This commentary originally appeared in The Monitor on June 7, 2015.
The end of the 84th Texas Legislature is the day free market folks in Texas look forward to every two years. There are fewer opportunities to block progress when they are not in Austin.
Taking a macro view of this session’s fiscal outcomes, it was largely successful with passage of a conservative budget and historic tax relief.
A coalition of conservative organizations, including the Texas Public Policy Foundation, defined a conservative budget before agencies submitted their budget request for the session as an increase of no more than 6.5 percent, which is based on population growth and inflation.
The fiscal 2016-17 total budget — otherwise known as all funds that includes state and federal funds — will increase by just 3.6 percent; the state portion allow will increase by 5.8 percent.
In dollar terms, the total budget increases by more than $7 billion to $209.4 billion that will fund transportation, education, health care and a host of other legislative priorities.
Legislators can clearly meet the needs of the state well within the rate of population growth plus inflation.
While there’s an argument to be made that the funding priorities could have been different and reforms, such as school choice, should have been made, it’s terrific news that the total footprint of government didn’t grow more than Texans’ ability to fund it.
Texans not only benefit from a weakened threat of higher future taxes and fees from limiting the budget growth, but they will keep more money in their pocket in the meantime due to a historic $4 billion tax and fee relief package.
The largest component of the package is a $2.6 billion value in permanently cutting the business franchise tax rates by 25 percent and reducing its compliance cost by raising the ceiling to file a less complex tax form to $20 million.
To combat rising property taxes that are now the 14th most punitive nationwide, the package also includes a permanent $10,000 increase in the homestead exemption for school districts to $25,000, if voters approve it in November for a value of $1.2 billion.
Though this property tax relief is intended to be permanent, it may be eroded within a couple years due to higher property appraisals in counties and local jurisdictions raising their property tax rates. But legislators did make a valiant effort to help keep these local governing bodies from passing a higher tax rate above the effective rate by requiring a 60 percent vote to do so.
Finally, the package consists of about $200 million in fees that are either eliminated or reduced.
Collectively, there is much to cheer about this session. However, there were some failures:
Though a valiant effort was made for the first time in years to reform the state’s weak spending limit, it ultimately did not pass. The Senate’s version was a step in the right direction by expanding the limit to cover more of the budget and calculate it based on population growth and inflation.
However, even without having this type of limit in place, the Legislature showed that Texas can prosper with a budget below this metric while meeting the needs of the state and providing historic tax relief.
And at the end of the day, it’s a good time to be a Texan.
Free enterprise, personal responsibility, and liberty have been shown repeatedly here in Texas to inspire greater prosperity. It is the reason Texas led the way economically from 2000 to 2014 compared with other large states, like California, New York and Florida.
Overall, the strides taken this session by legislators to pass pro-growth policies will contribute to improving the Texas model and contribute to more opportunities for homeowners, entrepreneurs and will help all Texans to prosper.
Dr. Vance Ginn is an economist in the Center for Fiscal Policy at the Texas Public Policy Foundation in Austin. Contact him at [email protected].