88th LegislatureTaxes & SpendingSpending Cap Draws ‘Creative’ Proposal by Lt. Governor Patrick for 2024-25 Budget

The only constitutional requirement of the Texas Legislature every session is to pass a biennial budget.
December 9, 2022
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$12.5 billion — that is all the Texas Legislature can currently add in new spending for the 2024-25 biennial budget without busting the cap or “getting creative.”

The Legislative Budget Board set the population and inflation spending cap for the next biennium at 12.33 percent, which may only be surpassed with a three-fifths vote in both chambers.

That sharply limits the amount of the projected $27 billion surplus from which interests across the board hope to direct funding toward their preferred item.

The headliner is the property tax; specifically, state officials are grappling with just how much to put toward a buydown of local property tax rates. The Texas Legislature approved $5.5 billion in rate compression — the technical term for the state lowering the local share of school finance paid for through property tax collections — and has itemized $3 billion in continued compression for next year from the state’s tranche of federal coronavirus aid.

During his campaign, Gov. Abbott called for “at least half” of the surplus to go toward cutting property taxes. That’d be $13.5 billion, pending any adjustments made by the Texas comptroller in January’s new revenue estimate, which eclipses the level set by the budget cap.

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However, under Senate Bill 1336 passed in 2021, the population and inflation spending calculation for “consolidated general revenue appropriations” exempts measures that provide tax relief or pays for emergency expenditures. That is a different cap than the constitutional spending limit.

In total, there is roughly $45.5 billion in front of the Legislature between the surplus, remaining federal pandemic aid, and the state savings account’s estimated balance. There is also $5.1 billion left in spending authority for the current biennium — a tranche that may be divvied out with a supplemental appropriation next year. If spent, that total will increase the 2024-25 spending cap to $13.1 billion.

Lt. Governor Dan Patrick unveiled his broad list of priorities earlier this month, saying a number of them may require funding from this pot of surplus dollars. On top of the expenses, Patrick said that the state should not spend all the money but save an undetermined portion of it for any potential rainy days ahead.

Across the Capitol rotunda, House Speaker Dade Phelan (R-Beaumont) is determined to put a slice of the surplus toward infrastructure improvements. “I think this is a once-in-a-lifetime opportunity to use some of these resources for infrastructure,” Phelan said last month. “If we want to be competitive and attract new companies, the job creators like we do every day, we have to invest in our infrastructure.”

Right off the bat, there are the three biggest players in the Texas Legislature with their own ideas on how to appropriate this sum.

When the spending cap is added to the equation, the issue becomes that much more contentious.

But during his priority item press conference, Patrick floated an unconventional method for appropriating dollars: amending the constitution.

Vaguely outlined by Patrick, the suggestion is to pass amendments to the constitution — items that must be approved in a statewide vote — for singular expenditures.

The idea is that moving such expenditures outside the traditional budget process would allow for more wiggle room as it relates to the cap.

Asked why the Legislature doesn’t simply bust the cap and explain its purpose, Patrick said, “Busting the cap sets a dangerous precedent.”

The first and only time the spending cap has been exceeded by the Texas Legislature since its creation in 1978 was in 2007 when the body compressed school district property tax rates. According to the Legislative Reference Library, the constitutional amendment strategy has never been deployed.

No blueprint for which items these expenditures may be put toward has been publicized. But the haggling over how to spend the money and for what purpose will be a feature of this coming session.

Where the previous session began with a focus on the global pandemic and all the problems it created, this session’s marquee topic stems from a recovering economy and its bedfellow of lingering inflation.

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Brad Johnson

Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.


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