November 20, 2006

Timing on Spending Cap Could Be
Point of Dispute Between Leaders

By Mike Hailey
Capitol Inside Editor

The Texas Legislature's top two leaders, who had a rocky relationship throughout last year's regular session, could be on the verge of a spirited disagreement on a constitutional spending cap that's threatening to keep lawmakers from paying for essential state needs and other obligations despite predictions of a record budget surplus.

There's speculation on both sides of the Capitol that House Speaker Tom Craddick and Lieutenant Governor David Dewhurst have different ideas on when to skirt the spending limitation rather than on whether it needs to be bypassed in order to give the Legislature access to all of the money the state's expected to have in its coffers over the next two years. House members say that Craddick may be more inclined to confront the issue sooner than later with a vote of the Legislative Budget Board. There's a prevailing sentiment that Dewhurst might prefer to let legislators make the call after they've convened in Austin for a regular session that gets under way in January.

The Republican leaders have not drawn any lines in the sand publicly - and neither side will confirm at this point whether it's leaning one way or the other on the questions of whether to bust the spending cap and when the proper time to do so might be. Craddick's office said Monday that all options are still on the table and that no decisions have been made in meetings that have been under way on the issue with the lieutenant governor's office. Dewhurst's office tends to agree generally with that assessment.

Without a vote by the LBB or the Legislature as a whole to exceed the constitutionally imposed ceiling on spending, lawmakers could find as much as one-third of a surplus that could be as high as $15 billion out of their collective reach at a time when they might need most if not all of it to fund the current level of services and local property tax reductions approved in special session earlier this year. The spending barrier was inserted into the Texas Constitution by voters in 1978 as a tool to keep increases in state appropriations in line with economic growth. While voting to exceed the limit might be necessary to ensure property tax relief, the pressure to bust the cap could be compounded by other demands as well.

Some legislators are concerned that the state could end up owing the federal government a substantial amount of money as a result of decisions to use funds that had been earmarked for highway construction and maintenance on other needs such as public employee benefits and medical care for poor children. Texas could conceivably have to repay the federal government for highway money that was sent from Washington to match state funds that ended up being spent on other areas of government. Lawmakers at that point could find themselves in the politically unenviable position of having to explain to voters why highway funds were being spent on other programs at a time when toll booths are starting to go up on new and existing roads in some parts of the state.

The LBB is required to base the limit on spending from non-dedicated tax revenues on the growth of personal income - but the board has the power under state law to adopt alternative indicators for measuring economic growth beyond income. The LBB, which is co-chaired by the lieutenant governor and the speaker and includes four members from each chamber, expects to adopt a spending limit for the next two-year budget at a meeting that's scheduled for November 27. But the LBB could essentially waive the limit it sets if a majority of members representing the House and a majority of senators on the board agree to do so. Otherwise, the spending cap could not be exceeded without an emergency resolution that would have to be approved by majorities in both houses.

The political dynamics at play going into the regular session could explain why Dewhurst and Craddick might not see eye-to-eye on the issue. House members who are loyal to the Republican speaker speculate that Dewhurst would rather have the Legislature vote on whether to bust the spending cap so it won't become an issue for him in a potential gubernatorial race in 2008. While Dewhurst hasn't revealed what his future plans might be, Republicans and Democrats alike predict that he will be a candidate for governor in four years after an easy re-election victory two weeks ago.

By the same token, there's speculation at the Capitol that Craddick doesn't want to punt the decision on the spending limit to House members at a time when he's seeking their support for a third term as the chamber's top leader in an election that will not be held until January 9 when the regular session opens for business. More than 100 House members have pledged their support in writing to Craddick for the upcoming speaker's election, but they are not legally bound to honor their promise.

The situation is politically sensitive no matter which direction legislative leaders ultimately take on the appropriations cap. Conservative activists want the Legislature to adhere to the constitutional spending limit and have refused to accept various justifications and rationalizations for going around it. But the dilemma hasn't come as a surprise to lawmakers and their leaders, who were warned that they were on a collision course with the cap while they were in special session this past spring contemplating a boost in public school funding and a cut in local property taxes that have to be replaced with state dollars.