Perry Surprises by Urging House to Bust Spending Cap

Gov. Rick Perry announces a 5 percent cut in the Texas franchise tax for small business on April 15, 2013. In the background are Rep. Harvey Hildebran, R-Kerrville, Gary Farmer of the Austin Chamber and MIke Morrissey of the governor's staff.
Gov. Rick Perry announces a 5 percent cut in the Texas franchise tax for small business on April 15, 2013. In the background are Rep. Harvey Hildebran, R-Kerrville, Gary Farmer of the Austin Chamber and MIke Morrissey of the governor's staff.

Updated, 5:30 p.m.:

Lucy Nashed, a spokesman for Gov. Rick Perry's office, said the governor has not changed his position on the state's constitutional spending limit. In a private meeting with the House Republican Caucus Wednesday, Nashed said Perry conveyed a message consistent with the State of the State speech he delivered in January.

"He supports one-time investment in water and transportation which could be financed with the Rainy Day Fund, among other options, but he does not support breaking the spending limit to cover ongoing operating costs," Nashed said. "Anyone claiming unfair surprise didn’t listen to the Governor’s State of the State in January or they are being disingenuous now."

Original story: 

Republican members of the Texas House met behind closed doors Wednesday with Gov. Rick Perry to discuss the plans for the last weeks of the legislative session. Once it was over, some left not believing what they had heard.

A key topic of the meeting was the state's next two-year budget. Perry told his fellow Republicans he wants them to break the state’s constitutional spending limit, according to several people who attended the meeting. He also told them that he would campaign for them after the session if they face political attacks for their support of breaking the limit, according to attendees.

The announcement took many in the room by surprise. For much of the past year, Perry has led a charge among conservative leaders and activists to push the Legislature to vote to tighten the state’s spending limit, dismissing the current one as too loose to ensure the state will budget conservatively in the future. Now he was urging them to break the limit he previously had described as too liberal.

One Republican House member described Perry’s remarks in the meeting as “baffling.” Another said it was “confusing.”

Perry’s comments at the meeting were initially reported by Mike Hailey, editor and publisher of Capitol Inside, an online, subscription-based newsletter focused on Texas politics. Hailey described the remarks as increasing suspicions that Perry is not planning to run for re-election next year.

A call to Perry’s office was not immediately returned Friday.

Perry called for tightening the state's spending limit last year as part of his Texas Budget Compact plan. It was his first major policy initiative following the end of his failed presidential campaign. The current spending limit is based on estimates of growth in Texans’ personal income. Perry favors basing the limit instead on the combined growth in the state’s population and inflation, which would be more restrictive.

“A constitutional limit on spending. That makes so much sense to Texans. Basically limit the amount of spending to population and inflation and cap it constitutionally,” Perry said during a tele-town hall hosted by Empower Texans two days before his meeting with House Republicans. “I don’t think there’s anything that can have a more powerful message.”

Along with backing Perry’s proposal for a tighter spending limit, Empower Texans is among the conservative groups pressuring lawmakers to avoid exceeding the limit currently in place, which would require a majority vote in both the House and Senate. Earlier this year, the organizations launched a website, capspending.com, devoted to the issue.

“There is no need for state government spending to exceed the limit… set by the Legislative Budget Board in January,” the site reads. “This is just like the debt-ceiling votes in Washington: don't do it.”

The limit, often referred to as the spending cap, stems from a provision in the Texas Constitution that essentially states that government can’t grow faster than the state’s economy. The limit is implemented in a complicated and confusing manner difficult for even some Capitol veterans to grasp. The limit applies to most of general revenue, a portion of the budget over which state lawmakers have the most control.

During most sessions in recent years, lawmakers have had enough room to expand spending without bumping up against the limit. This session is different due to the Texas economy’s rapid swing from a recession to recovery. After last session’s budget cuts, lawmakers have enough money to increase the budget by more than $15 billion over current spending — but spending even half of that amount would likely cause lawmakers to hit the spending cap.

Both House and Senate budget proposals increase general revenue spending by more than $6 billion. Lawmakers are operating under the assumption that they can spend roughly half-a-billion dollars more before reaching the spending cap. The Legislative Budget Board has previously estimated that $684.9 million more could be spent within the cap based on the House version of the budget, according to LBB spokesman John Barton. However, that figure will be revised soon based on expected changes to the current budget, he said.

The state’s Rainy Day Fund has over $8 billion in it but is projected to grow to $11.8 billion by the end of the next biennium in 2015. Lawmakers have discussed tapping that fund for several expensive initiatives, including for hundreds of water infrastructure projects, addressing a funding shortfall at the Texas Department of Transportation and reversing school spending cuts made last session.

The House’s chief budget writer, Jim Pitts, R-Waxahachie, said he isn't sure if there are enough votes in the House to break the spending limit but that it will be necessary to do so if lawmakers want to achieve certain expensive goals before the session ends.

“I think if we want to do anything with water or put more money in education, if we want to do what some people are asking for for transportation, we will have to break it,” Pitts said.

Several House Republican lawmakers said Perry’s support for exceeding the cap doesn’t remove their reservations about it.

“I think especially with what’s happening in Washington, people expect us to stay responsible and stay within the spending cap,” said state Rep. Bryan Hughes, R-Mineola. “I’m not prepared to exceed the spending cap.”

State Rep. David Simpson, R-Longview, said he is open to breaking the spending limit, but only for what he believes to be the right budget for the state.

“To pay down our debt, I would be for using some of the Rainy Day Funds and breaking the spending limit,” Simpson said.

State Rep. Donna Howard, D-Austin, has filed a bill that would exempt spending from the Rainy Day Fund from the calculations on spending limits. She said that bill would allow lawmakers to invest in areas such as education and water without having to deal with the political complications of voting to bust the cap.

“I’m definitely getting the sense that I have some support,” Howard said. “I’m spoken with several of my colleagues as well as my Republican colleagues who do feel this is an option that would allow us to move forward.”

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