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Senate budget "unambiguously" unconstitutional, House leadership says

In a letter sent Tuesday, an attorney for two House leaders urges Attorney General Ken Paxton to side against a $2.5 billion accounting trick proposed in the Texas Senate's version of the state budget.

State House Speaker Joe Straus on the floor as the House takes up the budget on April 6, 2017.

Accusing Senate budget writers of “clearly and unambiguously” contradicting the Texas Constitution, House leaders on Tuesday urged the state’s top lawyer to take their side in a dispute over how state lawmakers should be allowed to balance the books.

It’s the latest development in an ongoing battle between the two legislative chambers as they seek to reconcile major differences in their budget proposals about what public programs to fund and how to fund them. At issue is a controversial accounting maneuver intended by the Senate to free up $2.5 billion by strategically delaying a payment to the state’s highway fund.

Amid criticisms that the trick could be unconstitutional — Texas voters in 2015 approved an amendment to the state constitution dedicating the $2.5 billion to highway projects — state Sen. Jane Nelson, a Republican who chairs the Senate Finance Committee, asked Texas Attorney General Ken Paxton to issue an opinion about whether her budget plan was kosher.

In a letter sent to Paxton's office Tuesday, a lawyer representing House Speaker Joe Straus and his top budget writer, state Rep. John Zerwas, R-Richmond, urged Paxton to make a case against the budget maneuver, which Straus last month likened to “cooking the books.”

Though attorney general opinions do not carry the force of law, Paxton’s answer could shake up policy negotiations in the final weeks of the legislative session.

By delaying the $2.5 billion transfer of sales tax revenue into the state highway fund from August 2019 to September 2019, senators bet that they could, in theory, push the liability into the next budget cycle, freeing up the money for health care, schools and other needs more immediately. Nelson has said the maneuver has “solved a lot of our problems” in crafting the chamber's $218 billion budget and wouldn’t hinder highway projects. 

But in his letter Tuesday, attorney Frank Battle wrote that Straus and Zerwas “believe the constitution clearly and unambiguously requires” that state money must be paid into the state highway fund “in the same fiscal year that the underlying revenue was received.”

The controversy essentially boils down to how literally state lawmakers should interpret a four-word phrase embedded in the Texas Constitution. That phrase directs the Texas comptroller to deposit $2.5 billion for highway funding “in that state fiscal year” when the revenue was collected as taxes.

Nelson sees some wiggle room when it comes to the timing of the payment. In a letter to the attorney general last week, she said she had been informed by the comptroller that it was not logistically feasible to calculate the tax revenue in question until after the end of the fiscal year, suggesting that it would be simply impossible to comply with the Constitution.

Battle fiercely disputed that argument, saying it was “contradicted … by logic.” His letter warned that the accounting trick could violate the rules of the Texas House, raising the possibility that a lawmaker could kill the budget through a procedural motion known as a point of order. If passed, the budget could also open the door to lawsuits from any Texas taxpayer arguing that lawmakers had unconstitutionally spent public funds, the letter added.

Both chambers’ budgets rely on accounting tricks in order to avoid steep cuts to public programs during a tight-fisted budget year. Lawmakers on key budget committees will spend the remaining month and a half at the Capitol debating which tricks to use in the final two-year budget they send to the governor's desk. The House budget proposal, for example, would delay a $1.9 billion payment for public schools into the next two-year cycle. Straus and his allies have defended the move, which is hardly unprecedented, as being completely different from the Senate’s payment diversion because the payment for public schools isn't constitutionally enshrined.

The House budget would also use $2.5 billion from the state’s Economic Stabilization Fund, a sort of savings account better known as the Rainy Day Fund, to pay for certain health care and border security programs. Senate leaders have been critical of that proposal. The debate over whether to use the savings account or whether to delay the highway fund payment is expected to be one of the fiercest points of contention between the two chambers in their closed-door negotiations.

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State government 85th Legislative Session Budget Joe Straus Ken Paxton Texas Legislature