Conservative budget preserves the state’s future posterity

This commentary originally appeared in the Houston Chronicle on June 3, 2015.

The 2015 Texas legislative session ends with Houstonians and all Texans having reason to cheer from a 2016-17 state budget that meets the needs and obligations of the state within their ability to support it, including historic tax cuts.

To put this in perspective, imagine that you budget for the next two years so that you meet all your necessary expenditures with available income and save for a rainy day.

That's exactly what the 84th Texas Legislature did this session that ended on Monday.

Since the needs of the state must be funded within available revenue because of a required balanced budget, population growth and inflation are two key measures that appropriately account for this.

Population growth potentially generates an increase in demand for government services and more income. Rising consumer prices is typically tied to wage growth so a measure of these prices, such as the consumer price index, is appropriate.

Population growth plus inflation provides a metric that the Texas Public Policy Foundation has recommended for years as a spending limit for the total budget.

Unfortunately, the state's current constitutional spending limit covers only about 40 percent of the budget and is based on the growth in the state's economy measured by a forecast of personal income for the next two fiscal years. This weak limit has contributed to excessive spending during multiple sessions and should be strengthened so Texans can avoid the threat of higher future taxes and fees.

Before the legislative session, this preferred metric was calculated for the last two fiscal years to avoid the nearly impossible task of forecasting a dynamic economy. The result was a 6.5 percent limit.

The Conservative Texas Budget Coalition, comprised of 14 conservative organizations including ours, specified this marker as the spending limit defining a conservative budget. This limit was not in the constitution. This limit was not in statute. This limit was shunned by critics as something that couldn't be done.

Not only was it done, but after increasing the total budget by $7.3 billion to fund such things as transportation, education, health care and border security, all funds increased only 3.6 percent to $209.4 billion and state funds increased only 5.8 percent to $141.4 billion.

This shows that a spending limit with population growth plus inflation as the metric not only can work, but it can meet the needs of the state and keep Texas prosperous. The state's leadership is to be commended for this remarkable feat.

Many times when legislators get to Austin, their focus is on how to spend every dollar. This time the attention was on how to best return dollars to taxpayers while meeting the needs of the state.

By flipping the argument right out of the gate, the stage was set for keeping the budget within your ability to fund it.

They met this newfound focus by passing a $3.8 billion tax-relief package.

The most onerous tax and the one that if cut would provide the biggest economic boost is the business franchise tax. The Legislature rightfully put the largest portion of the package toward permanently cutting this tax 25 percent at a value of $2.6 billion.

To reduce what ranks as the 14th-most punitive tax in the nation, legislators also permanently increased the homestead exemption by $10,000 and put a safeguard in place to hold rising property taxes in check by requiring a 60 percent vote of a local governing body to raise a property tax rate above the effective rate.

By limiting spending, keeping taxes low and providing pro-growth policies that have contributed to almost two times more total jobs created since the start of the Great Recession than all the other states combined, Texas proves the case that fiscally conservative policies work. This is something that other states and D.C. would be wise to follow for greater prosperity for all.

Heflin, former chairman of the Texas House Committee on Appropriations, is director of the Center for Fiscal Policy at the Texas Public Policy Foundation.