FISCAL NOTE, 85TH LEGISLATURE 1st CALLED SESSION - 2017
July 21, 2017
TO:
Honorable Paul Bettencourt, Chair, Senate Committee on Government Reform, Select
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
SB18 by Estes (Relating to a limit on local government expenditures.), As Introduced
No fiscal implication to the State is anticipated.
The bill would amend Chapter 140 of the Local Government Code, regarding miscellaneous financial provisions affecting municipalities, counties and other local governments.
The bill would direct the Legislative Budget Board (LBB) to annually publish a rate equal to the product of (1) the state's population growth rate in the preceding calendar year and (2) the growth rate for the state's consumer price index for all items in the preceding calendar year. The bill would limit the rate by which total expenditures from all available sources of revenue for a municipality or county may grow each fiscal year to the latest annual growth rate published by the LBB.
A municipality or county could exceed the growth rate limit if voters approve the additional expenditures or if all or part of the geographic area of the local government lies in a declared disaster area.
Revenue from bonds, grants, gifts and donations would not be considered available sources of revenue for purposes of the bill.
For the purpose of illustration, the 2018 growth rate that is assumed to be proposed by the bill, based on the this state's population growth during calendar year 2017 and the rate of monetary inflation during calendar year 2017, would be 4.3 percent. This calculation is based on economic data in the Comptroller's Fall 2016 Economic Forecast for calendar years.
The bill would take effect December 1, 2017.
Local Government Impact
According to the Texas Association of Counties (TAC), there are counties whose rates of population and inflation growth are significantly higher than the state as a whole. As a result, some counties would be required to hold elections to keep pace with local growth. TAC notes that for many counties the election could not be held until after the start of the fiscal year given the requirement to hold the election on a uniform election date. Additionally, TAC reports that the bill would limit the ability of a county to manage recovery from the effects of economic fluctuations. TAC anticipates a significant negative fiscal impact to counties.
According to the Texas Municipal League (TML), the bill would have indeterminate but significant fiscal impact on city revenue as it would limit the amount of city expenditures based upon a statewide (and not city-specific) formula. TML estimates that city budgets across the state would be reduced, along with services and infrastructure improvements cities can provide.
According to the City of Pasadena, the bill would significantly limit the city's ability to add new personnel in response to growth, to initiate new programs identified by the City Council or residents or to adjust user fees or court fines.
According to the City of Mansfield, the bill would significantly limit the city's ability to manage its services and annual operating costs. The city's calculations conclude that the city would have to eliminate between an estimated $2.9-$5.2 million from the proposed budget for the upcoming fiscal year of 2018 resulting in decreased spending in public services including public safety services.