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Texas Early Retirement of State Debt Amendment (2015)

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The Texas Early Retirement of State Debt Amendment was not on the November 3, 2015 ballot in Texas as a legislatively referred constitutional amendment.

The measure, upon voter approval, would have required tax revenue that the comptroller withholds from the Economic Stabilization Fund (ESF), which is the state's rainy day fund, to be deposited in a new account that could be appropriated only to retire state debt early.[1][2]

The reason the comptroller may withhold some tax revenue from the ESF is because Section 49-g of Article 3 of the Texas Constitution limits how much revenue the ESF can hold to an amount equal to 10 percent of the total amount deposited into general revenue during the previous fiscal biennium. Although the ESF cap has never been reached, the revenue exceeding the cap would be placed in the general revenue fund under the current constitution.

The amendment would have also appropriated any interest earnings that would put the ESF over its cap into the new account used for retiring state debt early.

The measure was introduced into the Texas Legislature by Rep. John Otto (R-18) as House Joint Resolution 8.[3]

Text of measure

Ballot title

The proposed ballot title was:[1]

“ The constitutional amendment to dedicate certain money to the purpose of retiring state debt early.[4] ”

Constitutional changes

See also: Article 3, Texas Constitution

The proposed amendment would have added a Section 49-g to Article 3 of the Texas Constitution. The following text would have been added by the proposed measure's approval:[1]

Sec. 49-g.

(p) When the comptroller acts to prevent the amount in the economic stabilization fund from exceeding the limit in effect for a biennium under Subsection (g) of this section by reducing an amount transferred to the fund from general revenue as provided by Subsection (b) or (c) of this section or by crediting to general revenue interest due to the economic stabilization fund as provided by Subsection (i) of this section, the comptroller shall credit to an account in the general revenue fund of the state treasury:

(1) if the comptroller reduces the amount transferred under Subsection (b) of this section, an amount of general revenue equal to the difference between the amount transferred to the economic stabilization fund under Subsection (b) of this section and the amount that would have been transferred under that subsection but for the limit in effect under Subsection (g) of this section;
(2) if the comptroller reduces the amount transferred under Subsection (c) of this section, an amount of general revenue equal to the difference between the amount transferred to the economic stabilization fund under Subsection (c) of this section and the amount that would have been transferred under that subsection but for the limit in effect under Subsection (g) of this section; and
(3) if the comptroller reduces the amount credited to the economic stabilization fund under Subsection (i) of this section, an amount of general revenue equal to the amount credited to general revenue under that subsection.

(q) General revenue credited to the account in the general revenue fund of the state treasury under Subsection (p) of this section may be appropriated only for the purpose of retiring state debt early.[4]

Support

Supporters

Officials

The following state legislators sponsored the amendment:[5]

Organizations

  • Texas Taxpayers and Research Association[6]

Arguments

The House Research Organization provided supporting and opposing arguments in the group's bill analysis. The following is an excerpt from the supporting statement:

“ HJR 8 would establish a fiscally responsible use for money that exceeds the cap on the ESF. The ESF never has been close to reaching its cap so the issue of what to do with excess funds generally has not been considered. HJR 8 would dedicate those funds to the early retirement of debt, which would benefit the state by reducing its debt burden and avoiding problems that could arise from allowing these funds to remain available for spending as general revenue.

Although the Legislature could appropriate spillover funds to early debt reduction without HJR 8, the amendment is needed to ensure fiscal discipline on this issue. Texas should not use money saved during good economic times to grow state government or to temporarily fund ongoing expenses, and HJR 8 would remove the temptation to use excess ESF funds for these purposes.

Retiring debt early would be the best use of these funds because reducing the state’s debt burden increases options for spending current revenue and for borrowing in the future. Texas had $44.3 billion in total debt outstanding at the end of fiscal 2014, and HJR 8 would apply only to retiring that debt early, not to paying regularly scheduled debt service. Retiring debt early would eliminate the state’s long-term commitment to that debt, thereby reducing the ongoing amount of general revenue that must be budgeted for regularly scheduled debt service. This could free up state funds to be used as the Legislature chooses. In addition, retiring debt would increase the state’s capacity to borrow again in the future and would be a positive factor for the state’s credit position.

Allowing funds that spill over from the ESF cap to remain in general revenue could create problems if the funds were appropriated for ongoing, general state spending because the source of the funds would not be dependable from one biennium to the next. Using such funds for early debt reduction would be appropriate since it would not be a mandatory expenditure and could be made only when funds were available...

The Legislature would retain full control over the spending of funds deposited in the new account under HJR 8. The Bond Review Board, the Texas Public Finance Authority, and other entities could identify debt that might be advantageous for the state to retire early. However, no funds would leave the new account unless appropriated by the Legislature. If the Legislature decided not to make an appropriation from the new fund to retire debt early or if there was no debt advantageous to retire, money would remain in the dedicated account...[4]

”
—House Research Organization[2]

Opposition

Arguments

The House Research Organization provided supporting and opposing arguments in the group's bill analysis. The following is an excerpt from the opposing statement:

“ By dedicating funds in excess of the ESF cap for one purpose, HJR 8 would reduce the flexibility of lawmakers to direct state appropriations. Current law balances the needs of the state both to save money for the future and to meet other spending priorities. Once enough funds have been saved in the ESF to reach the cap, funds should continue to be available for any purpose, rather than being reserved for just one. The needs of the state change, and tying the use of revenue in excess of the ESF cap to one purpose would reduce the flexibility of lawmakers to meet those needs.

HJR 8 would result in funds being locked away for early debt retirement, even if it were not advantageous to the state to do so. Debt might be unavailable to retire early, interest on the debt could be so low that other uses of the money might be more beneficial to the state, or consistently retiring debt early could factor unfavorably into the way lenders structure the state’s debt. Absent HJR 8, the Legislature could consider all factors and state needs in deciding whether funds exceeding the ESF cap should be used to retire debt or for another purpose.

The state could consider other worthy causes if it wants to dedicate funds that are in excess of the ESF cap. Using excess funds to make contributions to the Employees Retirement System, the Teacher Retirement System, or to the Texas Tomorrow Fund would pay down future liabilities of the state. Public education, higher education or taxpayer relief also could be appropriate uses for excess ESF funds.

The spending limit is designed as a check on state spending, and HJR 8 would work counter to this policy by constitutionally dedicating funds and removing them from the spending limit calculation. The Texas budget should be as transparent as possible and should count the spending of general revenue that spills over the cap toward the spending limit. The amendment also would not be in line with responsible budgeting if funds made available by retiring debt early were used to expand government.[4]

”
—House Research Organization[2]

Path to the ballot

See also: Amending the Texas Constitution

The proposed constitutional amendment was filed by Rep. John Otto (R-18) as House Joint Resolution 8 on January 15, 2015.[3]

A two-thirds vote in both chambers of the Texas State Legislature was required to refer this amendment to the ballot. Texas is one of 16 states that require a two-thirds supermajority vote in both chambers. On April 7, 2015, the Texas House of Representatives approved HJR 8, with 142 representatives voting "yea" and two voting "nay."[3] The measure was not approved by both chambers of the legislature.

See also

External links

Footnotes

  1. ↑ 1.0 1.1 1.2 Texas Legislature, "HJR No. 8," accessed January 22, 2015
  2. ↑ 2.0 2.1 2.2 House Research Organization, "HJR No. 8 Bill Analysis," accessed April 20, 2015
  3. ↑ 3.0 3.1 3.2 Texas Legislature, "HJR No. 8 History," accessed January 22, 2015
  4. ↑ 4.0 4.1 4.2 4.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source. Cite error: Invalid <ref> tag; name "quotedisclaimer" defined multiple times with different content Cite error: Invalid <ref> tag; name "quotedisclaimer" defined multiple times with different content Cite error: Invalid <ref> tag; name "quotedisclaimer" defined multiple times with different content
  5. ↑ Texas Legislature, "HJR No. 8 Authors," accessed April 20, 2015
  6. ↑ Texas Legislature, "HJR No. 8 House Committee Report Witness List," accessed April 20, 2015
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