Off the Kuff Rotating Header Image

spending cap

Tighter spending cap defeated

I consider this to be a victory.


The state’s constitutional spending cap will remain untouched this session, and House and Senate leaders are blaming each other for the lack of action on the arcane but politically important measure.

Senate Republicans had sought to tighten the rules that guide how much future state budgets can grow, but House and Senate negotiators said in interviews Sunday that talks between the chambers fell apart late Saturday on Senate Bill 9, the last bill standing on the matter.

“The Senate passed the people’s priorities, the Governor’s priorities and my priorities on the spending cap and ethics reform during this legislative session,” Lt. Gov. Dan Patrick said in a statement Sunday. “The House chose to ignore these very important bills.”

House Speaker Joe Straus argued it was the Senate that was intractable on an issue that defied simple answers.

“The House passed responsible, well-thought-out language that recognizes the spending limit is a complicated issue, not a sound byte,” Straus said in a statement Sunday. “The Senate rejected this approach.”

Under the Texas Constitution, state spending cannot grow faster than the state’s economy. Ahead of each legislative session, state leaders set a growth rate for state spending based on the estimated rate of growth in Texans’ personal income over the next two years. (The rate picked just before the current session: 11.68 percent.)

Gov. Greg Abbott joined Patrick in calling for basing the growth rate instead on the estimated combined growth in population and inflation, a figure that, more often than not in recent years, has been smaller in Texas than the growth in the economy. But the House, concerned about the impact on future Legislatures, preferred a non-binding measure that would have factored in how different areas of government spending grow at different rates.

In the end, the two chambers remained miles apart.


In the House, Appropriations Chairman John Otto, R-Dayton, viewed the Senate’s approach as unworkable. As the House’s lead budget writer, he also expressed concerns about how the bill would impact future Legislatures.

“All of you know we passed a very conservative budget out of the house,” Otto told House members last week. “It would have failed SB 9.”

Otto opted to replace Hancock’s population/inflation metric with limits for different areas of government spending, such as transportation and health care, with each one based on a combination of how spending in that category was expected to grow as well and how the population served by each category was expected to expand.

He also amended the bill so that those new spending limits were no longer mandatory, but would simply be reported to state leaders who then could choose to factor that information into setting the growth rate.

During negotiations with the Senate over coming up with a compromise version, Otto said his concerns about hamstringing future legislatures remained.

“I wanted it to be considered. I didn’t want it be the mandate,” Otto said. “I was happy to include what the Senate’s methodology was as well as the methodology that was in my substitute.”

Just a reminder, in addition to the existing cap, we also have a constitutional mandate for a balanced budget, which in its way serves as a spending cap, too. At a time when the state has a lot of short-term needs like its pension funds and all kinds of facilities that need maintenance, the Lege chose to hoard billions of dollars that may never get spent given how much harder it is to tap the Rainy Day fund. Restricting spending further, with a school finance ruling looming and an economy that has cooled considerably, is just plain nuts. I’m glad we managed to dodge this bullet for another biennium, but I don’t know how much longer that can happen in the absence of some fundamental changes in our politics.

The state spending cap is a stupid idea

And the Republicans want to make it worse.


Texas Senate leaders on Tuesday announced another round of efforts to change the way the state determines its two-year spending limit, and keep tax cuts from counting toward the constitutional cap on spending.

Lt. Gov. Dan Patrick joined state Sen. Kelly Hancock, R-North Richland Hills, at a Capitol press conference to announce legislation that would not allow the state’s budget to grow faster than population growth plus the rate of inflation.

State budget leaders in December pegged the state’s economic growth over the next two years at 11.68 percent, based on the projected rate of growth in Texans’ personal income. That means state spending cannot exceed $107 billion for the next biennium, leaving several billions of dollars in state coffers.

Hancock said basing economic growth projections on personal income is “a false measurement.”

“Individual income typically grows at a faster rate than the state’s economy,” he said.

Hancock’s Senate Bill 9 and Senate Joint Resolution 2, assigned low numbers as a sign of importance, would also exempt tax cuts from counting towards the spending limit. That would allow Republicans to provide billions of dollars in tax relief without having to vote to exceed the spending limit.

The proposed constitutional amendment changes the number of votes needed in both houses to exceed the spending limit from a simple majority to a three-fifths majority.

This is a companion to the earlier proposal to exempt spending on tax cuts and reducing debt from the spending cap. It’s not about spending or limiting spending so much as it is about limiting options, and it has nothing at all to do with fiscal responsibility, despite what some people want to believe. If the only things you can easily spend money on are tax cuts and reducing debt, what are you going to prioritize? The Observer points out some of the problems inherent in these ideas.

Hancock’s Senate Joint Resolution 2 and Senate Bill 9 would ask voters later this year to redefine the spending cap and tie it to state population growth, plus inflation, instead of growth in Texans’ personal income, which rises faster. It would broaden the spending cap to apply to all of the state’s spending, instead of just certain kinds.

That would bind the hands of future legislatures even tighter, while ensuring that more and more revenue would be untouchable beyond the cap. Legislators could still vote to bust the cap—though few seem to have the political courage to do that now—but Hancock would make that harder, too. Right now, the cap can be lifted by a simple majority of both houses. Hancock would make it a three-fifths vote.

If passed, Patrick’s two budget proposals don’t technically contradict—actually, they’d be weirdly toxic (or synergistic, depending on your perspective) in combination, since more and more money would end up on the wrong side of the spending cap, and that money could only be used for tax cuts and debt—but it’s still a weirdly incomprehensible mess from a policy perspective, and put together seemingly on the fly. It’s the art of government as outlined on the back of a Gadsden Flag cocktail napkin.

What’s worse—it’s straight out of Sacramento. You know how the recent recession calcified a Texas meme about the Golden State being the worst place on earth? California is doing pretty well lately, though you won’t hear about it in Austin. But one of the ways California got itself into a mess over the last few decades was by tying the hands of future legislatures and restricting the state’s ability to raise revenue, all the while kicking tough (and easy) decisions to voters. All three are becoming more and prominent parts of the Texas model—paradoxically, done in the name of targeting “California-style” spending.

You think the Lege engages in shenanigans and sleight of hand now to meet the constitutional mandate for a balanced budget? (And by the way, doesn’t that already serve as a spending cap?) Just wait till they’re foolish enough to put more obstacles in their own path. Whether they like it or not, ultimately stuff needs to be done. Why make it harder than it needs to be? It’s even more ludicrous hearing anyone talk about this as if it represented “discipline”. Last I checked, being disciplined meant having the restraint to not do unwise but tempting things. If you have to be handcuffed to a pole to ensure you don’t do them, you’re not disciplined.

But there’s another factor to consider as well. The budget is in surplus now, but the state has many documented needs. Roads, water, education, pension funds, and a laundry list of deferred maintenance that’s causing some of the people responsible for deferring it some poetically just problems, and so on. As someone who is old enough to remember the budget crunch of 2011 – which largely turned out to be the fault of a Comptroller who couldn’t do arithmetic – I heard the hoary old “household budget” metaphor dragged out to justify savage cuts so many times that if I’d received a nickel each time, I’d have a bigger surplus than the state does right now. Well, there’s a household budget metaphor for good times, too. When households are sitting on a pile of extra cash, they tend to the needs that they have build up over time. They fix things. They upgrade. They maintain. They invest in the care and wellbeing of their household, both the physical structure and the residents of it. Everyone recognizes such behavior as being responsible and necessary. Putting another artificial constraint on spending, especially now, is the opposite of that. It ensures that the problems we have now, both the ones we try to deal with and the ones we continue to ignore, will get worse and be more expensive to deal with later. How is this a good idea? Republicans are going to do what Republicans are going to do, but any Democrat who signs onto this needs to rethink their priorities. Eye on Williamson has more.

Voodoo economics

Also known as Dan Patrick’s budgetary contortions.


Lt. Gov. Dan Patrick, joined by the Texas Senate’s lead budget writers, announced “a new bold proposal” Wednesday morning to allow lawmakers to cut property taxes and pay down the state’s debt without busting the state’s politically charged spending cap.

“Gosh darn, we know our businesses and taxpayers need tax relief,” Patrick said at a press conference. “But because of the cap, we are limited in what we can do.”

Lawmakers entered the session with an estimated $113 billion to haggle over, but are expected to hit the state’s spending cap at $107 billion. Spending beyond the cap would require a simple majority vote in the House and Senate, a move that Republican leaders have repeatedly insisted will not happen this session.

The measures filed Wednesday are an attempt to provide political cover for Texas lawmakers to tap more of the billions of dollars sitting in state coffers without being viewed by voters as freewheeling spenders. Republicans in particular are wary of a vote for breaking the state’s spending cap being used against them in future primaries to paint them as fiscally irresponsible.

“We have more money on hand than we believe any Legislature has ever had at one moment in time dealing with budget issues,” Patrick said. “There is no support for exceeding the spending cap, but that also means that when we leave, we will have approximately $4.5 to $5 billion in the state’s checking account.”

While a simple idea in theory, the spending cap in practice is a complicated measure that even some members of the Legislature have trouble grasping. The Texas Constitution says the government can’t grow faster than the state’s economy. State leaders set a growth rate of 11.68 percent for this session in December, based on the estimated rate of growth in Texans’ personal income over the next two years.

“For 36 years our state spending cap has helped enforce fiscal discipline, and we should be very cautious about any attempt to weaken it,” House Speaker Joe Straus said in a statement responding to Patrick’s proposals.

Well, gosh darn, Dan Patrick categorically refused to consider exceeding the spending cap in 2013 when some people wanted to more fully restore the cuts to public education spending, so right there is your first clue that this is little more than a gimmick and an attempt to hardcode Republican priorities into the state constitution. I’m a bit pressed for time, so I’ll point you to a couple of good analyses of this. First, from Ross Ramsey:

Lots of things would be possible right now without that spending cap in place; this year, it leaves as much as $6 billion in the state treasury that is out of budget writers’ reach. That has lawmakers dreaming of how to get around the cap, and there are ways to do that.

The first one is simple: Vote to spend more. If a majority of senators and representatives agree, they can spend more than the cap allows. This requires some intestinal fortitude from legislators, especially in primaries where voters will want to know how the state budget ballooned so quickly. Price-sensitive voters won’t like the answer unless they can be convinced that the extra money was well-spent.

A second, proposed Wednesday by Lt. Gov. Dan Patrick and Sens. Jane Nelson, Juan “Chuy” Hinojosa and Kevin Eltife, is complicated. They want to change the constitution to exempt spending on tax cuts and debt payments from the calculation of a spending cap. They would be able to take care of other items on their wish lists and keep spending past the cap on taxes and debt. Voters would have to approve, and it would take approval from two-thirds of the House and two-thirds of the Senate to get the measure to voters.

That’s more complicated, but it fits the recent pattern established by the state’s officeholders. They are scared to death of voters — so much so that they rely on a “Mother, may I?” approach to tough votes.

For two Novembers in a row, the state of Texas has gone to voters asking for more money, first for water and more recently for transportation.

Those didn’t involve taxes — lawmakers are allergic to that. But they were nervous about spending money, even on popular things — water projects during a drought and highway money for the state’s perpetual traffic jam — and asked voters for permission instead of just writing the checks themselves.

The state had the money it needed, sitting in the so-called Rainy Day Fund, but lawmakers didn’t want to just write a check themselves, for fear they would be labeled spendthrifts in the next round of primary elections.

Those would be Republican primary voters, of course, since those have always been the only voters Dan Patrick cares about or listens to. I’m old enough to remember back in 2011, during the (now known to have been mostly phony) budget crunch, when everyone compared that situation to households that cut back and tighten their belts and all those other virtuous things during hard times. Well, I don’t know how it is at your house, but at mine if the roof starts to leak or if the water heater breaks, I spend what I must to get it fixed. Somehow, that part of the household-as-budget-analogy never gets brought up.

And from Christopher Hooks:

The proposal makes a certain sense from the Democrats’ point of view—busting the spending cap probably means more money will go to state needs like education, even if Patrick wins his tax cuts. And it makes a certain sense for somebody like Eltife, who won’t have to stand in the way of tax cuts while other fiscal needs get attention, too.

But from Patrick’s POV, it’s a weirdly craven move. For one, he’s proposing to bust the spending cap—a sacred cow among conservatives—while saying loudly that he’s proposing to preserve it. And it contains a certain measure of political cowardice; if legislators wanted to, they could vote to bust the spending cap this session with a simple majority vote. Instead, they’re asking voters to make the hard choice for them, a move that seems eerily reminiscent of the dreaded Sacramento style of governance.

Furthermore, the amendment, if it passed, would privilege tax cuts over other kinds of spending. If the Lege ends up with $6 billion in additional revenue over the spending cap next session, it would virtually assure that that money would produce more tax cuts rather than, say, go back to schools or health care or roads.

Finally, it’s a move that’s emblematic of Patrick’s emerging leadership style—impulsive, seemingly thought-up on the fly and done with little consultation with his legislative partners. House Speaker Joe Straus gave an exceptionally cool statement in response: “For 36 years our state spending cap has helped enforce fiscal discipline, and we should be very cautious about any attempt to weaken it.”

But Patrick’s proposal points to a reality about the new era in the Lege: Patrick and the generally suburban-oriented senators who represent the new vanguard are not amenable to government spending and value tax cuts above almost all else.

Yes, that’s what this is about. It’s what basically all of the budgetary tricks and sleights-of-hand are about, including the spending cap itself. It’s a convenient excuse for not doing what you didn’t want to do anyway, like restoring cuts to public education, and it’s an opportunity to restrict the terms of debate further by forcing certain priorities ahead of others. I feel the same way about things like proposals to dedicate certain taxes that have otherwise been for general use to specific purposes. I get why Sen. Hinojosa is playing along, but I fear he’s being suckered. This is a bad deal, and we should hope the House rejects it.

There are no new ideas, but there are plenty of bad ideas

There’s so much wrong with what Greg Abbott wants for Texas that it’s hard to know where to begin.


In his first major policy address as a gubernatorial candidate, Attorney General Greg Abbott proposed tighter constitutional limits on state spending and increased constraints on the multibillion-dollar Rainy Day Fund.

Abbott laid out his “Working Texans” plan, which is based on fiscal reform to reduce the scope of government, during a campaign stop Monday in Brownsville.

Abbott said that if he were elected governor, he would propose two constitutional amendments to keep state spending tied to population growth and inflation and to safeguard the Rainy Day Fund, the state’s savings account, from “being raided” by the Legislature.

Additionally, Abbott said the governor should be given “expanded line-item veto authority” to reduce excessive spending. He will face former Texas Workforce Commission Chairman Tom Pauken in the 2014 Republican primary.

“I am willing to take on the task of making difficult decisions to reduce government spending when at times the Legislature may not be able to do so,” Abbott said, according to prepared remarks, adding that the state has seen “a troubling trend” of using the Rainy Day Fund to cover “what should be core government operations and expenses. “

Instead, Abbott wants to limit the excessive spending of the fund by only allowing it to be used to meet unforeseen revenue shortfalls, to reduce existing debt, to pay for state disaster relief and to address one-time infrastructure payments.


In his proposal, Abbott also emphasized the importance of finding a permanent source for additional transportation infrastructure, including a proposal to constitutionally divert a portion of the motor vehicle sales tax to road construction and maintenance.

“We need to stop diverting transportation funding away from building roads,” Abbott said. “Money raised for roads should be spent on roads.”

Texas Politics has this in bullet point form. Let me open with what Burka has to say:

Abbott’s ideas will have the effect of constricting the state’s economy rather than expanding it. He says next-to-nothing about public education, for example, nor does he address health care; in other words, he ignores the two biggest and costliest areas of state services. The only solace one can take in Abbott’s vision for the future of the state is that it resolves the question of whether he would be better or worse than Rick Perry. Astonishing as it may seem, I think he is worse than Perry.

The question must be asked: Is Abbott’s vision what Texans want for their government — or their families? Is this really a state whose leaders have no interest in improving the lives of its citizens? Is Texas really going the way of Arkansas and other backward states where all that matters is guns?

Well, there’s also hating on gays and “illegal immigrants”, plus suing the federal government, but you get the idea. I guess it hasn’t occurred to Abbott that the reason we’re dipping into the Rainy Day Fund for a water infrastructure bank is because we have a vast unmet need for water infrastructure projects and no other politically acceptable way to pay for them. He’s also probably not noticed the gaping hole in Texas’ transportation funding, and the fierce resistance to any way of paying for some of it. Oh, and there’s also the judgment against the school finance system – the suit is being relitigated, but I don’t expect a substantially different outcome – and the millions of uninsured Texans that he and his cronies try not to acknowledge. Clearly what we need is a rigid and restrictive spending cap, because that will solve all these problems with the magic of the free market, or something like that.

The Observer shows the degree of Abbott’s ignorance on the subject.

The idea of tying spending to inflation and population growth is not a new one. It’s been popular among elements of the right for years. The Texas Public Policy Foundation, uber-activist Michael Quinn Sullivan and even Perry have flogged the proposal for years. But it’s never gone anywhere for two main reasons—one, there is little appetite in the Texas Legislature for tying their own hands; two, it’s a bad idea.

Texas is already a (relatively) low tax, minimal services, small government state. Indeed, as Nate Blakeslee pointed out in a January Texas Monthly profile of Sullivan, state spending as a share of both the state’s gross domestic product and personal income has been trending downward for two decades. For personal income, which is what the Comptroller uses to set a spending limit, the share of spending has decreased from around 5.2 percent in the early ’90s to just over 4 percent today. Even using the population-plus-inflation spending limit, Texas’ budget has stayed under that limit for the last decade, according to an analysis by the Legislative Budget Board.

In other words, there’s just not a spending problem in Texas. Which is not the same thing as saying there’s an inequity problem when it comes to how revenues are collected (not having a state income tax, for example, means the poor and middle class take it on the nose with regressive sales and property taxes).

Still, tying the state’s budget to inflation and population growth could further constrain state government. You could pretty much forget about ever investing more in public schools, higher education or infrastructure, at least during non-flush times.

In April, the Legislative Budget Board crunched the numbers. The growth in personal income used to set the spending cap for 2014-2015 was 10.71 percent. In other words, the state could spend almost 11 percent more than it had the previous biennium. Using population growth plus inflation instead would limit spending growth to 6.82 percent. That would mean $2.7 billion less for state leaders to work with. That’s not a huge number given that the 2014-2015 state budget includes $95 billion in general revenue. But lowering the spending limit now would have a compounding effect over time.

That’s probably the point—force future generations to subscribe to the current model of low-ish taxes and minimal services. Abbott more or less admitted as much during a press confab after his Brownsville speech.

“By imposing these standards by constitutional provision it means that for generations there will be limits in the growth of spending in this state,” he said, according to the Associated Press.

However, the Legislature has shown little appetite for any of the proposals Abbott is touting. A bill tying the spending limit to population-plus-inflation is filed every session… and goes nowhere.

The Lone Star Project points out that much of what Abbott is proposing is constitutionally redundant as well. The good news is that by going the constitutional amendment route, Abbott starts from a position of not having enough votes for his ideas, and being unlikely to get any more support for them. But the best way to prevent bad ideas from gaining a foothold is to beat them back at the ballot box.

Another reason why spending caps are a bad idea

There are many reasons why, but this is one we haven’t encountered before.

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.

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.”


In November, the LBB voted to set the growth rate in spending at 10.71 percent. Several people watching the budget process predict that rate should lead to a final spending limit that will allow lawmakers, if they choose, to spend virtually all of the available general revenue this session, expected to be roughly $95 billion after lawmakers pass a supplemental budget for 2012-13.

The $11.8 billion projected to be in the state’s Rainy Day Fund is a different matter. House officials have said the limit applies to most types of spending that lawmakers have proposed for the fund, though certain kinds of tax relief would be exempt. Dale Craymer, president of the Texas Taxpayers and Research Association, helped write the legislation that created the Rainy Day Fund in the late 1980s, and he said that’s not what the lawmakers who originally approved it bargained for.

“It was never the intent that the spending limit apply to the Rainy Day Fund,” said Craymer. He agreed the issue is now a point of debate.

Well, this is the sort of thing that happens when you let ideology override policy. Surely no business would allow itself to be handcuffed by the inept forecast of an incompetent financial officer, but that appears to be the position Texas has put itself in. The good news, as the Statesman notes, is that so far at least legislators don’t appear to be willing to tie themselves down in this fashion. Rep. Donna Howard has filed a bill to clarify that the Rainy Day Fund is not subject to this spending cap; the bill in question is HB652. There’s hope that we can work around this without anything too dumb happening.

This assumes that Rick Perry doesn’t make the situation worse by pushing through an even tighter cap, because doing stupid and harmful things like that is his job. Scott McCown explains why this is such a bad idea.

If a family budgeted this way, no matter how much money the family made, it could never improve its life. Imagine sitting down to write your first family budget. Naturally it is lean, but you have dreams of a better future — a safer neighborhood, a graduate degree. Under the governor’s proposal, though, even as your income increased, you would be stuck living under that lean budget adjusted only by family growth and household inflation. You could never make your life better.

Not being able to make things better would be a big problem for Texas. However you measure it, Texas ranks low in spending. Our systems for education, water, transportation, mental health, child protection, and many others are struggling. If we could adjust our current lean budget only for population and inflation, we could never make major new investments to improve our state.

The governor’s proposal has another big problem: Not only could a family not improve its life, periodically things would actually get worse. As the Great Recession reminded us, income doesn’t always go up. Sometimes breadwinners suffer a pay cut or lose a job, and a family has to cut its budget. Under the governor’s proposal, this lower level of spending would become the new base.

For a family, that would mean if it made $35,000 last year, but only $30,000 this year, its budget for next year would have to be based on the lower figure even if it made $40,000. Yes, even after the family’s income recovered, it couldn’t increase spending. No family would budget in a way that prevented recovering from a setback, and no state should, either.

The governor’s formula also uses the wrong measures of population and inflation. A family budget isn’t based merely on family size, but on family composition — whether the family is budgeting for a baby, for a child in college, or to care for grandma matters a lot to the bottom line. Likewise, a state can’t merely consider growth in total population; a state must consider who it is actually serving. For example, in Texas the rate of elderly who potentially need assisted living through Medicaid is projected to grow twice as fast as our total population between now and 2040.

And just as a family wouldn’t base its budget on government inflation, a state shouldn’t base its budget on household inflation. Families and governments buy different “baskets” of goods and services. A much higher portion of the state budget, for example, goes to buy health care, which is increasing in cost faster than household inflation. By using the wrong measures of population and inflation, year after year, the governor’s proposal would force Texas to do less and less for fewer and fewer.

As far as Perry and his cronies are concerned, doing less and less for fewer and fewer is a feature, not a bug. As always, now is an excellent time to let your State Rep and State Senator know that you want them to work on solving Texas’ problems, not making them worse. It’s not their job to tell future legislators what they can and cannot do. EoW has more.