NCPA - National Center for Policy Analysis

Key Points in Texas Governor Abbott's Budget Reforms

March 3, 2015

Greg Abbott's first State of the State speech as Texas' new governor got straight to the point. Abbot, a fiscal conservative, did not waste time making recommendations for spending limit reform and relief that would help restrain the footprint of government.

Abbott's spending limit reform would cover more of the budget based on the rate of population growth plus inflation for the last four fiscal years immediately preceding the regular legislative session instead of current spending limit based on the projected personal income for the upcoming two fiscal years. The addition of two metrics, population growth and inflation, allows for economies of scale whereby the average cost declines over time.

By comparing these spending limits during fiscal years (FY) 2006-07 to 2016-17, Abbott's recommended average growth rates (8.52% since FY 06-07, 7.32% FY 16-17) are lower than the adopted average (10.82% since FY 06-07, 11.68% FY 16-17) with Texas Public Policy Foundation's (7.64% since FY 06-07, 6.47% FY 16-17) being the lowest of the three.

In addition, the percent increase compounded over time grew the most under the current spending limit with 66.25% and least under TPPF's reforms with 43.1%, and the recommended compounded growth since FY 06-07 is 50.7%.

Governor Abbott recommends almost $4.5 billion in tax cuts with $2.2 billion going to lower property taxes, $2 billion in business margin tax relief, and another $268 million towards ending collection of dedicated taxes and fees. These must provide permanent tax relief.

While the Texas Governor's recommended spending limit reforms do not exactly match with the ideal reforms that closely align with Senate Bill 361, his approach is much better than the status quo.

Source: Talmadge Heflin, Vance Ginn, "Texas Governor Abbott Outlines Key Budget Reforms In State Of The State Speech," Texas Public Policy Foundation, February 20, 2015.


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