Yesterday I discussed how Texas needs to develop our human capital through education and strengthen critical infrastructure such as our water, transportation, and health care systems. The biggest problem facing our state is that our antiquated tax system does not produce enough revenue to make these sorts of investments. Instead of talking about how to modernize our tax system, however, state leaders are discussing ways to further restrict spending.
Worried that future majorities in Texas will eventually reject continuing a course of austerity, Texas leaders propose to constitutionally restrict spending so that it grows no faster than general population and consumer inflation without the approval of two-thirds of the Legislature.
In a democracy, tax and spending decisions should be decided by majority rule. Even though majority rule is a deeply held Texas principle, spending-limit proponents propose to empower the minority to block any new spending. Imagine living in a community where almost two-thirds of the voters (who had children who needed education) could not pass a budget to provide for the schools because just over a third of the voters (who didn’t have children) refused. Texas can’t build a prosperous state if the minority governs spending decisions.
In any event, no spending limit should be adopted that uses as its starting point an inadequate base. Texas state government consistently ranks at or near the bottom of the fifty states in spending per resident, and when you add local government spending, Texas still ranks as low spending. Yet this inadequate base becomes the starting point if an arbitrary spending limit is adopted.
Let me give you just one example: In 2011, the Legislature again slashed Medicaid payment rates for health-care providers who take care of low-income Texans. Because of these cuts, fewer than one out of three Texas physicians are now willing to take on new Medicaid patients, compared to two out of three in 2000. Addressing problems like inadequate payment for health-care providers may require increasing the budget more in one year than population times inflation allows.
Even if we started with a fully adequate funding base, if we allowed future spending to grow only as much as general population, we would have to cut the budget each year. Why? General population growth isn’t the correct measure of necessary growth to continue to provide the same services. The needed growth is the growth in the particular populations of those who use state services; for example, the growth in school children or the growth in the elderly in nursing homes. The growth in general population is likely to be slower than the growth in these particular populations, forcing the budget to grow more slowly than the cost of actually maintaining education for children or nursing care for the elderly.
Likewise, allowing spending to grow only as much as consumer inflation is the same as saying that current services must be cut each budget year. Consumer inflation is the measure in the growth of costs for what a family buys, not for what a state buys. For example, a huge portion of the state budget goes to buy health care for which costs increase much faster than consumer inflation.
And even if you start with a fully adequate funding base, an economic recession can reduce revenue collections forcing you to cut the budget. If you have a tight spending limit, it can prevent you from restoring the budget because you can’t increase it beyond population and inflation. In other words, recessions would permanently ratchet down spending.
In the upcoming legislative session, the state will again struggle to meet the needs of Texas. The state will continue to do so until we modernize our tax system. In the meantime, it is extremely important that we reject any spending limits designed by today’s majority to ensure that they continue to control Texas when their policies ultimately consign them to tomorrow’s minority. And no spending limit should be adopted that works to arbitrarily prevent Texas from meeting the needs of Texas children and families.
See Wednesday's story: The Truth About Texas, Taxes and the Budget
F. Scott McCown retired as a state district judge in 2002 to become director of the Center for Public Policy Priorities. Called "the voice of the voiceless" and "the conscience" of Texas politics by Texas Monthly, he is responsible for the center's direction and administration. He is also an expert on school finance and child welfare. Before coming to the center, he presided over all of Texas' public school finance cases from 1990-2002 and thousands of child abuse cases. He is a member of the National Council of Juvenile and Family Court Judges, and an elected member of the American Law Institute and the Philosophical Society of Texas.