Texas lawmakers set a spending cap they likely won't reach

^{Editor's note: This story has been updated.}

The Legislative Budget Board on Thursday set the state’s growth rate, a number that in flush times looms large over lawmakers haggling over state spending.

But these are not flush times.

The 10-member board — chaired by Lt. Gov. Dan Patrick and House Speaker Joe Straus — picked 8 percent as the growth rate in the state’s two-year budget, capping how much lawmakers can spend in what promises to be a tight-fisted legislative session kicking off in January.

The rate, approved unanimously after no debate, is nearly 4 percentage points lower than the threshold set two years ago. Lawmakers described the new cap as essentially moot because the state won’t have enough money to grow its budget by that much. 

“There will not be revenue available to get the 8 percent,” state Rep. John Otto, R-Dayton, and a budget board member, told The Texas Tribune, calling the budget situation the tightest since 2011.

Instead, lawmakers will focus on the state’s “pay-as-you-go” cap  — the notion enshrined in the Texas Constitution that says they cannot spend more than what’s in state coffers.

“Really, the controlling issue this session is going to be pay-as-you-go,” meaning that the growth rate cap “doesn’t matter,” Sen. Jane Nelson, R-Flower Mound, said at the hearing.

Lawmakers will learn of that more-consequential threshold when Texas Comptroller Glenn Hegar unveils his certified revenue estimate in December.

Thursday’s vote — and reactions to it — reflects economic growth slowed by stubbornly low oil prices over the past two years.

“The Texas economy continues to grow at a modest pace,” Tom Currah, Hegar’s chief revenue estimator, told lawmakers, noting that the state has weathered oil’s price plunge better than other big energy-producing states. He also offered a few reasons for mild optimism: a modest increase in oil rig counts in recent months and an agreement from OPEC nations this week to cut oil production in hopes of stabilizing prices.

But the state’s growth, Currah added, “is still well below the rates we saw years ago,” and beginning balances in the 2017 session will be “substantially lower” than the more than $7 billion lawmakers saw two years ago.

Though it may look arcane at first glance, the budget’s growth rate can matter mightily — if the state has plenty of cash.

This year, it essentially serves as a symbol of the less-than-rosy budget outlook.

The growth rate limits how much lawmakers can spend in the current two-year budget cycle compared to the previous one, effectively capping spending on roughly half of a budget that last session totaled $209.4 billion.

More specifically, the growth rate limits how much “nondedicated revenue” — state tax dollars not already obligated to specific programs — that lawmakers might allocate in 2017. This year’s limit amounts to roughly $99 billion. 

The budget board is supposed to base the growth rate on projections of Texans’ personal income growth in the coming two years.

The board received five projections of personal income growth ahead of the vote, ranging as high as 11.44, forecasted by the research firm IHS. Hegar’s forecast was the lowest at 9.99 percent.

But in a move that some called rare, lawmakers approved the significantly lower 8 percent figure. 

“Today’s vote will allow the Legislature to produce a balanced, responsible state budget,” Straus said in a statement. “It will also allow us to make strategic investments in priorities such as education, child protection and mental health care.” 

Two years ago, when oil prices had only begun to tumble, the budget board set a growth rate of 11.68 percent.