November 28, 2006
Tax cuts or spending caps? You decide

This has the makings of an interesting conundrum for some legislators.

Paying for promised cuts in local school property tax rates over the next two years would put lawmakers at least $4 billion over a constitutional cap on state spending, and that's before they fund growth in any other programs.

So, leaders are thinking about tying a legislative vote to exceed the cap directly to the tax-relief measure. That could make a cap-busting vote more palatable to the GOP-majority Legislature.

"You offer a bill that reduces property taxes and you tell everybody that the amount of money involved exceeds the spending cap, and let's vote," said Sen. Steve Ogden, a Bryan Republican who heads the Senate Finance Committee. "We're exceeding the spending cap so we can cut your property taxes. I think everybody'll vote for that."

Maybe they will, I don't know. I feel confident in predicting that it won't be unanimous. Someone's not gonna like this.

I have one particular someone in mind, but as yet I've not seen any public statement from him. Before I get to that, read this:

A 1978 constitutional amendment limits growth in certain state spending to the rate of Texas' economic growth, now measured by growth in personal income.

The cap applies only to state tax revenues not constitutionally dedicated to other purposes. It doesn't apply to dedicated state tax funds, fees or federal funds. A legislative majority can vote to exceed the cap.

Even under the most generous estimate of personal income growth examined by the board, 17 percent, the cap would limit such spending to $65 billion for a two-year budget period, up $9.5 billion from $55.5 billion.

But the board staff said promised property tax relief for the next two years will cost $13.5 billion.

Republican Lt. Gov. David Dewhurst and Craddick said they've heard no sentiment for cutting discretionary spending to fit tax relief under the cap.

Dewhurst said, "I, for one, am going to ask any of our senators that are talking about arbitrarily cutting $13.5 billion out of a $55 billion budget 'Great, show me where.' "

Note that 17 percent figure. Now consider what a certain freshman Senator from Houston has to say on the subject:

3. Reduce government spending now

We elected Republican majorities in the Texas House and Senate and expected them to be fiscally conservative. Our legislature has let us down. The most recent state budget includes a 20% increase in spending. We should focus on needs-based-budgeting, rather than revenue-based-budgeting.

I'm not sure how Senator Patrick calculated that 20% figure, but given the 17% figure cited previously, I suspect he's factoring in federal "pass through" monies. If so, he needs to learn a bit more about how the budget actually works.

But never mind that for now. What's more important to Sen. Patrick - funding the full 1/3 property tax cut that I daresay his listeners strongly favor, or holding some imaginary line on government spending? Call me crazy, but I suspect that Dewhurst's "show me where I can cut $13.5 billion" remark was aimed at him. So what's it going to be? I look forward to hearing his answer.

Posted by Charles Kuffner on November 28, 2006 to That's our Lege | TrackBack