Bumping up against the state’s constitutional spending limit is usually not a serious concern when Texas lawmakers plan their two-year budgets. This year could be an exception, and the state’s fast rebound from the recession is a key reason why.
Several political observers well-versed in the state’s finances say that lawmakers could hit the state’s spending limit this session, complicating efforts to access the $11.8 billion in the state’s Rainy Day Fund.
The Texas Constitution says the government can’t grow faster than the state’s economy. That growth rate is always set ahead of the session based on the estimated rate of growth in Texans’ personal income over the next two years. Passing a budget that busts the limit requires support from a simple majority of the House and Senate.
While it’s a simple idea, in practice, the constitutional spending limit is about as clear as mud. The exact amount of the spending limit for the next budget remains a moving target, and there is disagreement on some aspects of how the limit is meant to be applied, particularly whether any spending from the Rainy Day Fund is subject to the limit.
“Apparently there’s a lot of confusion out there about what counts and what doesn’t,” said Eva DeLuna Castro, a senior budget analyst for the liberal Center for Public Policy Priorities in Austin.
There are issues because of the Comptroller’s faulty (for whatever reason) revenue estimate from 2011.
This year, lawmakers find themselves contending with reaching the limit largely because of the Texas economy’s rapid swing from a recession to a robust recovery. Cuts made in 2011 were based on estimates from the comptroller’s office that revenue would come in at low levels. The rebound happened faster than expected, leaving the current Legislature with a large surplus and calls to spend some of it on a range of expensive proposals, including tapping the Rainy Day Fund to restore billions in education cuts made last session.
“One can argue that we really didn’t need to make many of the cuts in the budget that were made in the last legislative session, including the $5 billion in cuts to public education,” said education finance expert Lynn Moak. “But to get it back, you have to bust the spending limit.”
But, as we all know, the Texas GOP will do anything for a supposed tax cut.
Yet it’s that vote on the spending limit that could pose the bigger challenge for lawmakers worried about their next election. A variety of conservative activists and state leaders including Gov. Rick Perry have called for tightening the spending limit so that it is based in the combined rates of population growth and inflation, rather than the current metric, growth in state personal income, which is usually larger. Some lawmakers may worry that voting to bust the looser spending limit already in place will give opponents ammunition to paint them as irresponsible.
“The vote on the spending limit is far more of a political problem than a technical problem,” said Moak, who worked for Lt. Gov. Bill Hobby when the limit was passed as part of budget negotiations. “It has more weight now than it probably had when it passed, when it wasn’t really considered that big a deal.”
The situation may motivate lawmakers to tap the Rainy Day Fund for tax relief over spending on water, transportation or improving budget transparency. The spending limit only applies to tax cuts when it impacts the property tax, which involves payments to local school districts, Craymer said.
“The fact that there is revenue above and beyond the spending limit no doubt has invited discussion of tax relief,” Craymer said.
As with restoring education funding, Commissioner Michael Williams appears to believe that we should be “prudent” when it comes to funding full day Pre-K.
Williams’ answer did not satisfy Sen. Judith Zaffirini, D-Laredo, who questioned why the commissioner did not include the prekindergarten funding in his budget recommendations to the Legislature. She suggested that he may want to add it to other funding proposals he has submitted, but he did not reply to her suggestion. The prekindergarten aid was part of the $1.4 billion in grant money that was cut two years ago, along with $4 billion in regular school funding. Democrats are seeking to restore the funds this year, but GOP leaders have been reluctant to make any commitment and some are opposed to the idea.
Sen. Tommy Williams ( R-The Woodlands) will try to slow, and not end, the hoarding of dedicated funds.
According to liberal budget analyst Eva DeLuna Castro of the Center for Public Policy Priorities, Williams’ starting budget would leave about $5.3 billion of dedicated funds unspent in 2014-15.
Williams said it will take “two or three sessions” for the Legislature to end the budgetary gimmick, which means that the practice could persist into 2017. Gov. Rick Perry and some conservative groups have said it should end immediately.
Last session, lawmakers hoarded $4.95 billion of dedicated funds. The practice let them avoid deeper spending cuts as they bridged a $27 billion budget shortfall, because they could pretend they had that much more in general revenue.
Among the programs denied their dedicated fees were ones helping poor electricity customers ($850 million unused); aiding hospital emergency rooms and paramedic services ($388 million unused); and reducing air pollution ($798 million unused in two separate programs).
Cutting help for the poor, for medical care, and for clean air. All so they can cut taxes. That’s a microcosm of the GOP’s budget plan.