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Analysis: Making the Worst of a Good Situation

Texas legislators have an unfamiliar problem: They have more money available to spend than their self-imposed limits will allow. And it's enough to start debates even where there is broad agreement.

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Having too much money is a real drag. Look at the state Legislature, which is swimming in green.

Both the House and the Senate came in with base budgets that require less than $100 billion in state funds, while $107 billion in state funds is available. There is another $6 billion available above that, if lawmakers can talk themselves into increasing the size of the budget by that much, and that’s without even mentioning the $11.1 billion expected to be sitting unspent in the Rainy Day Fund at the end of the next budget cycle.

Not surprisingly, there is a quiet race to use the extra money for something — or to return it to some or all of the state’s taxpayers. Surpluses turn out to be no easier to reconcile than deficits.

What should have been good news — tax cuts! — turned into a battle over which taxes to cut and by how much. First the House and the Senate came in with different numbers — both north of $4 billion — about how much cutting is possible. That’s easy enough to work out.

Then a series of news conferences and hearings on the Senate side flushed out all of the differences and preferences over which taxes should be cut. Small companies want to kill or shrink the business margins tax. Big businesses say they would get a fairer break from a cut in property or sales taxes. Homeowners want bigger homestead exemptions, which leaves business out.

It’s like watching an ice cream party come apart because nobody can agree on which flavor they want.

Border security was the first financial battleground. The Senate wanted a plan that would leave state police and National Guard troops on the border for the next two years — an idea priced at $815 million in the Senate’s proposed budget. The House countered with the suggestion that 4,000 cameras placed along the border could get similar results for a lot less money. Gov. Greg Abbott landed in the middle, suggesting the state could hire more troopers to replace the National Guard troops.

The common thread? Money. The state is so flush that lawmakers can talk about flinging $5 billion at two problems without constantly worrying about what’s left.

What’s left is actually quite a lot. Set aside the easy part of this accounting: the $11.1 billion that Texas should have in the Rainy Day Fund by the end of the 2016-17 biennium. State leaders have some designs on that money, but nothing they have revealed would actually drain that account.

And there is another $13 billion to $14 billion that is available to spend — but about $6 billion of that falls outside a constitutional limit on growth in the state budget.

That spending cap has become a political idol. Spending more takes a simple majority vote in both chambers, but some conservatives in the Legislature have promised that they would never do that. More importantly, lots of Republican lawmakers fear, with good reason, that the conservative voters in their party will come after them in next year’s elections if they increase the size of government faster than the state is growing.

But it’s so tempting. The state’s problems are big, and this is a rare moment when there is enough money to put a dent in some of those problems.

Meanwhile, the tax cut proposals are piling up. The Senate passed a transportation finance bill that would take sales tax money on cars and dedicate it to roads. That one is devilishly clever, increasing funds available for transportation and moving that spending from the category that counts against the spending cap and putting it into one that doesn’t. Voters will have to approve it first. Another proposal, also from the Senate, would take spending on tax cuts and on debt payments out of the calculations of spending limits.

Enough of those sorts of innovations and there won’t be any meaningful limits left at all.

The House is digging in its heels some, particularly on questions of spending more than the constitutional growth limit. But they have wish lists, too, that include tax cuts, covering pension liabilities and reducing state debt. And the conversations include the Rainy Day Fund, too, which was once used just to cover cash flow problems and has become a burgeoning and almost untouchable savings account.

Between that and the $6 billion that is outside of the cap, lawmakers have roughly $17 billion or so to dream about and debate, whether their preferences are for giving the money to taxpayers or for programs or services or something new.

Those are questions they only face when times are good.

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State government 84th Legislative Session Budget Texas House of Representatives Texas Legislature Texas Senate