operations in Galveston, Midland and Corpus Christi after measures requiring similar background checks. Uber continues to operate in Houston, where the city council has insisted on fingerprint-based checks.

Disclosure: Uber and Lyft are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

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For this week’s nonscientific survey of insiders in government and politics, we asked about future threats to state revenue collections.

Revenues and budgets are on the minds of lawmakers these days after Speaker Joe Straus' "sober-faced pep talk" and worries about the fiscal implications of multiple lawsuits directed at the state.

How troubled are those waters? We began this week's inquiry by asking the insiders what should worry most the person who will be tapped to succeed John Otto as the head of House Appropriations.

We listed three things — the school finance system, legal challenges to sales and franchise taxes and the low cost of oil. A solid majority of the insiders said all three things should worry the new chief House budget writer. Another 20 percent cited school finance as the chief worry and 15 percent named the low cost of oil.

We then asked the insiders for their take on how the Texas economy will perform over the next two years. On this one, the insiders were split for the most part with 38 percent saying they were bearish and 32 percent saying they were bullish.

Most thought the state would be able to preserve at least some of the current projected $4.2 billion revenue surplus. A total of 44 percent thought that the projected balance would dwindle to less than $2.1 billion while another 37 percent thought the balance would fall somewhere between $2.1 billion and $4.2 billion.

The insiders were also split on whether lawmakers would use the Rainy Day Fund should the state lose several large tax cases. Exactly 50 percent said they would while 45 percent said they wouldn't.

We collected comments along the way, and a full set of those is attached. Here’s a sampling:

Enlarge Emily Albracht

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Congratulations, you’ve been named the new House Appropriations chairman. What worries you the most?

• "You only listed revenues. I'm worried most about expenses (like health care and insurance and other things that costs what they cost regardless of the price of oil or sales tax collections)."

• "It's not going to be a fun year on appropriations. But, in classic Joe Straus fashion, the budget process will conclude in an anti-climactic way with a reasonable, generally conservative, but also fairly responsible budget."

• "Oil, while very important, isn't nearly the economic driver it once was thanks to the diversified Texas economy. School finance, on the other hand, has the potential to gum up the budget like nothing else."

• "All of the above, but especially the low cost of oil. Not because oil will stay low; but rather, because the State relies heavily upon a commodity price they cannot control."

• "The person with real worries is the chair of Ways & Means. There's no way out of this without more money."

Enlarge Emily Albracht

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Based on what you know now, what’s your take on the Texas economy over the next two years?

• "Donald Trump and Hillary Clinton un-inspire economic activity, especially in Texas."

• "WTI is at $41 today, which is about $20 less than a year ago. Hard to see it rising much higher. As oil and gas sputter along, eventually the ripple effects will make their way through the rest of the economy."

• "We will rock along. The state diversified itself in the '80s and '90s. We will be OK."

• "I'm fearing a natural disaster and other problems to be named later!"

• "Oil and gas are much more important to the Texas economy and revenue than many want to believe. The state's economic peaks and valleys still follow the drilling cycle. You'd think we'd be past that by now. But we ain't. If oil and gas stay down, Texas goes down — some."

Enlarge Emily Albracht

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Based on what you know now, how much of the state’s $4.2 billion projected revenue surplus will still be there when lawmakers return in January?

• "The $4.1 billion 'surplus' in the October CRE includes $3.5 billion in dedicated GR balances, so the next Lege will be lucky to have any 'regular' General Revenue that's not already committed to something. 2016 General Revenue collections will be at least 2 percent short of the Comptroller's most recent forecast. Best case scenario: local property taxes for schools continue rising enough to reduce state aid, freeing up money that's already been appropriated so it can be used for any shortfalls (Medicaid supplemental, natural disasters, etc.)"

• "With zero-based-budgeting, there's no such thing as a budget shortfall. Who says you have to spend everything you spent last year plus population growth! You don't."

• "As much as we like to 'fool' ourselves into thinking we have a diversified Texas economy, we are STILL heavily dependent upon old man oil; his troubles are our budget troubles."

• "The surplus will be there, but the items for the supplemental will quickly erase that amount. The real question is, will the Legislature have the will to draw down the Rainy Day Fund?"

• "It's not really a 'surplus' in the sense of extra money. Just a cash balance, most of which is actually GR-Dedicated funds."

Enlarge Emily Albracht

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If the state is on the losing end of one or more of several large tax cases, will lawmakers use the Rainy Day Fund to cover the cost?

• "Possibly, if the leadership can't find & agree on enough 'smoke and mirrors'-type budget balancing mechanisms (postponing large payments to 2019; speeding up tax collections; re-amassing GR-dedicated balances). School finance resolution could be postponed to a 2018 special session."

• "They didn't use much of it when the budget cratered in 2011, and if that doesn't tell you something then nothing will."

• "Even though it would only take 16 votes to pass, the Senate won't get 19 votes to take up a bill to spend from the Economic Stabilization Fund."

• "They won't use the Rainy Day Fund directly if they can avoid it. Look for some sleight of hand to make things look more palatable. And also some payback against the industries that brought these lawsuits."

• "Even if Noah was building an ark, they won't touch the fund."

Our thanks to this week's participants: Gene Acuna, Brandon Aghamalian, Brandon Alderete, Clyde Alexander, Jay Arnold, Charles Bailey, Andrew Biar, Allen Blakemore, Tom Blanton, Chris Britton, Raif Calvert, Lydia Camarillo, Kerry Cammack, Elna Christopher, Randy Cubriel, Beth Cubriel, Denise Davis, Eva De Luna-Castro, June Deadrick, Nora Del Bosque, Glenn Deshields, Tom Duffy, David Dunn, Richard Dyer, John Esparza, Dominic Giarratani, Bruce Gibson, Eric Glenn, Kinnan Golemon, Daniel Gonzalez, John Greytok, Clint Hackney, Wayne Hamilton, Bill Hammond, Steve Holzheauser, Kathy Hutto, Deborah Ingersoll, Mark Jones, Robert Kepple, Richard Khouri, Tom Kleinworth, Sandy Kress, Dale Laine, Pete Laney, Dick Lavine, James LeBas, Luke Legate, Ruben Longoria, Vilma Luna, Matt Mackowiak, Jason McElvaney, Steve Minick, Bee Moorhead, Mike Moses, Keats Norfleet, Todd Olsen, Nef Partida, Jerod Patterson, Robert Peeler, Tom Phillips, Wayne Pierce, Allen Place, Gary Polland, Jay Pritchard, Jay Propes, Ted Melina Raab, Patrick Reinhart, David Reynolds, Carl Richie, A.J. Rodriguez, Grant Ruckel, Andy Sansom, Barbara Schlief, Stan Schlueter, Robert Scott, Bruce Scott, Steve Scurlock, Ben Sebree, Ed Small, Martha Smiley, Larry Soward, Dennis Speight, Colin Strother, Sherry Sylvester, Sara Tays, Trey Trainor, Vicki Truitt, Ware Wendell, David White, Darren Whitehurst, Christopher Williston, Peck Young, Angelo Zottarelli.

Enlarge Todd Wiseman

Friday, April 22

• Dallas Earth Day panel — "A Real Conversation About Oil and Gas Regulation," featuring Railroad Commissioner Ryan Sitton and Pioneer Natural Resources Executive Vice President Mark Berg; Fair Park Dallas, Automobile Building 2, 1121 First Ave., Dallas (2 p.m.)
  

Saturday, April 23

• NE Tarrant Tea Party “Texas Tough Texas Proud” fundraiser, with guests Glenn Beck, U.S. Rep. Louie Gohmert, R-Tyler, Attorney General Ken Paxton, state Rep. Jonathan Stickland, R-Bedford, and many others; home of Colleyville City Councilman Chris Putnam, 204 White Drive, Colleyville (5 p.m.)
  

Sunday, April 24

• State Rep. Eddie Rodriguez, D-Austin, fundraiser; Esther's Follies, 525 E. Sixth St., Austin (4 p.m.)

Monday, April 25

• Early voting begins in May 7 House District special elections for HD-120, HD-139
• Last day to register to vote in May 24 party primary runoff elections

Tuesday, April 26

• Presidential nominating contests: Connecticut, Delaware, Maryland, Pennsylvania and Rhode Island
• SD-24 runoff election candidate Susan King fundraiser; 51 Fairway Oaks Blvd., Abilene (5-7 p.m.)

Wednesday, April 27

• State Rep. Armando Walle, D-Houston, fundraiser; Austin Club, 110 E. Ninth St., Austin (4:30-6 p.m.)

Thursday, April 28

• 2016 Texas Grid Security Summit; Texas Capitol, E1.004 (Auditorium), 1100 Congress Ave., Austin (April 28-29)
  

U.S. Sen. Ted Cruz laced into Donald Trump Thursday morning in Maryland for the billionaire's suggestion that North Carolina should back down from a law that says individuals must use the public restroom that corresponds with one’s birth certificate gender.

Thousands of retired Texas state workers are essentially stuck in 2001. Though health care, food and pretty much everything else keep getting more expensive, they haven't seen a cost-of-living increase in their monthly pension checks since Gov. Rick Perry’s first year in office, and their purchasing power has dropped by about 25 percent.

Pro-Ted Cruz forces raised nearly $23 million in March and spent almost as much, showing a presidential effort in full swing as the U.S. senator from Texas navigated the thick of the primary season, according to reports filed with the Federal Election Commission.

The Texas Department of Family and Protective Services faces a $40 million budget shortfall, a critical shortage of good homes for foster children and overwhelming caseloads for staff, agency leaders told state lawmakers at a hearing on Wednesday.

The Texas State Teachers Association filed a lawsuit Wednesday in an attempt to block the state from implementing a controversial system that for the first time ties assessments of educators to student performance on standardized tests for the first time.

After a bruising defeat in New York, Ted Cruz is officially retooling his outlook on how the Republican Party will pick its nominee. The U.S. senator from Texas, once hopeful he could win the nomination without a contested convention, is now conceding a floor fight is his only hope.

Texas has become the top destination for people moving from other states, according to a report from the Office of the State Demographer. Leading the way are Californians, who have come in the largest numbers to Texas in recent years.

Bexar County Sheriff Susan Pamerleau says U.S. Immigration and Customs Enforcement is being "disingenuous" by claiming in administrative records that her jail declined 11 "detainers" seeking custody of undocumented immigrants. 

The U.S. Food and Drug Administration has told the Texas Department of Criminal Justice it is tentatively barred from importing a drug used in executions.

UnitedHealthcare, a major health insurer, will no longer sell insurance on the Affordable Care Act marketplace in Texas next year, according to a letter filed with state regulators.

State health officials confirmed Tuesday they have asked the Obama administration to keep a 15-month lifeline of Medicaid money flowing into Texas to help hospitals treat the uninsured — despite the state's refusal to offer subsidized health insurance to the poor.

Nearly one month after Texas regulators approved — with major stipulations — Ray L. Hunt’s plan to buy Oncor and reshape it into a real estate investment trust, the Dallas oilman and his investors want a do-over. The development casts serious doubts over whether investors can close the high-stakes deal.

The Texas state auditor's office has referred its investigation into possible misuse of state workers by state Rep. Dawnna Dukes to Travis County prosecutors, the Austin American-Statesman reported late last week. 

Disclosure: The Texas State Teachers Association, Oncor and UnitedHealthcare are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

Gov. Greg Abbott appointed three people last week to the Texas Board of Professional Geoscientists — Bereket Derie of Round Rock and Steven Fleming of Midland, who are both licensed professional geoscientists, and Lindsey Bradford of Edna, owner of The Car Lot and L2 Cattle Company. All three will serve terms to expire Feb. 1, 2021.

Abbott appointed Lesli Ginn of Austin as Chief Administrative Law Judge for the State Office of Administrative Hearings, effective May 1. She has worked in the Texas Attorney General’s Office for a decade, and is currently chief of the financial litigation and charitable trusts division.

Brad Livingston, who's led the Texas Department of Criminal Justice since 2004, plans to retire in August, he announced last Friday. He began at the department in 1997 as deputy director of the financial services division. He was appointed interim executive director for TDCJ in 2004 and formally given the job in 2005.

State Rep. Jeff Leach, R-Plano, announced last week that he was promoting legislative director Lauren Young to chief of staff. Young will replace Mary McClure, who will transition into a new role as district and communications director.

The Texas Hospital Association announced last week it’s hired Sara Gonzalez, formerly chief of staff for state Sen. Sylvia Garcia, D-Houston, as vice president of advocacy and public policy. Prior to her stint with Garcia, Gonzalez worked for state Sens. Eddie Lucio, D-Brownsville and Leticia Van de Putte, D-San Antonio.

Emerge America, which recruits and trains Democratic women to run for office across he country, announced last week that former state Sen. Wendy Davis of Fort Worth has joined the group’s board.

Railroad Commission runoff candidate Wayne Christian has won endorsements from state Rep. Jonathan Stickland, R-Bedford, and state Sen. Craig Estes, R-Wichita Falls.

SD-24 runoff candidate Dawn Buckingham has been endorsed by the Texas Home School Association, Llano County Commissioner Peter Jones and former Bandera County Chair and former SREC member Kim Hesley.

SD-24 runoff candidate Susan King was endorsed by the political arm of the Texas Hospital Association.

HD-54 runoff candidate Scott Cosper has been endorsed by state Rep. Jimmie Don Aycock, R-Killeen, the current occupant of the seat.

HD-139 runoff candidate Kimberly Willis was endorsed by state Rep. Garnet Coleman, D-Houston.

CD-19 runoff candidate Glen Robertson received an endorsement from the Texas Home School Association.

CD-19 runoff candidate Jodey Arrington received an endorsement from former Gov. Rick Perry.

Republican Party of Texas Chairman Tom Mechler has had his re-election campaign endorsed by state Sen. Donna Campbell, R-New Braunfels, and the Texas Alliance for Life PAC.

Vision America founder Rick Scarborough announced Thursday that he’s endorsing former Harris County GOP Chairman Jared Woodfill in his challenge to Mechler for Republican Party of Texas chairman.

Disclosure: The Texas Hospital Association is a corporate sponsor of the Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.