Published Online: December 12, 2006
Published in Print: December 13, 2006, as Pot of Cash May Be Out of Reach

State Journal

Pot of Cash May Be Out of Reach

Spending limit may stymie Texans' hopes of using surplus for schools.

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Texas lawmakers may find themselves facing a fiscal puzzle when they convene Jan. 9: flush with cash to pay for the school finance bill they passed earlier this year, but unable to spend much of it.

According to budget estimates by Speaker of the House Tom Craddick, a Republican, the state could have a $7.4 billion surplus at the end of fiscal 2007 and a projected $7.6 billion in the biennial 2008-2009 budget.

Those numbers would seem to be more than enough to cover the loss of $11.4 billion in local property-tax revenue for schools in fiscal 2008 from a tax cut the legislature passed in May. The tax cut came after a 2005 Texas Supreme Court order requiring the state to retool the way that local property taxes are used to fund education.

But there’s a catch for lawmakers looking to get their hands on that surplus: constitutional spending limits passed in 1978 to curb government growth. Those limits may put a cap of $7 billion to $9 billion on increased state spending to compensate for the tax cuts or to pay for other services, according to the Legislative Budget Bureau, which makes appropriations recommendations for state agencies and sets the state spending limit.

Final numbers on the surplus and the spending cap are not expected until next year, but the situation appears to put lawmakers in a political pickle.

By a simple majority vote, lawmakers could approve a one-time override of the spending cap for the budget covering 2008 and 2009, letting the state use surplus money to offset the loss of local property-tax revenue for schools.

It remains to be seen, however, whether such a vote would succeed in a state with a strong tradition of opposing increased government expenditures.

Rep. Bill Callegari, a Republican, already has proposed legislation for the next session of the legislature that would limit spending growth to an amount not to exceed inflation, with an adjustment for population growth. In a similar vein, the House speaker has talked about looking at additional spending caps in the coming session.

But the speaker said he’s not ruling out an exception for one year.

“I think the key is that exceeding the cap is going to be for property-tax relief only,” Mr. Craddick told the Houston Chronicle last month.

Vol. 26, Issue 15, Page 15

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