Texas Governor Proposes Spending Reforms, More Accountability

Published December 1, 2006

Spending restraints and increased accountability for how taxpayer money is spent are the goals of a five-point budget reform plan put forth at the end of September by Texas Gov. Rick Perry (R).

Perry’s proposed reforms include:

  • a stricter state spending growth limit;
  • using dedicated revenue sources strictly for their dedicated purposes;
  • constructing a budget with a more detailed listing of expenditures;
  • requiring that individual state expenditures be posted online; and
  • amending the Texas constitution to allow for tax refunds when surpluses occur.

Tied to Population, Inflation

First among these reforms would be a stricter spending limit based on the state’s population growth rate and inflation, similar to Colorado’s Taxpayers Bill of Rights measure.

The current limit, made part of the state constitution in 1978, is based on growth in personal income. Personal income growth in Texas regularly exceeds the sum of population growth and inflation.

“Tying how much we spend to how much we make is a recipe for runaway spending,” said Perry.

Dedicated Means Dedicated

The second reform would require dedicated revenues–revenues from fees and taxes intended to fund specific types of expenditures–to be used only for the specific purpose for which they were intended.

In the most recent biennial Texas budget, according to Senate Finance Committee Chairman Steve Ogden (R-Bryan), $1.8 billion in dedicated revenues were appropriated to purposes other than those for which they were dedicated in the first place.

“We created a myriad of fees in order to balance the budget [in the past],” Ogden said.

Greater Detail, Internet Publication

The third budget reform Perry is offering would require more detail in the state’s budget document. Currently, each agency’s appropriation is arranged into various categories, called strategies. A strategy can correspond either to a single program or to multiple programs.

Mike Morrissey, who heads the Governor’s Office of Budget, Planning, and Policy, said “there is not enough detail to answer reasonable questions” regarding the state’s budget.

Perry’s fourth recommendation is for agencies to post individual expenditures on the Internet in a clear, concise, consistent format.

“If the taxpayers are picking up the bill, they ought to be able to look at every item on the receipt,” said Perry. The intent is to publish the state’s check register online.

Calls for Refund Mechanism

The fifth reform would allow the return of tax money to the state’s taxpayers in the event the state runs a budget surplus.

Currently, surpluses can’t be returned, because the Texas Constitution requires that all expenditures be made for a “public purpose.” Refunds would not qualify because the recipients of the funds would spend it on personal needs.

Texas has no income tax, and without an income tax or other type of tax paid directly to the state by individuals it is not immediately clear how a tax refund system might work.

Other Suggestions Offered

Scott McCown, who heads the Center for Public Policy Priorities, which advocates for persons with low incomes, questioned the need for most of the reforms.

“We have a structural deficit in this state that will last for decades,” McCown said. While he applauds the governor for asking that dedicated funds be spent as intended or be eliminated, “the problem is that other revenue has to be raised or cuts have to be made to balance the budget.”

McCown suggested agencies be required to submit current-services budgets. He said a tightening of the budget growth limit “assumes we have the right base of spending, which Texas clearly does not.”

State Rep. Bill Keffer (R-Dallas), a prominent member of the legislature, likes the governor’s suggested reforms. He thinks the tax refund can be implemented through tax reductions, and he called a spending limit based on population growth and inflation “commonsensical.”

Keffer offered a suggestion for further reform, saying, “The number one thing I’d like to see is zero-based budgeting, a process like what we saw in 2003.” In 2003, Texas balanced its budget without a general tax increase despite a projected $10 billion shortfall.

Byron Schlomach ([email protected]) is chief economist for the Texas Public Policy Foundation.