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.

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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.