Issues

In November of even numbered years, the Legislative Budget Board (LBB) meets to consider a number of measures including the adoption of the growth rate.  

The Texas Constitution limits amount of money the Legislature may spend.  The amount is voted on by the LBB and is estimated by the state economy's growth rate.

As co-chairs of the LBB, Speaker Craddick and Lieutenant Governor David Dewhurst decided to adopt the most conservative estimate of 11.34 percent as provided by the Comptroller of Public Accounts in November of 2004.

To calculate the spending cap, the 2004-05 appropriation of $49.9 billion from non-dedicated state tax revenue is multiplied by the 11.34 percent to return the 2006-07 spending limit of $55.6 billion.

By subtracting the 2006-07 appropriation of $52 billion from non-dedicated state tax revenue from the 2006-07 spending limit of $55.6 billion, the amount under the limit is $3.6 billion.

This spending limit is set to ensure the state government lives within its means.

The amount by was increased from $2.6 billion to $3.6 billion as a result of changes in the Comptroller's most recent revenue estimate, indicating a $8.2 billion surplus.

Governor Perry's Texas Tax Reform Commission's proposal to buy down tax relief will cost the state $2.375 billion in 2007, and with the current spending limit at $3.6 billion, there isn't much room to digress. 

If the Legislature needs to spend more than the $3.6 billion from state taxes not dedicated by the Constitution during the Special Session, then a majority of the House and Senate would have to pass a resolution that would allow them to do so.

For example, if the Legislature wanted to buy down property taxes $0.25 it would cost about $3.125 billion - still under the constitutional cap. But, if the Legislature wanted to give teachers a $3,000 pay raise, in addition to lowering the property tax rate, it would cost the state an additional estimated $1 billion, bringing the total to almost $4.125 billion.   The Legislature would then have to pass a resolution to exceed the spending limit.

Technically, the total appropriations from General Revenue could exceed the $3.6 billion limit by approximately $0.3 billion.  Because not all General Revenue appropriations are funded 100 percent with tax revenue subject to the limit (about 10 percent would be funded with non-tax revenue), General Revenue appropriations could be increased by approximately $3.9 billion.

The constitutional spending limit would also apply to any supplemental appropriations that might be made during this special session, any subsequent special session or the next regular session that were over and above $3.6 billion, including the value of property tax relief, such as funding for hurricanes, textbooks, deferrals and any other appropriations that might be necessary during the FY06-07 biennium.

To date, the Constitutional spending limit has never been overridden.