State Leaders Adopt Spending Cap for 2014-15 Budget

The Legislative Budget Board voted Thursday morning to cap the state’s spending growth rate at 10.71 percent for the next two-year budget, while Republican leaders in the Senate signaled plans to fight for a budget with spending even lower than that.

The Texas Constitution states that nondedicated spending can’t grow by more than the growth in the state’s economy, but it doesn’t spell out how to measure that growth. State lawmakers have long relied on estimates of growth in Texans’ personal income.

LBB staff presented the board with five forecasts of 2014-15 Texas personal income growth ranging from 8.71 percent by the University of North Texas Center for Economic Development to 12.21 percent by Moody’s Analytics. The LBB, which includes Lt. Gov. David Dewhurst, House Speaker Joe Straus and four other members each of the House and Senate, voted unanimously to select the 10.71 percent estimate from the comptroller’s office, which was the second-lowest forecast.

The growth rate is the amount of spending over the current budget that lawmakers can commit next session in nondedicated revenue, those parts of the budget that are funded by taxes but are not required by law to go to specific programs. That category amounted to about $70.4 billion out of the $173.5 billion two-year budget lawmakers approved last session.

With the growth rate now set, the other part of the equation — the size of the current two-year budget, remains a moving target. Last session, lawmakers deferred billions of dollars in spending including $4.7 billion out of the Medicaid budget. Soon after the start of every new session, lawmakers pass a supplemental budget to address such funding gaps in the current budget. The supplemental budget will add to the total cost of the current budget, and increase the amount lawmakers can spend in the next budget.

If the base budget were to remain unchanged, nondedicated revenue would be capped at $77.9 billion for the 2014-15 budget under the growth rate adopted Thursday.

State Rep. Sylvester Turner, D-Houston, took issue with acting LBB director Ursula Parks' decision to cite the base budget without acknowledging that it will undoubtedly grow, which will in turn boost the spending cap. He called Parks’ figures “misleading” and a “backwards look” at the current budget.

“We are effectively placing a limit on what we can spend for 2014-15, and that’s why I think the base appropriations and how we calculate that is very important,” Turner said.

Parks agreed that the base budget will grow.

Dewhurst also drew Turner’s attention with a pronouncement about next year’s budget.

“At the present time in my judgment, we can fund our priorities within a number representing inflation plus population growth,” Dewhurst said. Senate Finance Committee Chairman Tommy Williams, R-The Woodlands, agreed.

Turner expressed amazement that Dewhurst was committing to limit the size of next year’s budget at a meeting where only the broader constitutional spending limit needed to be decided.

“I think it’s irresponsible,” Turner said. “I don’t think it’s good policy.”

Dewhurst said he was merely expressing the Senate’s intentions for the next session.

Straus said he expected the House would pass a conservative budget next year but stopped short of echoing Dewhurst’s prediction. Along with the role the House Appropriations Committee will have in developing the budget, Straus noted that “we will be welcoming more than 40 new members of the house in January who haven’t had a chance to weigh in on any of this yet.”

After the meeting, Dewhurst said he believed he and Straus "are on the same page."

Several Republican lawmakers made a point of noting how little state spending has grown over the last decade. Some conservative groups have recently argued that the budget has grown too much in recent years and that leaders should adopt a lower spending cap than usual.

“Anyone to me who is making the claim that we have been spending beyond growth plus inflation, they don’t seem to have their facts right,” said state Rep. Dan Branch, R-Dallas.