Well, well, well
Wed June 4, 2014 2:49 pm

Yesterday the Texas Public Policy Foundation released a report on “The Real Texas Budget.” The purpose of the report, as expressed in the introduction, is to help Texans understand what our state government actually spends—a task that is more difficult than it should be because of “legislative tactics, insufficient reporting, and the complexity of the system.” The report is the result of “weeks of work,” according to TPPF’s Chuck Devore, and covers state spending trends since 2004. The first of its key findings, though, concerns state spending, a topic that has been much in the news lately: “Total Texas state government spending for 2014-15 is estimated to be $201.9 billion, a 9 percent increase over the previous biennium.”

The figure is right in line with what Texas’s most credible budget experts estimated at the end of last year. As the regular legislative session wound up, Politifact Texas asked several analysts, most of whom estimated that state spending for the 2014-15 biennium would be 8 to 9 percent greater than in the 2012-13 biennium. The Legislative Budget Board, for example, estimated that the state’s general spending in 2014-2015 would increase 8.3% from 2012-13 (PDF). Staff for Tommy Williams, the Republican from The Woodlands who chaired the Senate Finance Committee, pointed to the LBB’s estimate as a good heuristic, with the note that the LBB’s figure had not been updated to reflect a supplemental spending measure that had been passed just in the nick of time.  

The growth in state spending—let’s go ahead and call it 9 percent—was significant, but not out of line given the state’s population growth, and it didn’t break the state’s constitutional spending cap, which had been set at 10.71 percent. And the budget itself wasn’t controversial in the Legislature, which is, of course, controlled by Republicans; it passed both the House and the Senate with whopping majorities, and was signed by Rick Perry to general acclaim.

Lurking on the fringes, however, were a group of conservatives clamoring that the budget actually represented a 26 percent increase in spending for 2014-15 compared to 2012-13. That figure was a blatant misrepresentation, but one that gained a fair amount of traction, especially after the Wall Street Journal published an editorial, in June, harrumphing that the 26 percent surge in state spending amounted to a California-style spending spree that would put Texas on the road to serfdom. Opposition to the budget became a litmus test among conservatives, a factor that would be heavily weighed in the report cards some of them are elected to represent.

Where did the 26 percent figure come from? Well, it came from the Texas Public Policy Foundation. The same Texas Public Policy Foundation that just released a report estimating that state spending will increase 9 percent in the next biennium.

In other words, TPPF is now disavowing its own earlier analysis. In a way, I think we should let them; if people don’t have a chance to discreetly change their tune, there’s a greater risk that they’ll double down instead of trying to recalibrate. On the other hand, the 26 percent calculation was wrong, and damagingly so—damaging to the Republican party, to the cause of fiscal conservatism, and possibly to the state—so I think we need to take a moment to look at how they arrived at that figure, and what happened as a result.

To understand how they calculated a 26% spending increase in the first place, you have to understand a couple of basic things about Texas’s budgeting process. The Legislature, in its regular sessions, is charged with writing the state’s general budget for the forthcoming biennium. So in 2011, for example, the Lege wrote the budget for the 2012-13 biennium; in 2013, they wrote the budget for 2014-15. In doing so, they’re constrained by several constitutional spending restrictions. The most important of these is the pay as you go requirement: the Lege can’t legally pass a budget that appropriates more money than the comptroller has projected the state will bring in during the span in question.

It’s a complicated process under the best of circumstances, because legislators have to make plans for state spending based on projections about what somewhat volatile income streams such as the sales tax will look like a couple of years down the line. In recent sessions, the challenges have been exacerbated by the fact that the comptroller, Susan Combs, has totally bungled the Biennial Revenue Estimate several times. In January 2011, for example, she told the Lege that it would have $72.2 billion available for general spending in 2012-13. It would later be clear that her estimate was off the mark by billions and billions of dollars. That was why her January 2013 Biennial Revenue Estimate included an $8.8 billion surplus and projected $101.4 billion available for general spending in 2014-15.

It was also why the Lege ended up appropriating a lot more money during the course of the 2013 session than it did in 2011. I think it’s fair to say that most people knew, in 2011, that the comptroller’s estimate was way too low. But the Eighty-second Legislature, which met that year, couldn’t officially overrule her. They had to write a budget that stayed in line with her estimate, which they did. The budget passed that year included draconian cuts to major state services like public education.

Then, when the Lege returned in 2013, they found themselves flush with cash, including that $8.8 billion surplus, which gave the unmistakable impression that Texas had recently slashed school funding by $5 billion by accident. So the Eighty-third Lege wrote a budget that restored significant funding to core services for the 2014-15 biennium; the budget, as passed, represented a 9 percent increase in state spending. They also made some supplemental appropriations to backfill the 2012-13 biennium, which was still in effect, and appropriated several billion dollars from the rainy day fund for one-time expenses. So all told, between January and May 2013 the Texas Legislature made a lot more appropriations than they did between January and May 2011—about 26 percent more. But it wasn’t a spending spree; it was an effort to mitigate some of the damage that had been caused by the comptroller’s bad projections and to make some investments in crucial aspects of infrastructure like water—investments that previous Legislatures had theoretically agreed to, but hadn’t actually been able to fund.

At the time, TPPF’s budget people insisted that the 26% figure was an estimate of state spending growth. When pressed, they allowed that their analysis of “session spending” was “different than the traditional method of looking at spending on a biennial basis”, as TPPF’s Bill Peacock put it. But, he added, “both are accurate”: “They simply provide two different views.”

I say nope. First of all, there’s no clear reason to use a euphemism like “session spending”, as opposed to “the amount of money appropriated during the course of the session”, unless you’re trying to mislead fiscal conservatives who are more concerned about state spending than about the foibles of the outgoing comptroller. Second, TPPF itself has conflated “session spending” and spending as the concept is normally understood, as in the handout they distributed during the session. In other words, I don’t think it’s entirely fair to blame EmpowerTexans, the Wall Street Journal, et al, for failing to understand an implicit and arcane methodological debate. (And although TPPF is now pushing back against outlets like Quorum Report, which have described the new report as a revision, they didn’t object when the Wall Street Journal et al “mischaracterized” their earlier analysis.)  Third, the new TPPF report—the one published yesterday—uses the normal definition of “state spending”. The money they previously described as “session spending” is now described, accurately, as money that was “appropriated and authorized.”

And here’s why this all matters.

First of all, if spending had really spiked by 26 percent, that would be a drastic change of course for Texas, and something that would merit public scrutiny. So the “26 percent growth in spending” claim distracted some legislators from giving their full attention to other problems—real problems—like roads and water. (As an aside the constitutional spending cap almost guarantees that state spending will never rise that dramatically in Texas from one session to the next, but let’s set that aside for now.)

Secondly, even the leaders who weren’t spooked by the 26 percent figure had to deal with the ones who were. On June 10 Rick Perry publicly rebuked the scaremongers: “Frankly, I don’t understand their math,” he told reporters, and added that they could use “remedial work.” On June 11, having antagonized the right wing the day before, he added abortion to the call for the first special session, which was then about halfway through. Doesn’t seem coincidental to me.

Third, the whole debacle helped elevate a couple of people whose understanding of the budget process may come back to haunt us. I don’t know of any budget analysts in Texas, apart from the ones actually at TPPF, who agreed with TPPF’s estimate of 26 percent spending growth. But several Republicans now running for statewide office seized the issue—and later invoked their opposition to the “spending spree” as a campaign credential. Dan Patrick, who is now the Republican nominee for lieutenant governor, voted against the budget. Ken Paxton, now the nominee for attorney general, voted against the budget.  They may have meant to distinguish themselves as fiscal conservatives. They succeeded in distinguishing themselves as people who understand report cards better than they understand math. 

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