On Thursday the House Appropriations committee heard from the Legislative Budget Board and the Comptroller of Public Accounts on state budget, economic, and revenue developments affecting the 2014-15 and 2016-17 two-year spending packages. Though membership of the Appropriations committee will change somewhat in January 2015, the group of lawmakers drafts the House of Representatives’ version of state investments in public and higher education, health and human services, highways, state employee benefits, and other key parts of the state budget. By the end of the general session, the House and Senate versions of the budget will morph into a final compromise appropriations and tax package that takes effect September 1, 2015.
The first order of business was a briefing on the four constitutional spending limits that apply to the state budget. One of the limits has already been set: the Article VIII, Section 22 limit on the rate of growth of appropriations from state tax revenues not dedicated by the constitution. A personal income growth rate of 11.68 percent, which allows about $10 billion in new spending, was approved by LBB officials earlier this week. It was the lowest of the four options considered as estimates of economic growth in 2016-17. If the LBB had chosen the highest forecast of 15.71 percent growth, an extra $3.4 billion would have been available to Texas schools, higher education systems, health care programs, public safety, or other critical areas. Instead, a simple majority vote will be needed in both chambers to exceed the growth limit if more than $10 billion is needed to maintain current services and fix the school finance system. Committee members also found out that lawmakers could add $1.1 billion in investments to the 2014-15 budget before reaching its cap. This is enough to cover an anticipated health and human services supplemental budget need for $1 billion in state General Revenue, most of it for Medicaid health care services.
Chief Revenue Estimator John Heleman confirmed that the amount of school property tax revenue lost because of the mandatory rate cuts enacted in the 2006 special session continues to be at least $14 billion every two years. Meanwhile the revenue to the Property Tax Relief Fund, which was created to receive money from the franchise and cigarette tax changes made in that session, is still only about $6 billion per biennium. The resulting continuing structural deficit of $8 billion forces the state to choose between cutting public education, cutting other state services, or creating new sources of revenue. So far, the Legislature has chosen to squeeze the state budget.
LBB staff also testified that local school property values grew at more than twice the rate anticipated when the current state budget was written. Based on data in the testimony, CPPP calculates that this unexpected value growth generates enough local property tax revenue to save the state $875 million in General Revenue that would otherwise have been needed for state formula aid to schools.
CPPP will monitor major state budget developments and how they affect local communities and taxpayers throughout the 84th Legislative Session. Follow CPPP on Twitter for more on what state officials could do to address our growing state’s needs and expand opportunities for all Texans.