Thoughts on House Bill 11

Thoughts on House Bill 11

The Texas House has an important vote tomorrow on House Bill 11 (the funding mechanism for HB4), and I thought I would offer my thoughts on the issue in a more detailed way than I will be doing in a TFR e-mail blast later today.

Like so many others in the conservative movement, I have been wrestling with this — contemplating the very big issues of infrastructure, the role of government, and the appropriate use of dollars taken from the people for dedicated purposes. I have tried to imagine when it would, and would not, be appropriate, and under what present-circumstances it could be supported or opposed.

As I write this, I will present not only my thinking, but also some recommendations (in bold, and at the end) for how HB11 could be improved.

Firstly: there is no disagreement about the state’s role in infrastructure development. One wouldn’t know that from 20 years of legislative inaction. We keep hearing how important water is, and we throw more money and credit at it, without ever addressing the underlying problems of permissions and rights.

And — sadly — we are using an old model of government programs and monopolies to build the infrastructure, rather than making greater allowance for free markets (like we have done in electricity, and much of Europe has done with water).

Secondly: I have little confidence in the present structure of HB4. It appears to be a sinking fund, rather than a revolving fund, and it appears to allow refinancing of completed projects rather than only directly financing new projects. (It seems adding capacity should be the water imperative, not bailing out old efforts.)

Some have tried to compare drawing ESF dollars for this purpose to families shifting money between savings and checking accounts. I have trouble with that analogy on several levels.

The State of Texas is not a family or business, it is government. The resources of a family are theirs, earned by the sweat of their brow and labor of their back. And the head of that family can move funds arbitrarily without restriction between savings and checking accounts.

But wait, that’s not always the case. There actually IS a family accounts example that works with the ESF.

For example, I have established an Health Savings Account. I legally cannot use those dollars for a vacation, or my children’s college. I can only use it for medical expenses. Similarly, a trust fund established for my children’s education cannot be used by me to buy a new car. It’s all my money, but it is saved for specific purposes exclusive of other things.

The ESF was specifically created for a specific purpose to contend with a specific issue. And it was done constitutionally.

The dollars in the ESF did not appear magically, but were gathered through taxation for a very specific, constitutionally dedicated purpose:

“prevent or eliminate a temporary cash deficiency in general revenue… Amounts from the economic stabilization fund may be appropriated during a regular legislative session only for a purpose for which an appropriation from general revenue was made by the preceding legislature and may be appropriated in a special session only for a purpose for which an appropriation from general revenue was made in a preceding legislative session of the same legislature. An appropriation from the economic stabilization fund may be made only if the comptroller certifies that appropriations from general revenue made by the preceding legislature for the current biennium exceed available general revenues and cash balances for the remainder of that biennium.”

It is not a savings account for any purpose, but a specific one: budget stabilization in a time of economic turmoil. It’s not a savings account, or a mad-money account.

Revenues can be removed “by a two-thirds vote of the members present in each house, appropriate amounts from the economic stabilization fund at any time and for any purpose.” So tapping the ESF is the same (from a legislative viewpoint) as passing a constitutional amendment — minus the people but adding the governor.

Now, if folks don’t like the restrictions placed on the fund, then let’s change the constitution. But don’t play games with it. The precedent is too long-lasting.

For as wrong-headed, harmful and distasteful as SJR1 is, it has the one small, barely redeeming quality of going to the people in regards to using the fund in a way not contemplated by the Constitution. (TFR opposes SJR1 for a great many reasons. They voted for it before anyone could read… How congressionally DC of them…)

Some worry about the ESF having “too much” money in there. I would agree that government should not hoard dollars. Rather than spend those funds, give the dollars back to the taxpayers. Return the money — don’t create new debt or new obligations.

HB11 could be improved by not drawing from the ESF; take the dollars from the existing general revenues.

Thirdly, let me shift to governance.

Two years ago, Texans were told we HAD to pass $6 billion in evergreen bonding authority for the Texas Water Development board to solve our water problems.

Here is the ballot language: “The constitutional amendment providing for the issuance of additional general obligation bonds by the Texas Water Development Board in an amount not to exceed $6 billion at any time outstanding.” It passed with only 51.5% of the vote, despite heavy spending by advocates.

Here is how the House Research Organization explained the need: “Due to demand for the financing programs of the Texas Water Development Board (TWDB), its current constitutional bond authority will be insufficient to sustain its responsibilities through the next two-year state budget period.”

Sound familiar?

To date, little of that has been touched — indeed, barely scratched. There are several reasons for that, but it is generally instructive.

I raise this because the $2 billion for HB4 is not needed on 1 Sept 2013. Some trifling amount may need to be, but there is a lot that has to happen — between governing bodies and loan rules — before the first check can be written.

HB11 could be improved by moving the draw date to the very end of the biennium.

Remember: the ESF has $8 billion in it right now, not $12 billion. We have an outstanding lawsuit on school finance that could easily run in the $3-$5 billion range (and that would be getting off easy if you have followed the trial court action). So, we’re looking at an ESF at $4 billion or less. Add to it a glancing blow from a hurricane against the Houston ship channel. That would cause a huge hit to the state economy, and therefore a shortfall in revenues. Hence, the ORIGINAL need for the ESF: smoothing out unanticipated revenue losses.

An ESF improvement might be something like Rep. V. Taylor’s plan to use it as an endowment fund — where revenues generated through investment go to well-defined, constitutionally protected infrastructure funds.

Fourth, no matter what might any of us might hope or wish regarding the accounting of the dollars, an ESF draw DOES count against the spending limit. This is spending under current law. The House has already approved a budget (I believe you voted for it), scraping up to the existing budget cap. That was a known number then AND both HB4 and HB11 were “fully formed” in terms of dollar draws.

So, voting for HB11 is a “bust” on the cap. It is unreasonable to ask the budget conferees to now take the budget legislators (House and Senate) voted on and draw it down $2 billion to make room for HB11. It should have been included in the budget from the beginning. When the budget passed the House, HB4 and HB11 were already in the mix.

HB11 could be made acceptable by reducing the draw (from whatever source) to whatever is the limit under the current spending cap.

Fifthly. All of this is taking place in the context of a legislative session that began with $8 billion in new revenues.

If it is such a priority, why was there no budgeting for it? No planning for it? Instead, we have grown programs, leadership is trying to pass (yet again) a Zerwas Medicaid expansion effort, and on and on.

Remember all the bold campaign promises of substantial tax relief? None has moved. Some targeted tax cuts for well-lobbied interests might, but no broad-based tax relief is in the works. Remember the calls for a stricter spending limit, set constitutionally at population and inflation? Nothing. The list goes on and on.

Legislators should not be held hostage to another “promise” of future action. Again and again they buy the “make the one compromise and then we’ll move your legislation.” The clock is running. Don’t believe it.

Sixth… I know there are threats of leadership cutting deals with Democrats, adding money for education, health care, etc. I don’t respond well to blackmail. As Sam Houston said, “Do right and risk the consequences.”

Others may scheme, but we have to stand on principle, and fight with valor and integrity.

Lastly: nothing done in HB4 or HB11 affects actual water availability today, or next week, or even next year. The structure of how we fund water is too important, and the source of the funding too critical, for an emotional, slap-dash effort. If we “do nothing,” the state runs out of water in 2050 or later. Texas isn’t doing nothing right now: projects are underway, and billions in funding are accessible.

Let’s get it right, and done right. HB11, as it stands, does neither.

Unless it is rehabilitated and reformed, HB11 should be opposed.


MY RECOMMENDATIONS:

  • HB11 could be improved by not drawing from the ESF; take the dollars from the existing general revenues.
  • HB11 could be improved by moving the draw date to the very end of the biennium.
  • HB11 could be made acceptable by reducing the spending to what is allowed under the current spending cap.

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