The city of Austin will soon start sending out $1,000 checks—with no strings attached—to approximately 85 Austin families, in the state’s first experiment in “universal basic income” (UBI). But the Texas Constitution prohibits cities from giving gifts—and that’s why this program is likely unconstitutional.
The program is aimed at people who are being priced out of Austin by rising rents and the skyrocketing cost-of-living (problems caused, in no small part, by city policies).
“This is about preventing displacement, preventing eviction and ensuring that our families are able to stay in their home, that we have that stability,” said council member Vanessa Fuentes, according to the Texas Tribune.
The fact that it comes without strings is key, says Austin Mayor Steve Adler.
“There’s always a question about using taxpayer dollars [this way],” Adler said, adding, “[but here the beneficiaries] might know better than we do how to spend this money.”
But that’s precisely what makes this program illegal.
A little background. The Texas Constitution in Article III, Section 52 prohibits the Legislature from authorizing political subdivisions to lend their credit or to grant public money—unless that money is used for a public purpose.
“The clear purpose of the constitutional provisions is to prevent the gratuitous application of public funds for private use,” the Texas Municipal League explains.
“The Constitution, however, does not invalidate an expenditure that incidentally benefits a private interest if it is made for the direct accomplishment of a legitimate public interest.”
The key question is whether the public interest goal is “directly accomplished” by the expenditure.
That’s pretty vague, but the Texas Supreme Court has provided a three-part test for whether such expenditures violate Section 52:
The purpose of the payment is to accomplish a public purpose, not benefit a private party;
The entity must retain public control over the funds to ensure the public purpose is accomplished and the public’s investment is protected; and
The entity must ensure that it receives a return benefit.
All three elements must be met before an expenditure of taxpayer funds can be considered valid.
So let’s examine Austin’s UBI experiment. Is its goal to achieve a public purpose, rather than benefit private parties? The city says the goal is to keep people in their homes. But because of the no-strings-attached nature of the $1,000 checks, the city shouldn’t be able to claim a goal at all. A public purpose isn’t achieved simply because the city says so. Austin already has rental assistance programs that address that need. If its goal truly was simply to reduce evictions, it could have spent this $1 million to bolster its rental assistance fund.
The Austin UBI program also fails the second part of the test. The city does not retain public control over the funds. Nothing ensures that the public purpose is being accomplished or that the public’s investment is protected. By design, a recipient of this program is free to spend the money however they want.
Finally, the program fails the third part of the test—though the city plans to gauge the effects of this untested program, there’s nothing in place to ensure there’s a return on this investment, or even a way to measure what deliverables this program seeks to accomplish other than to hand out money to a select few Austinites.
The UBI is the most materialistic—and therefore limited—approach to fighting poverty. If the poor are poor simply because they don’t have enough money, then sure, this might work. But poverty—and people—are more complex than that. “Poor” doesn’t equal “broke.”
In fact, programs like the UBI work against proven tactics in combatting poverty. That’s because it creates a “benefits cliff” which serves as a disincentive to finding work and improving your situation. If the recipient of a UBI check gets a job (or a better job, or a promotion), that person may find themselves ineligible for certain benefits, including that check. They may lose more than they’re bringing in—so why work?
Job opportunities and reducing the local property tax burden (which will improve housing affordability) are real solutions to poverty and its symptoms (such as housing instability). They’re a far more effective investment of public funds than a no-strings-attached check sent to the lucky UBI winners.
Nevertheless, one thing is clear—Austin’s experiment in a universal basic income isn’t only misguided. It’s also illegal.
The Honorable Robert Henneke is the Executive Director and General Counsel at the Texas Public Policy Foundation.