The Conservative Texas Budget (CTB) Coalition has defined a conservative budget to be one where biennial appropriations (General Appropriations Act and supplemental appropriations, when available) of state funds (excludes federal funds) and all funds—the footprint of government—increase by no more than population growth plus inflation. The 2018-19 CTB limits are $147.5 billion in state funds and $218.5 billion in all funds.
This CTB growth rate maximum limit is based on a 4.5 percent increase in population growth plus inflation during fiscal years 2015 and 2016. The CTB limit amounts are a 4.5 percent increase above the 2016-17 initial appropriations. However, we include in a recent one-pager the figure below that highlights the starting points in the House and Senate versions of the 2018-19 proposed appropriations.
The proposed initial appropriations by the House indicate that they would exceed the CTB limits by $402 million in state funds and by almost $2.9 billion in all funds. These initial appropriations also exceed the Texas Comptroller’s Biennial Revenue Estimate for General Revenue (GR) by $4 billion. While there may be a push to tap the state’s Economic Stabilization Fund (ESF) to cover this amount, this would likely not be prudent based on appropriate uses of the fund to cover budget shortfalls or one-time emergencies. Given that there is a 1.7 percent increase in GR available of $109.6 billion when the chosen legislative priority of dedicating $4.7 billion of GR to transportation last session is included, there is not a budget shortfall or emergency at this time. Therefore, there is no reason to tap the ESF, as Governor Greg Abbott noted in the State of the State speech when he said, “I’m confident we can balance the budget without looting the Rainy Day Fund.” Furthermore, the Foundation’s research finds that there are ample reasons to reform the ESF. These reforms include raising the threshold vote to use the ESF for nonemergency purposes to four-fifths of each chamber, and consider lowering the cap to 7 percent of certain GR while prioritizing funds above the cap to return to taxpayers and subsequently pay state liabilities.
The Senate’s version is below the CTB limits by about $5 billion in state funds and all funds. There is concern that the Senate version has not included caseload growth and cost growth in Medicaid, but they have also included cuts to account for part of the reduction.
In total, these starting point budgets show that the House proposes to appropriate $8 billion more than the Senate. Although there is plenty of time to negotiate these versions into a final budget, it is essential that the final budget increases by no more than population growth plus inflation.
The Governor’s proposed budget increases by less than population growth plus inflation, includes tax relief, and leaves money on the table. The Governor notes, “Spending restraint must always be practiced, especially when the revenue projection is tight. While there are difficult choices to be made, the Governor’s budget funds the state’s priorities without issuing new debt, raising taxes, or utilizing the Economic Stabilization Fund.” The table below shows the Governor’s budget recommendations, which would satisfy the conservative budget criteria.
Ultimately, it is essential to hold the footprint of government from growing by more than population growth plus inflation. This will allow taxes to remain lower than otherwise and the Texas economy can flourish.