Two Upcoming House Votes May Reveal Whether Texas is Going to Keep Spending Under Control

While things do tend to be bigger in Texas, that doesn’t mean that bigger is always better. This exception would certainly apply to the budget for Texas government.

Unfortunately, after the Texas Senate passed SJR 1 this week to raid Texas’ Rainy Day Fund of $5.7 billion, it appears that the Texas budget is about to get much bigger. Two key votes in the Texas House of Representatives in the next few days will let us know if the House is going to follow the Senate’s lead in ignoring fiscal restraint.

It’s a shame that only two years after doing a pretty good job of holding the line on spending in addressing a $15 billion budget shortfall, the Texas Legislature is poised to embark on a spending spree. But it wouldn’t be the first time this has happened.

In 2003, Texas also experienced a revenue shortfall. And as happened in 2011, the Texas Legislature managed to balance the budget for the most part by practicing fiscal restraint. However, the fiscal restraint was short lived. The Texas Legislature came back in 2005 and went on a three-session spending spree. And, as we know, that spending brought Texas back to another budget shortfall last session.

If we do not watch our spending, Texas may well repeat that cycle again. Unfortunately, there is little evidence this session of the fiscal discipline needed to keep spending under control.

For instance, out of the almost $85 billion of non-dedicated general revenue that is available for appropriation, only about $70 million—less than one tenth of one percent—would be left unspent by the current appropriations bill; in other words, the Texas Legislature is spending almost every penny it can get its hands on.

In fact, with the raid on the Rainy Day Fund new spending this session may increase as much as $14 billion, exceeding the state’s constitutional spending cap that limits spending growth to no more than the growth of the Texas economy.

To avoid the limits of the spending cap, the legislators have three options. They can pass SJR 1, which allows them to bypass the cap. They can vote directly to break the cap in an appropriations bill. Or, the best option, they could make only modest increases in spending to keep it under the spending cap.

Tomorrow is the first test to see which way the House will go. It will take up HB 1025, a supplemental appropriations bill, which would spend an additional $874.9 million for the current biennium. Very little of this money needs to be spent; most of the bill is a wish list from state agencies—the exception being funds to pay for the 2011 Texas wildfires. However, some might wish to pass this bill anyway because the spending cap is set up so that the more the Legislature spends now, the higher the spending cap will be for the next biennium.

Next, on Monday the House will debate HB 11, which would take $2 billion from the Rainy Day Fund for the development of new water projects. Most of this money, however, will not be needed for some time, and none of it will be needed until 2015.

Depending on how these votes go, we’ll have a pretty good idea by Monday evening of whether the Texas Legislature is going to spend all available general revenue, raid the Rainy Day Fund, and bust the budget cap.

Let’s hope it doesn’t, because there is a better way.

The Legislature has on hand about $8 billion of new general revenue to spend this session. There is simply no reason the Legislature can’t fund all of its priorities—including water, transportation, or education—out of this money. Yet at this point, the plan seems to be to spend the general revenue on some of these “priorities,” then head to the Rainy Day Fund to pay for the rest.

There is one proposal out there that might actually put the Rainy Day Fund to good use: a $1.6 billion business tax cut. While this is a good start, it isn’t enough. If we want to keep Texas heading in the right direction, here is the path Texas should take:

• Do not tap the Rainy Day Fund for any new spending. Instead, pay for all new spending using only available general revenue without exceeding the state’s spending cap.
• Carefully examine the calls for new spending on roads, water, and education. For instance, many people are saying we couldn’t spend any new funds on water until at least 2015—so why appropriate the money this session? And proposed public education spending in the regular budget will be up $3 billion—so why tap the Rainy Day Fund for more?
• Use the Rainy Day Fund only to give Texans a $3.8 billion tax cut: $2.2 billion from a 1/4 cent sales tax cut and $1.6 billion from a business margin tax cut.

The tax cut—along with the restraint on spending growth—would put money back into the hands of Texans, boosting the Texas economy and increasing jobs.

If we don’t take this path, we might find ourselves heading toward another budget shortfall—and this one may not wait six years to show up. With the economic recovery still wavering, higher Medicaid and health care costs heading our way with the full implementation of ObamaCare, and the harm to the Texas economy caused by higher spending, we could face another budget shortfall as early as next session—2015.

History often repeats itself. But it doesn’t have to. Members of the Texas Legislature should take to heart the lessons from our recent past and adopt a smaller, better 2014-15 budget to keep Texas on the path to economic prosperity.