Debate Over Water Bill Could Spur Bigger Fight

A debate about how to address the state’s drought — set for the Texas House on Monday afternoon — is poised to turn into a floor fight over what it means to be a fiscal conservative in the Tea Party era.

Conservative activists have spent the weekend mobilizing like-minded lawmakers ahead of Monday’s scheduled debate over House Bill 11 from state Rep. Allan Ritter, R-Nederland. HB 11 would draw $2 billion for water projects from the Rainy Day Fund. 

Michael Quinn Sullivan, who heads Empower Texans, sent out an email missive Sunday urging conservative supporters to call their House members to oppose the legislation, arguing that it spends too much money from the fund, a reserve of oil and gas taxes that's projected to contain $11.8 billion by the end of the 2014-15 biennium. Sullivan argued that if water were a top priority, the money should come from general revenue.

"Conservative legislators voting for bad policies in the hopes of getting good legislation to move might do well to remember that selling out will rarely provide the pay-day they expect," Sullivan wrote.

Gov. Rick Perry, meanwhile, backed HB 11 in an op-ed over the weekend, saying it was necessary to keep Texas attractive to businesses.

"If we want to retain our status as the nation’s epicenter for job creation, we need to address this issue now, and address it aggressively," Perry wrote in stating his support.

On Monday afternoon, just before the debate on the legislation, Perry met with the House Republican Caucus to urge support for the bill. The governor said funding the money from general revenue as many conservatives want was "not the highest and best use" of the money. He also said if lawmakers fail to provide the kind of water infrastructure envisioned in HB 11 "people will quit moving here and the economy of Texas will suffer.” 

The business community also supports the bill, said Bill Hammond, president and CEO of the Texas Association of Business.

Earlier this month, House lawmakers overwhelmingly passed a companion water bill, House Bill 4, also sponsored by Ritter, which created a special revolving fund that would offer loans for water-supply projects around the state.

HB 4 could come up in the Senate on Monday. So could Senate Bill 4, a measure by Sen. Troy Fraser, R-Horseshoe Bay, which would restructure the Texas Water Development Board, the state's main water agency, in addition to authorizing the creation of a special water fund.

While Perry supports tapping the Rainy Day Fund on water infrastructure projects, the debate over HB 11 has shifted in recent days as criticism of the measure as fiscally reckless from conservative groups has grown louder.

"Lawmakers started with a lot of promises, and even more money,” Sullivan wrote in his email to conservative activists. “They’ve blown through the cash, and are trying to grab even more. And thanks to a leadership undermining conservatives, those pledges are evaporating faster than water in August."

The Texas Public Policy Foundation, a conservative think tank with close ties to several of the state’s political leaders including Perry, announced Sunday it was opposed to the bill.

"The 83rd Texas Legislature has on hand more than $8 billion in new general revenue to pay for increased spending in areas like Medicaid, roads, water and education," foundation president Brooke Rollins said. "But instead of setting priorities to make the new spending fit within available revenue, the Legislature appears ready to spend far more than this.”

In an unusual disagreement with the group, Perry made the case for a big one-time withdrawal from the Rainy Day Fund for water projects in his op-ed. The governor, who considers himself a fiscal conservative, has made economic development his signature issue. And if water gets tight, he said businesses relocations to Texas would dry up.

"The good news is that current economic conditions and available balances in the Rainy Day Fund provide a unique opportunity for the state to partner with communities by offering financing to develop and implement new water supplies," Perry wrote in support of a one-time transfer of $2 billion from the fund.

Asked about the split among conservatives, Rich Parsons, the governor's spokesman, said: "We have infrastructure needs in the state that need to be met." He added: "I think Texans recognize the need for action and expect state leaders to take action, and that's precisely what the governor is doing."

Hammond, of the Texas Association of Business, said Monday in support of HB 11: “I think the business community is pretty much united. ... It's necessary [because] unless we do something more than what we’re doing now, in 50 years demand will be up by about 22 percent and supply will be down by about 10 percent. That’s a disaster.”

“It’s already being used against us," Hammond said, "that Texas is in a drought and they’re not doing anything about it.” 

In a way, the House and the state's conservative groups have been barreling toward this clash since the start of the session, when budget analysts at the Legislative Budget Board informed lawmakers that spending from the Rainy Day Fund counts against the state's constitutional spending limit.

At first, various political leaders including Lt. Gov. David Dewhurst argued that the analysts were wrong. It frankly made no sense, they said. The spending limit is meant to keep a portion of the state's budget that lawmakers have the most control over from growing too much one session from the next. The Rainy Day Fund is essentially the state's savings account. Republicans often insist on spending the fund on one-time needs rather than recurring expenses. Counting withdrawals from that fund toward the spending limit would artificially increase the amount lawmakers could spend the following session, some argued.

After consulting with lawyers and legislative experts, budget writers on both sides of the chamber grudgingly agreed that Rainy Day Funding spending legally counts against the state's spending limit. This created an unexpected political problem, as many lawmakers had planned to spend several billion from the Rainy Day Fund to address water and transportation issues this session, and perhaps invest some in education as well.

Breaking the spending limit requires a simple majority vote in the House and Senate. Politically, it is far more complicated. Republicans worry that voting to break the limit is akin to Congress voting to break the debt ceiling. Though the two are different conceptually, voting to break either creates easy attack lines for potential Republican primary opponents.

The spending limit, also referred to as the spending cap, is meant to prevent state spending from growing faster than the state's economy. In reality, the limit is a complicated and confusing mechanism that even some veteran lawmakers didn't understand before the start of this session. That's because it usually isn't a factor in planning out the state budget, as lawmakers rarely plan to spend enough to reach it.

Over the past year, Perry and conservative activists have called for tightening the state's spending limit. This month, Perry somewhat reversed course by privately telling the House GOP Caucus they should vote break the spending limit to pay for one-time spending from the Rainy Day Fund. He vowed to campaign for those Republican House members who faced trouble in the next election because of the spending limit vote.

Yet the Texas Public Policy Foundation and Empower Texans, among others, are pressing House members to reject Ritter's water bill because it would break the limit.

Conservative groups are also expressing opposition to previous action by the Senate on water. Earlier this month, the upper chamber unanimously passed Senate Joint Resolution 1, which would ask Texas voters to approve $5.7 billion of spending from the Rainy Day Fund, including $2 billion for water projects. By having voters approve the spending via a constitutional amendment, it would not be subject to the spending cap.