What We Talk About When We Talk About Spending Limits

Don't understand Texas's constitutional spending cap? You've come to the right place.
Wed April 3, 2013 4:45 pm
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What exactly is the constitutional spending limit? That question, along with the question of why it’s so politically risky to vote to “bust” the cap, will be on the mind of many a House member Thursday when that chamber takes up the budget bill, CSSB 1.

There are actually four spending limits in the Texas constitution, all of which place restrictions on the way lawmakers can spend state money. But only one, the “limit on the growth of certain appropriations,” gets the dubious honor of being known as the constitutional spending limit. (The appropriations spending limit is to constitutional spending limits as Kleenex is to facial tissue: it defines the genre.)

The appropriations limit says that the “rate of growth of appropriations in a biennium from state tax revenues not dedicated by the constitution may not exceed the estimated rate of growth of the state's economy.”

Note that the growth in appropriations is bound to be a moving target, because it’s pegged to the estimated rate of growth of the state’s economy; as Aman Batheja explained in the Texas Tribune last year, estimates vary, and it’s up to the Legislative Budget Board to pick which projection is most reliable; for the 2014-2015 biennium, the LBB went with the projection that expects 10.71 percent growth.

In any case, in English: You can spend more money than you spent last year, but spending can’t outpace the growth of the Texas economy. This restriction applies only to funds that do not have a “dedicated” purpose, i.e., the tax that raised them does not specify where they should be spent. Non-dedicated funds include those raised by the sales tax, the franchise tax, and cigarette and tobacco taxes. Dedicated funds include non-tax sources of revenue such as fees, fines, and penalties, and taxes with a specified purpose (such as the motor fuel tax, the revenue from which, again per the constitution, must be spent on transportation and education).

So, to review: buy a car, and the sales tax you pay goes into the pool of money that is subject to the spending limit. Steal a car, and the court fees you pay post-arrest can be spent with abandon, but only within the court system they were established to benefit.

Thursday, the House votes on the budget, not the spending limit. But this session, it’s hard to think about one without the other. The budget bill as passed by the Senate came in just under the spending limit, which is set around $97 billion for the 2014-2015 biennium . Any withdrawals from the rainy day fund, however, could push lawmakers into the red. And withdrawing from the rainy day fund, according to some legislators, would be the best way to fund much need infrastructure and water projects. (Or, as Governor Perry suggested, much-needed tax relief.)

Though it would only take a simple vote, in both chambers, to override the limit and bust the cap, it would also only take a critical blog post from conservative activist Michael Quinn Sullivan to make some lawmakers rue the day they voted to “ignore” the budgetary limitations set in the Texas Constitution.

So what’s a cash-strapped representative to do? Hard to say. But expect them to fight about it.

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