Fiscal Notes
A fiscal note dated April 2, 2015 anticipates no fiscal implication to the State in the upcoming biennium, or to units of local government.
The fiscal note adds that future fiscal implications would depend on the composition of state revenue in the future, as well as appropriation decisions, and actions of the Legislative Budget Board regarding the adoption of the rate of growth.
Bill Analysis
05/25/15 update:
A committee substitute was introduced in House committee. The CS would apply a limit on the growth of appropriations from all sources of revenues other than the federal government for 6 categories of spending: transportation, public primary and secondary education, higher education, health care, public safety and corrections, and other general government.
The Legislative Budget Board (LBB) would have to provide a rate of growth of appropriations for each spending category calculate by subtracting one from the product of the sum of one and the estimated rate of growth in the population served by expenditures in each spending category during the biennium in which appropriations are made, and the sum of one and the estimated rate of inflation in a representative set of goods and services for which appropriations are made for that spending catgory during the biennium.
The legislature would be able to exempt by law an appropriation from the application of this limit. I such a case, the LBB would have to exclude then current or previous appropriations that are of nature similar to the exempted appropriation.
The LBB would also be required to hold a hearing every even-numbered year, to solicit testimony on the information and methodology and sources used in the calculation of the rate by the LBB.
A majority vote of the members of the LBB from each house could allow that the limit adopted by the LBB be exceeded. A record vote of the majority of the members of each house of the legislature would be required in order to raise the proposed limit.
First chamber analysis:
Senate Bill 9 would change the way the constitutional limit on the rate of growth of certain appropriations in a state fiscal biennium is calculated and to which appropriations it applies.
The constitutional limit would apply to consolidated general revenue appropriations, that is appropriations from the general revenue fund and dedicated accounts in the general revenue fund.
The maximum rate of growth would become the product of the 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, and the average biennial rate of monetary inflation in the state during the same periods.
If the rate is negative, or should the Legislative Budget Board fail to adopt a rate, consolidated general revenue appropriations for the following state fiscal biennium would have not to exceed those of the previous state fiscal biennium.
Appropriations to pay for a rebate of state taxes would be excluded from computations to determine whether appropriations exceed the maximum amount authorized.
Senate Bill 9 would leave it up to the Legislative Budget Board to decide which source of information to use to determine the rates of population growth and inflation.
Senate Bill 9 would apply to appropriations made for the state fiscal biennium beginning September 1, 2017. It would take effect only if Senate Joint Resolution 2 is approved by voters. Senate Bill 9 is the enabling legislation for Senate Joint Resolution 2.
Vote Recommendation Notes
05/25/15 update:
The House committee substitute has weakened SB 9. While we continue to support the bill as a marginal potential improvement over the status quo we recommend that it be amended to clearly apply to all state funds instead of spending categories.
The second chamber sponsors are Reps. John Otto, Greg Bonnen, Trent Ashby, Cindy Burkett, and Larry Gonzales.
First chamber recommendation:
Senate Bill 9 would be a step in the right direction: using population growth and inflation to determine the maximum rate of growth of appropriations would be more representative of the possible needs for growth in appropriations than the growth in personal income currently used to determine the spending limit. It would result in a more conservative budget by further limiting spending.
Nevertheless, Senate Bill 9 could go even further in order to more accurately reflect the maximum rate of growth of appropriations needed in each state fiscal biennium:
- Using population growth plus inflation as the basis to determine a limit in appropriations has proven to efficiently reduce the growth of government. Adding the rate of population growth to the rate of inflation, instead of multiplying both rates, would better limit state spending,
- Instead of calculating the average rates of population growth and inflation based on the current fiscal biennium and the one for which the appropriation limit is calculated, resulting in using figures that are forecasts, using figures from the two fiscal years immediately preceding the regular legislative session would give a more accurate base for the calculation of the spending limit,
- The spending limit in Senate Bill 9 would only apply to part of appropriations made in a fiscal biennium. The spending limit would be more conservative if it applied at least to all state funds,
- Finally, Senate Bill 9, and the constitutional spending limit, would greatly benefit from designating one source of information for population growth and inflation rates, instead of leaving the option to pick a source open to the Legislative Budget Board; it would eliminate the always possible temptation of picking the source that has the highest rate, especially possible when dealing with forecasts.
Since Senate Bill 9 is going in the right direction by making an effort to limit the growth of state government, we support it. But we think the recommendations above should be taken into consideration to amend the bill.
