Texas public policy foundation
Houston, We Have a Spending Problem
 
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Last month, Houston Mayor Annise Parker "sounded the alarm" as she proposed a fiscal year 2015 city budget of $5.2 billion. The mayor warned of budgetary problems on the horizon in 2016 as a result of the city's property tax revenue cap.   

More from the Houston Chronicle:

"I'll be very clear: If the cap stays in and there are no other sources of revenue, there will be layoffs," Parker said. "The Houston economy is going to continue to grow. We have held the line on taxes, and yet, there's a forced tax rollback just when there's more and more demand for services. The options are raise revenue, cut spending, both, or go to the voters in 2015 and amend the charter."

Mayor Parker may well be right to express concern over the shape of Houston's finances-but it's arguable that the city's revenue cap is the source of the problem. Just take a look at how the city's proposed and actual budgets stack up compared to population and inflation growth in fiscal years 2013, 2014, and 2015.

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Assumes a 3 percent annual inflation increase for fiscal years 2014 and 2015. Population projections for 2014 and 2015 are based on a three-year average for preceding years.

As the chart above shows, the city of Houston's All Funds and General Revenue Fund budgets for fiscal years 2013, 2014, and 2015 have or will outpace population growth and inflation in each budget year, even with some generous assumptions made for 2014 and 2015. In some cases, the discrepancy between spending and reasonable government growth are substantial-General Funds was 71 percent greater than the growth rate of population and inflation in 2013.

The data suggest that government spending is the driving force behind the city's mounting fiscal difficulties. As such, the best solution entails not more property tax revenues, but rather policies that address the spending side of the ledger and slow the growth of government spending, like zero-based budgeting, eliminating unnecessary and redundant programs and services, and enacting a comprehensive local tax and expenditure limit.

Said another way by U.S. Congresswoman Marsha Blackburn: "Government does not have a revenue problem; government has a spending problem. Government does not have a revenue problem; government has a priority problem. It is time that we begin to fine tune our focus and decide what the priority of government ought to be." 

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