Unable to Tighten Spending Cap, Senate Built a New One

Lt. Gov. Dan Patrick and Senate Republicans had hoped to amend the Texas Constitution to tighten the state's spending cap. Short of the needed votes, they passed a measure creating a new cap in state law instead.

State Sen. Kelly Hancock, R-North Richland Hills, and Lt. Gov. Dan Patrick touted legislation to exempt tax cuts from counting toward the state spending limit at a Capitol press conference on March 10, 2015.

Lt. Gov. Dan Patrick claimed victory last week on one of his top legislative priorities: tightening the state’s constitutional spending cap.

"This historic bill has been a priority for more than a decade, and I am proud that the Texas Senate has finally accomplished this goal," Patrick said Thursday in a statement after the Senate passed Senate Bill 9.

That’s one way to look at it.

Another is that the bill the Senate passed Thursday on a 19-12 vote wasn’t the sweeping win Patrick and most Senate Republicans had initially sought. The bill they passed was a watered-down version of SB 9— rewritten during a 16-minute floor debate on the legislation.

Patrick and other conservatives had made tightening the spending cap a key goal of the session. Under the Texas Constitution, state spending cannot grow faster than the state’s economy. The simple idea is complicated in practice, depending on how the terms are defined.

Less than half of the state budget is actually subject to the spending cap. Large pots of money, including federal funding, are exempt. Busting the cap requires a simple majority vote in both chambers. Patrick and other Republicans have argued for years that the cap should cover more of the budget, be calculated differently and be tougher for lawmakers to break.

State Sen. Kelly Hancock, R-North Richland Hills, who authored SB 9, originally proposed asking voters to amend the Texas Constitution to include such changes. But amending the Constitution requires passing both a bill and a joint resolution, in this case SB 9 and Senate Joint Resolution 2. While passing a bill just takes the support of a simple majority, passing a joint resolution has a higher threshold: two-thirds of each chamber. Hancock couldn't draw the support of enough senators for SJR 2, so he and like-minded senators opted for a different approach last week. 

On the Senate floor, state Sen. Robert Nichols, R-Jacksonville, amended Hancock’s bill to put most of the language from the joint resolution into the bill.     

“Since he doesn’t have the votes for a constitutional amendment, we’re trying to take the features from that [and] instead of constitutionally setting it up, doing it by statute,” Nichols explained to fellow senators.

Rather than tightening the constitutional spending cap, the Senate approved an additional cap in state law, said Dale Craymer, a former revenue estimator in the comptroller’s office and the current president of the business-backed Texas Taxpayers and Research Association.

“In effect, they have created an additional spending limit on top of the current limit,” Craymer said. “It creates a second limitation.”

House Finance Chairman John Otto, R-Dayton, said Monday that he had not looked closely yet at what the Senate passed but expressed skepticism regarding the overall approach.

“If you’re going to do something as important as change the spending cap, then you need to do it in the Constitution,” Otto said.

If SB 9 passes the House and Gov. Greg Abbott signs it, the second spending cap would be broader than the constitutional spending cap by including some non-tax revenue. Breaking the cap would require the support of three-fifths of the members of both chambers. (But it would only take a simple majority vote to repeal that higher threshold.)

While Hancock wasn't able to amend the Constitution, his bill would still impact how the constitutional spending cap would work.

The Texas Constitution says that spending cannot “exceed the estimated rate of growth of the state's economy.” Backers of Hancock’s original bill wanted to edit that phrase to require lawmakers to look to the combined growth of the state’s population and inflation, which tends to be lower than the metric the state currently uses, the growth in state personal income. Since amending the Constitution wasn’t an option, the version of SB 9 that passed in the Senate defines “an appropriate measure of the estimated rate of growth in the state’s economy” as the combined growth of population and inflation.

Craymer took issue with that approach.

“I think it’s highly arguable that you can say that population and inflation measures the entire Texas economy,” Craymer said. “Economists don’t measure entire economies that way.”

Hancock stood by the measure that passed the Senate.

“A constitutional change would have written this adjustment in permanent marker, but we didn't have the votes for that,” Hancock said. “So we settled for writing it in pen.”

Hancock added that he believed his bill, if it becomes law, would still have the desired outcome of restricting how much future budgets can grow.

“Not everything that's worth doing in Austin requires a constitutional change,” Hancock said. “If a simple majority vote is good enough for passing the budget, it's good enough for tightening the budget.”

Asked what the House’s plans are for SB 9, House Speaker Joe Straus said in a statement, “The House will deal with Senate ideas in due course.”

A request for comment from Patrick was not immediately returned late Monday.