Correctly Applying the Spending Cap: How to Reduce Property Taxes, Improve Public Education,

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Eva DeLuna Castro /(512) 320-0222 x 103

April 28, 2006

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Our state constitution imposes a little-known cap on state budgeting—a limit on the spending of tax revenue not dedicated by the Constitution. Because of the cap, even with over $8 billion in unallocated revenue, the legislature is finding it difficult to write a budget that includes additional state dollars to 1) reduce local school property taxes; 2) improve education spending, such as through a teacher pay raise, and 3) pay for supplemental needs in 2006-07. We described needed supplemental spending in Policy Page 263, which analyzes the $2.5-billion Senate Bill 16 (Ogden) as introduced. The SB 16 committee substitute laid out on April 24 has an even larger GR price tag of $3 billion. Reducing school property taxes, increasing education spending, and meeting supplemental needs can all be achieved, if the spending cap is correctly applied. This Policy Page explains the spending cap, how it should be applied, and why this is critically important.