This commentary, written by Dr. Vance Ginn and Kiara Pillay, originally appeared in the Austin American-Statesman on May 2, 2016.
Texas’ 2017 legislative session is quickly approaching. The bedrock of the Texas miracle has been a diversified economy and a good tax climate. Lower oil prices and slower economic growth and job creation threaten the state’s prosperity.
With less revenue likely available next session, it’s essential to keep this solid economic foundation by scrutinizing every taxpayer dollar spent, so excesses and higher taxes are not on the table. The Texas Public Policy Foundation does this with its Spotlight series that highlights trends in all 10 articles of the 2016-17 state budget.
The findings are alarming when comparing budget increases with compounded population growth plus inflation. This key measure is included in the recommended spending-limit reform that covers the budget and uses actual past data. Thirteen member organizations of the Conservative Texas Budget Coalition support using this key measure as the budget’s maximum growth rate.
Since the 2004-05 budget, the overall budget has increased 69 percent, compared with an estimated 55 percent increase in the key measure. If our reforms were followed since the 2004-05 budget, taxpayers would be supporting a budget that’s $17 billion less than the 2016-17 budget of $209.1 billion.
This means Texans are paying higher taxes today than if the budget had increased at only the rate of essential demands of government. Therefore, it’s important for legislators and taxpayers to probe every budget area for excesses.
Fortunately, the Legislature passed a budget last session that increased 2.9 percent, which was less than our target based on this key measure of 6.5 percent. However, several functions have increased by more than this measure — and multiple articles increased by more than it has increased since the 2004-05 budget:
- Article I is $6.3 billion for general government functions. This article has increased by 80 percent since 2004-05 and is up 17.5 percent from the previous budget, both outpacing the key measure in each period. The largest appropriations increase of 691 percent was in the Facilities Commission, primarily for new buildings.
- Article II is 37 percent of the budget, making it the second-largest item. Its $77.2 billion budget for health and human services functions has increased 76 percent since 2004-05 and only 3.3 percent from the previous budget. It was the largest item for the first time in Texas history in the 2014-15 budget and likely will continue to increase. Driving this growth is a 14.9 percent increase in the Department of Family and Protective Services for foster care and a rising amount to behavioral health services that now totals $6.7 billion.
- Article III, the largest budget item, includes K-12 and higher education that totals $78.6 billion. The current budget is up 59 percent since 2004-05 and up the largest amount of $3.9 billion, or 5.1 percent, from the previous budget.
- Article IV includes the judiciary. Article V includes funds for public safety and criminal justice. These two articles have increased by less than the key measure compared with the previous budget but the judiciary budget has increased by 88 percent since 2004-05.
- Article VII relates to business and economic development and includes the Department of Transportation and Texas Workforce Commission. It’s budget increased by 77 percent since 2004-05 and by only 1.7 percent from the previous budget. Article IX includes appropriations to general provisions that apply to multiple articles, and no amount is usually included in the final budget. However, $390.2 million is included in the current budget for salary and benefits increases.
- Articles VI and VIII showed decreases in the current budget, but that doesn’t tell the entire story. Appropriations to Article VI, which is for natural resources functions, declined by 37 percent because of a one-time amount of $2 billion for water projects in the previous budget. However, it increased by 86 percent since 2004-05. Funding for regulatory functions, Article VIII, declined 18 percent primarily because of a one-time decrease in the Public Utility Commission’s system benefit fund for the low-income electricity discount program.
Bottom line: Each article must be watched closely to ensure that the 2018-19 budget doesn’t exceed population growth plus inflation. This will assure Texans that lawmakers are being good stewards of their tax dollars and are keeping a solid economic foundation for them to prosper.
Ginn is an economist at the Texas Public Policy Foundation. Pillay is a research associate in the Center for Fiscal Policy at TPPF.