Patrick: Exempt Tax Cuts, Debt Payments From Spending Cap

Sen. Jane Nelson R-Flower Mound, together with Lt. Gov. Dan Patrick, hold a press conference on the budget on Jan. 27, 2014.
Sen. Jane Nelson R-Flower Mound, together with Lt. Gov. Dan Patrick, hold a press conference on the budget on Jan. 27, 2014.

*Editor's note: This story has been updated throughout.

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.

Not all spending is subject to the cap. However, paying down state debt is. So is cutting property taxes, because it would require lawmakers approving extra state spending to make up for the loss to public schools. 

Senate Finance Committee Chairwoman Jane Nelson and state Sen. Juan "Chuy" Hinojosa, a McAllen Democrat and the committee’s vice chairman, filed measures Wednesday that would ask voters to approve amending the Texas Constitution to exempt from the cap spending on tax cuts or paying down the state debt. Patrick said lawmakers might approve extra spending for both but make them contingent on voters approving the constitutional amendments in a future election.

Nelson described the measures as “a no-brainer” and predicted they would have little trouble drawing support from a majority of the state’s voters.

In the past, lawmakers have rarely had fears of hitting the spending cap. But in the 2013 session and the current one, an influx of revenue from a booming economy have made the spending cap an unavoidable issue for budget writers.

State Sen. Kevin Eltife, a Tyler Republican and the Legislature’s most vocal supporter of paying down the state’s debt more quickly, is a joint author on the measures filed Wednesday by Nelson and Hinojosa. He has also publicly questioned whether the state can afford large tax cuts and still address its needs. Eltife said that exempting debt repayment and tax relief from the spending cap would make him more amendable to tax cuts but that he still might ultimately oppose them.

“I will only support a tax package when I see a clear-glide path to fixing the problems that we’re talking about," Eltife said. "This is a major step to getting there.”

 

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