This commentary originally appeared in the Austin American-Statesman on January 13, 2015.
The best path out of poverty is a job. The latest employment report shows that no other state has created more jobs during the last year than Texas. The state’s 4.9 percent unemployment rate is at its lowest level in six years and has now been at or below the national average for almost eight years.
Supporting this success for folks in Austin and statewide is the proverbial three-legged stool of low taxes, sensible regulation and a good lawsuit climate.
Unfortunately, the low-tax leg of the stool, and the economic benefit it provides, may soon crumble unless legislators slow excessive government spending growth by reforming the state’s spending limit.
The current spending limit caps nonconstitutionally dedicated general revenue funds, which is only about 40 percent of Texas’ 2014-15 budget of $203.8 billion, to the projected growth rate of personal income for the next two fiscal years. Limiting such a small share of the state’s budget provides opportunities for legislators to use accounting gimmicks to avoid busting the limit and spend at a quicker pace than taxpayers can support.
Consider that total spending is up 13.4 percent above increases in population growth plus inflation since 2004. State spending is growing faster than the cost of providing basic public goods and services for a growing population, burdening Texans with the potential of paying higher taxes to fund state government.
Legislators should consider the following key reforms to strengthen the state’s weak spending limit: limit the total budget, ending commonly used accounting gimmicks to avoid busting the cap; base the limit on the lowest growth rate of population plus inflation, personal income, or gross state product to better match Texans’ ability to support core government functions; and calculate the growth rate using the two fiscal years immediately preceding the regular legislative session to stop the nearly impossible practice of accurately projecting personal income.
Following these proposed reforms, the Conservative Texas Budget Coalition — comprised of 14 organizations, including the Texas Public Policy Foundation — recommends that the upcoming 2016-17 total budget not increase more than population growth plus inflation of 6.5 percent. Add this to the current two-year budget, and the conservative marker to compare the final budget that’s passed in the 2015 Legislative Session is $217.1 billion.
Passage of this conservative budget would fund core government functions and potentially leave revenue available to provide substantial tax relief, strengthening the legs of the stool for future economic prosperity for all Texans, including the working poor.
If the Legislature had followed these recommended reforms since the 2004-05 budget, Texans would support a $23 billion smaller budget than it is today, translating into Texas families of four saving $1,700 more this year alone.
These potential savings don’t stop there.
Recently, state officials adopted the spending growth limit on nondedicated general revenue based on a personal income projection of 11.68 percent. If legislators passed a 2016-17 total budget increase of this magnitude, it would almost double the spending increase during the next two fiscal years compared with a conservative Texas budget.
For the continued success of the Texas model and the improved well-being of all Texans, legislators need to effectively limit state spending next session before the stool comes crumbling down.
Ginn is an economist in the Center for Fiscal Policy at the Texas Public Policy Foundation.