Spending limits

Via the Quorum Report, here's something that I haven't seen mentioned elsewhere:

Analyst Dick Lavine of the Center for Public Policy Priorities warns dedicating the combined revenues of House Bills 3,4 and 5 only to property tax relief could seriously hamper any additional spending on state services in any supplemental appropriations bill going into the next session.

The Texas Constitution caps state tax revenues that are not constitutionally dedicated, pegging that cap to the growth of the state's economy. Those taxes cannot grow any faster than the Legislative Budget Board’s estimate of biannual growth, which is 11.34 percent this biennium. That means, based on a base budget of $50 billion, the state cannot spend any more than $3.6 billion in tax revenues. Combined with non-tax revenues, it puts a cap of $3.9 billion on the current session, Lavine says.

In essence, the state is swapping tax revenues, but the Constitution reads it as new tax spending. Lavine says it only makes sense that the cap be adjusted to recognize the expanded role of state government in the funding of education, accomplished by replacing school property taxes with state tax revenue.

Today, Sen. Florence Shapiro (R-Plano) noted that the combination of property tax relief and new educational spending would put the state just $26 million short of the cap. Under House Bill 2, the Legislature also has proposed legislation that dedicates all new revenue to property tax relief, without regard to other state services, Lavine said.

“This squeeze can be avoided only by resetting the spending cap to take into account the significant shift in school funding from local property taxes to state taxes, and by avoiding giving property-tax reduction top priority in all future budgets,” Lavine writes.

Lavine's full analysis is here. Maybe this will turn out to be moot, if nothing more is done with this session after the tax bills are all passed (as it looks like they will be; more on that later), and maybe it won't. Read and judge for yourself.

Posted by Charles Kuffner on May 02, 2006 to Budget ballyhoo | TrackBack