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Analysis: A Senate Trying to Regulate Its Own Spending Habits

The Texas Senate wants to limit growth in the state budget — by adding a fifth spending limit to state law.

State Sen. Kelly Hancock, R-North Richland Hills, speaking at the Texas Public Policy Foundation legislative orientation session on Jan. 7, 2015.

State spending is set by legislators, who write up a budget, negotiate changes and then finally agree — by voting — to adopt it. State agencies can’t spend money that’s not in the budget, and the entire enterprise is required to fit within the state’s means. Under ordinary circumstances, Texas government cannot spend more money than it brings in.

But lawmakers do not trust themselves. They and the state’s voters have adopted four separate limits on how fast state spending can increase from one budget to the next, including three that they and the state’s voters added to the Texas Constitution.

That’s right — they’re talking about a cap on spending as if there is nothing to restrain them now — kind of an ongoing Stop Us Before We Spend Again program. But this dog is already dragging four leashes.

One prevents the state from issuing new debt if its current debt payments reach a certain threshold. The state is in no danger of hitting this one.

Another limits the percentage of the budget that can be spent for assistance grants to needy children and their caretakers. Fear not: According to the Legislative Budget Board, the current budget spends $132.5 million on those grants, or $1.9 billion below the limit.

The so-called pay-as-you-go limit is the one that says lawmakers can’t spend more than they’ve got.

And then there is the one commonly referred to as the state’s spending cap. It says spending of nondedicated state revenues cannot grow faster than “the estimated rate of growth of the state’s economy.”

The state Senate wants that last one to be more restrictive. Sen. Kelly Hancock, R-North Richland Hills, originally sought to amend the constitution but could not muster the votes in the Senate. His proposal would have prescribed a tighter limit on growth and required something more than a simple majority of representatives and senators to bust that spending cap.

He reworked it, passed it and sent to the House a bill that attempts to accomplish the same thing without changing the Constitution.

When budget writers are calculating the spending cap, they use an estimate of growth in personal income, figuring that’s a good measure of what will happen to the overall economy. Hancock would change that to a combination of population growth and inflation, which generally produces a smaller estimate of growth. He would also require a 60 percent majority in the House and in the Senate to approve a budget that spends money faster than the statutory limit would allow — in place of the simple majority now required.

The only modern instance of Texas legislators busting the cap came after they increased state spending enough to lower property taxes in the state’s school districts in 2006. It was higher spending, but for a big tax cut. Republican leaders backed it, providing cover for legislators who worried about voter reaction. As it turned out, the voter reaction was bad, but not for the reasons they feared: Promised a property tax cut averaging $2,000, voters were left wondering what happened to their money. Increases in property values and taxes ate up their promised savings.

Most of the time, busting the spending cap is too scary for the average Texas lawmaker to imagine, and that fear is what governs the growth of the budget. It only takes a simple majority now, and it hardly ever happens; adding a supermajority might not make any difference.

But the promoters argue that a lower growth estimate would make a difference. If lawmakers are afraid to bust the cap, they say, putting an even lower limit in place would dictate smaller increases in spending. And if this legislation doesn’t work, they could always try to get the 10-member Legislative Budget Board to adopt a new index based on population and inflation without writing it into law.

They could also write smaller budgets if they wanted to. But some of them think it’s safer to put the money out of reach.

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State government 84th Legislative Session Budget Dan Patrick Kelly Hancock Texas Legislature Texas Senate