Let's talk surplus

Texas has a surplus in it. There are worse things to have.

After considering basic demands like school enrollment growth and making good on a highly touted promise to lower local school property tax rates, there are choices to be made. Loosen restrictions in public health care programs? Target high college tuition rates? Lower property taxes further? Or save for the future?

"It's never going to be easy to write a budget. There are many legitimate needs out there," Sen. Steve Ogden, R-Bryan, Senate Finance Committee chairman, has said.

What's more, before leaders can have a free hand in deciding to spend, save or give tax breaks, they'll have to pry loose a constitutional spending cap that will otherwise put billions of dollars beyond their reach.

"There's a challenge in the pull on funds -- particularly the billions needed in state dollars to lower local school property taxes -- and the cap," said Rep. Jim Pitts, R-Waxahachie.

As chairman of the Appropriations Committee, Pitts' budget experience is among the pluses he touts as a House speaker candidate: "This is the 'budget session,' " he said.

"It will be extremely challenging, because it always is," agreed Sen. Judith Zaffirini, D-Laredo, who has been Senate Finance Committee vice chair through bone-thin and pleasantly plump budget times. "There's a challenge when there is money, and when there isn't."

This time, there appears to be money.

House Speaker Tom Craddick, R-Midland, has estimated lawmakers will have $15.5 billion in new state dollars available when they write the budget for the next two years. That's an unofficial tally; the state comptroller will make the official estimate.

[...]

Others have their eyes on restoring services they say still suffer from cutbacks made in 2003, when lawmakers faced a $10 billion revenue shortfall.

"I think we have seen some of those cuts were probably penny wise and pound foolish -- for example, the (Children's Health Insurance Program) cuts. We're seeing all of the millions and millions of dollars of unreimbursed care that our local hospitals are having to pick up, and that in the end the taxpayers pick up," said Rep. José Menéndez, D-San Antonio, House Appropriations Committee member.

It would take the entire $15.5 billion, plus $2.7 billion more, just to restore general spending to the 2002 level, according to the Center for Public Policy Priorities, which advocates for services for low-income Texans. That estimate takes into account inflation and population growth.

"Taking every dollar that the speaker thinks we're going to have and spending it somewhere still doesn't get us back up to where we used to be before we made some pretty horrible cuts for social services," said Eva DeLuna Castro, senior budget analyst for the center.

You know where I stand on this. If that means we can't slash property taxes down to a dollar, that's fine by me. Those cuts aren't sustainable anyway, and I don't expect the Lege to properly address that.

Looming over the debate is the constitutional spending cap, which limits growth in certain state spending to the rate of Texas' economic growth. The cap applies to state tax revenues not constitutionally dedicated to other purposes.

Unless lawmakers suspend the cap -- a vote some in the GOP-majority Legislature might find difficult even if it's tied to tax relief -- or leaders find an innovative way around it, much of the $15.5 billion surplus will remain off limits.

Unless they make reconciling cuts elsewhere, the Legislature would be unable to meet its promise to cut school property tax rates to $1 per $100 valuation without breaking the cap, which would allow no more than $9.5 billion in spending from affected revenues.

Legislative Budget Board director John O'Brien has said the estimated $13.5 billion needed to pay for the school property tax cut in the coming two years would alone put lawmakers over the cap, leaving no funding increases for anything else.

I think this is going to be the liveliest debate of the session. Look for some genuinely strange bedfellows as deals get proposed and negotiated. I really don't know how this will get resolved, but if I had to guess I'd say they find a way around the cap. How they do it, and if they can do it without someone filing a lawsuit over it, that's the question.

On a side note, the article quotes a certain freshman Senator from Houston at some length. I don't know any more than anybody else does how successful Dan Patrick is going to be as a Senator. (If you haven't read the Texas Monthly profile of him, in this month's issue, I highly recommend it.) I tend to think his temperament is more suitable to an executive role than it is to a legislative one, but I also think one underestimates him at one's peril. I'm just curious if the amount of media attention he's going to get once the session actually starts and he gets assigned to whatever committees David Dewhurst sees fit to place him on will be directly or inversely proportionate to his actual influence as a legislator. In other words, will he be quoted a lot because he's a mover and shaker and his position on an issue can affect the fate of a given piece of legislation, or will he be quoted a lot because he's unable to do anything else besides complain about all the things he couldn't stop? Given all that we know about Danno, I don't think there's any scenario under which he isn't quoted a lot, but as with some other of my predictions, this is one where I won't mind being proven wrong. We'll see.

UPDATE: From Peggy Fikac:

The Legislative Budget Board on Thursday is again scheduled to take up the constitutional spending cap.

The board put off a vote on the issue when it last met in late November.

[...]

Legislative leaders have discussed tying a legislative vote to exceed the cap directly to the tax relief measure. Officials including Gov. Rick Perry say tax relief shouldn't count against the spending cap.

The cap applies only to state tax revenue not constitutionally dedicated to other purposes. It doesn't apply to dedicated state tax funds, fees or federal funds.

A majority of the Legislature can vote to exceed the cap, but legislative leaders directed LBB staff to see if there are other options.

Has anyone heard what these options might be? Do you have a guess?

"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean -- neither more nor less." My guess is that someone will claim the same thing for the spending cap, which is why I think litigation is likely.

Posted by Charles Kuffner on January 02, 2007 to Budget ballyhoo | TrackBack