Honorable John Otto, Chair, House Committee on Appropriations
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
SB9 by Hancock (Relating to the constitutional limit on the rate of growth of appropriations.), As Engrossed
No fiscal implication to the State is anticipated in the upcoming biennium. The provisions of the bill would take effect with the 2018-19 biennium.
The fiscal implication of restricting the biennial growth of appropriations from state tax revenues not dedicated by the Constitution to the growth of compounded population and inflation would depend on both the actions of the Legislative Budget Board with respect to adopting the rate and future appropriation decisions by the legislature.
The fiscal implication of establishing a new statutory limit restricting the biennial growth of consolidated general revenue appropriations (General Revenue and General Revenue-Dedicated) to the growth of compounded population and inflation would similarly depend on both the actions of the Legislative Budget Board with respect to adopting the rate and future appropriation decisions by the legislature, as described below.
The bill would amend the Government Code with regard to the growth rate used to set the constitutional limit on appropriations from state tax revenues not dedicated by the Constitution and would create a new statutory limit on the growth of consolidated general revenue appropriations (General Revenue and General Revenue-Dedicated).
The bill would limit the biennial growth of appropriations from state tax revenues not dedicated by the Constitution to the estimated average biennial rate of growth of the state's population during the state fiscal biennium preceding the biennium for which appropriations are made and during the state fiscal biennium for which appropriations are made adjusted by the estimated average biennial rate of monetary inflation in this state during the same 4-year period. If that calculated rate is negative, appropriations from state tax revenues not dedicated by the Constitution for the forthcoming biennium cannot exceed that of the current biennium.
The bill would establish a new statutory limit on the biennial growth of consolidated general revenue appropriations (General Revenue and General Revenue-Dedicated). The growth rate applicable to the new statutory limit would be identical to the growth rate applicable to the constitutional limit described above. A three-fifths vote of the members in each house of the legislature would be required to exceed the new limit.
Currently, Article VIII, Section 22 of the Texas Constitution limits the biennial growth of appropriations from state tax revenue not dedicated by the constitution to the estimated rate of growth of the state's economy. Section 316.002 of the Government Code, instructs the Legislative Budget Board to determine the growth of the state's economy by estimating the growth in Texas personal income. The change from a limit applying the projected growth of personal income to one described by the bill would likely reduce the allowable growth rate in appropriations for subsequent biennia. Forecasted personal income has exceeded that of forecasted population and inflation over the last six biennia; twice, however, actual population and inflation has slightly exceeded actual personal income.
For the purpose of illustration, the estimated rate of growth of personal income used to set the 2016-17 spending limit was 11.68 percent. In November 2014, the Board was presented with personal income growth rates ranging from 11.68 percent to 15.71 percent. The 2016-17 growth rate proposed by the bill, based on the estimated average rate of growth of population and inflation during 2014-15 and 2016-17, ranged from 6.35 percent to 8.32 percent, also based on information provided to the Board at that time.
The establishment of a new statutory limit on the biennial growth of consolidated general revenue appropriations (General Revenue and General Revenue-Dedicated) applied to the population and inflation growth methodology described above would restrict the Legislature's ability to appropriate from General Revenue and General Revenue-Dedicated accounts. The fiscal implication of applying the new statutory limit would depend on both on the actions of the Legislative Budget Board with respect to adopting the rate and future appropriation decisions by the legislature.
The bill's provisions would apply beginning with the spending limit adopted prior to the 2018-19 biennium.
The bill would take effect on September 1, 2015.
Local Government Impact
No fiscal implication to units of local government is anticipated.