Pay As You Go

In the fiscal arena, Texas is known as a “pay-as-you-go” state. The Texas Constitution prohibits our state government from spending more money than it receives. Unlike the federal budget, the state budget always must balance; so-called “deficit spending” is not allowed. But just because Texas is required by law to live within its means doesn’t mean it can’t borrow money.

The state takes on debt for various public purposes, typically by selling bonds. Usually the proceeds pay for capital projects and long-term programs. They can range from highway construction and water development to college student loans and cancer research. The Legislature appropriates funds in the state budget to repay almost all state debt, although a few entities may issue their own debt individually.
Texas Comptroller – Debt and Finance

Problems:

Cities and Counties
Local governments hundreds of millions of dollars annually in debt interest and fees to private for-profit banks to finance infrastructure. The [failed] Rebuild Houston program is used to avoid the revenue cap. In reality it would be cheaper for taxpayers to repeal the revenue cap and the rebuild program by letting elected officials and voters decide how best to spend their money, instead of a gimmick.

State Government
We believe the rainy day fund should be included in the Texas pay as you go and that constitutional amendment require 3% be placed into the fund annually.

 

Solutions:

 

Alternatives:

 

Texas Constitution
Code – The Texas Constitution
Article 3 – Legislative Department
Section 49(a) – Financial Statement and Estimate by Comptroller of Public Account; Limitation of Appropriations

 

CBPP – Economic Effects of the Pay-As-You-Go Rule

CBPP – PAYGO: Improving State Budget Discipline While Retaining Flexibility

OECD – The Problems and Prospects Faced by Pay-As-You-Go Pension Systems: A Case Study of Greece

World Bank – Paying for a shift from pay-as-you-go financing to funded pensions

Texas Legislative Budget Board – Constitutional Spending Limits

Texas Tribune – Elephant Dung