Budget Caps to be Set Today

The State of Texas has two constitutional limits on amounts that legislators may appropriate for the state’s biennial budget. The first, and usually most effective, limits the proposed budget to the estimated state revenue for the two-year period as determined by the State Comptroller. The second limits spending to the projected growth in the state’s economy, determined by the estimated growth in personal income. While it’s too early for the Comptroller’s revenue estimate, today the Legislative Budget Board (LBB) is meeting to set spending caps based on the estimated growth in personal income. Since the LBB uses estimates, it has a wide range to choose from.

According to the San Antonio Express News, “The Legislative Budget Board has received five estimates…ranging from 8.7 percent from the University of North Texas to 12.2 percent from Moody's Analytics. The state comptroller has offered a 10.7 percent growth rate.” With such a wide range the LBB has obvious flexibility in setting the limit. Various political factions are calling for lower or higher limits, and with the increased state revenues this limit might actually come into play this session. The last session the projected revenue limit was so low that the personal income growth limit was unimportant.

Governor Perry and some legislators think the constitutional limit needs to be revised, tying the limit to inflation and population growth rather than personal income growth. Evidently, at least in the past, this would result in lower spending limits. State Sen. Dan Patrick (R-Houston) has already filed a proposed constitutional amendment, SJR 10, to base the spending limit on inflation and population growth. Similar amendments have been filed in previous sessions, to no avail.

The current limit only applies to part of the state’s budget; it does not apply to federal funds nor to funds mandated by the state constitution. That means the limit only applies to about 41% of the total biennial budget of $173 billion. According to the Austin American-Statesman, Sen. Patrick would like to expand the limitation to all the budget funded by state revenues, but stops short of applying the limit to federal funds.

The budget battles are officially underway today.

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