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2008 Financial Crisis

Concerned with taxes,
government spending,
public debt, and
management of government money

Texas Budget Compact

Pledge to oppose any new taxes,
restrict spending rainy day fund,
reduce expenditures and programs, and
eliminate using accounting devices to balance
the budget.
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Taxing Policy
Texans traditionally oppose taxes
Regressive taxes (sales tax)

a tax in which the effective tax rate falls as the tax

base increases. Disproportionately impacts lower
income earners.

Progressive taxes (income tax)

a tax where the effective tax rate increases as the
tax base increases

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Taxing Policy
Texas government depends on sales taxes
Rank among the highest in the nation
In addition, more than 60 separate taxes, fees,
and assessments are collected.
Bingo games
Oil and gas servicing
Annual attorney occupation fee
Legal services fee
Mandatory state bar dues

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Budget Policy
Texas Constitution prohibits the state from

spending more than its anticipated revenue.

Required balanced budget
The state can only borrow money for:
casual deficiencies of revenue
to repel an invasion
suppress an insurrection, and
to defend the state in the event of war.

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Budget Policy
General Revenue Fund

Non-restricted state funds

available for general appropriations
Dedicated funds

Restricted state funds

only to be used for designated purposes.
Rainy Day Fund

Funds to be used for unexpected revenue

shortfalls.

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Spending Policy
Texas ranked between 48th and 50th in state
spending per capita
Greater support for spending on infrastructure

Highways
roads, and
other public improvements.

Little support for spending on social/welfare

programs

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Taxes are the primary source of

government revenue.
Other revenue sources include:
Licenses
Sale of assets
Investment income
Gambling
Borrowing

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The Politics of Taxation

Sales Taxes 55% of state tax revenue
General Sales Tax
Applied to all tangible personal property
Many exemptions
Grocery food, water, telephone, goods sold via the
Internet, and most professional/business services

Selective Sales Tax

Highway User Taxes
Sin Taxes
Miscellaneous sales tax

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The Politics of Taxation

Business Taxes

Sales taxes
Businesses are consumers
Franchise taxes
Businesses try to limit personal liability of owners
Imposed on businesses for doing business in Texas
Payroll taxes
Provides funds for payment of unemployment
insurance

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The Politics of Taxation

Business Taxes

Selective taxes
Severance tax

Death Tax

Currently not at federal or state level

Tax burden

Texas ranked 48th for taxes alone

Tax collection

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Revenue from Gambling

Racing

Horse races and dog races taxed

Lottery

Administered by Texas Lottery Commission

Profits dedicated to public education spending

Bingo

Tax divided evenly between state and local

governments

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Nontax Revenues
Federal grants-in-aid

95 percent directed toward three programs

Health and human services
Business/economic development
Education
Voluntary state participation

American Reinvestment and Recovery Act

2009 (aka Stimulus Bill)

Allocated $22.9 billion to Texas

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Nontax Revenues
Land Revenues

Nontax revenue from public land sales, rentals,

royalties, and oil and gas leases

Tobacco Suit Windfall

Tobacco industry must pay Texas an $18 billion

settlement over twenty-five years
Supports variety of health-care programs

Miscellaneous Sources

Fees, permits, and income from investments

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Public Debt
General Obligation Bonds

Borrowing repaid through General Revenue Fund

Revenue Bonds

Borrowed amounts repaid from a specific revenue

source

Bond Review

Must be approved by Texas Bond Review Board

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Public Debt
Economic Stabilization Fund (rainy day fund)
Intended for use when Texas faces an
economic crisis
Financed with excess money in General
Revenue Fund at the end of a biennium and
with oil and natural gas taxes

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Budgeting Procedure
Plan of financial operation
Texas is one of four states that has a biennial

budget

Opposition to a biennial budget is based on too

frequent economic fluctuations
Supporters argue that a biennial budget
is a model that forces strategic planning,
allows for program evaluation, and
permits agencies to spend less time on
budgeting and more time on delivering service.
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Budgeting Procedure
Legislative Budget Board (LBB)

10-member body of Texas legislature

Prepares a biennial current services-based
budget
Helps draft the general appropriation bill for
introduction at each regular session of the
legislature

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Budgeting Procedure
Governors Office of Budget, Planning, and
Policy

Prepares and presents a biennial budget to the

legislature
Governors plan is policy based
Separate budgets created by legislative and
executive branches

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Budgeting Procedure
Budget Preparation

Begins with development of mission statement

Agencies must submit five-year plan to GOBPP
and LBB
Budgets are reviewed by legislature with LBB plan
receiving preference
Budget must agree with comptrollers revenue
estimate
Sent to committees, then governor signs

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Budget Expenditures
Functional expenditures (public education,
human services, and highway construction
and maintenance)
Objective expenditures (goods and services
purchased to render functional services)

Budget Execution
Process by which the governor and the LBB
oversee or modify implementation of the
spending plan
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Purchasing
State agencies must make purchases

through supervision of Texas Procurement

and Support Services
Council on Competitive Government required
to find cost-effective purchasing methods

Texas Facilities Commission

Provides property management services for

state facilities

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Accounting
The state comptroller of public accounts

oversees the management of states money

Major accounting task include:
preparing checks to pay the states obligations
acknowledging receipts from state revenue

sources
recording information concerning receipts and
expenditures in ledgers and other accounting
books.

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Auditing
State accounts audited by the appointed

state auditor
Provides random checks of financial records
and transactions
Examining the activities of agencies to
determine the quality of services,
determine whether duplication of services exist,

and
recommend changes.

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Public Education
Accounted for almost 29 percent of state

expenditure for 2012-13

Covered less than 50 percent of the actual cost of

education

Costs covered by hybrid of local, state, and

federal funding

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Public Education
Sources of public finding

Gilmer-Aiken Law and the Foundation School

Program
the Available School Fund
the School Taxing Ability Protection Fund
the Texas Lottery
the General Revenue Fund
Property Tax Relief Fund
Increased franchise taxes
Reduced property taxes
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Public Education
Funding Equalization
The Robin Hood plan
Requires wealthier districts to transfer funds to
poorer school districts
Wealthier districts
aka Chapter 41 districts
Tax base equal to $319,500 or more per student
Numerous court challenges
Found to be constitutional

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Higher Education
Increasing enrollment but declining state
financial support
Texas Higher Education Coordinating Board

Closing the Gaps initiative

HB9

Requires Texas Higher Education Coordinating

Board to develop an outcomes-based formula for
funding

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Higher Education
Community College Funding

Hybrid of state contact hour funding, local

property taxes, grants, tuition, and fees

University Funding

Legislative funding, tuition, fees, grants, and gifts

Permanent University Fund

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Higher Education
Tuition Deregulation

Allows universities and community colleges to set

tuition and fees
From 20032011, tuition increased 90%

Texas Tomorrow Funds

Tuition plan provides a way for parents to save for

childrens education and lock in costs

State Grants

TEXAS Grants Program

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Public Assistance
Poverty levels remain above national

average
Health Care Programs

Increasing health-care costs and more people

becoming eligible for Medicaid
The cost of Medicaid and CHIP frequently exceed
budget allocations.
ChildLINK purchases insurance coverage

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Other Needs
Transportation

Pay-as-you-Ride
Increased costs have exceeded funding
Texas Mobility Fund

Water

Texas drought has had huge impacts

Texas Water Development Board

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Other Needs (Contd)

Public Safety Programs

State agencies share the responsibility with local

governments

Homeland Security

Unfunded mandates
Border security

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