GOVT 2306

The Texas Budget

The slides will provide you with a few links to material related to the

Texas Budget.

We will then walk through the process and I’ll outline its major

features.

The most important institution related to the Texas Budget is the

Legislative Budget Board. They provide a variety of functions

related to the budget.

They’ll be more on this institution below, but click through to get familiar with them.

Click here for the link to info on the LBB in the Texas State

Historical Association website.

Legislative Reference Library has a page with links to the major

documents related to the Texas Budget, in addition to a snapshot

view of the budget process.

The most thorough resource is this report from the Senate Research

Center:

Budget 101: A Guide to the Budget Process in Texas.

The House Research Organization has a pretty good document too: Writing the State Budget – 82nd

Legislature.

Here are useful external sites focused on the Texas Budget:

Texas Budget SourceState Budget Solutions.

For differing ideological takes on budgeting, click on the following:

The liberal Center for Public Policy Priorities: Budget.

The conservative Texas Public Policy Foundation: Budgets and Spending.

And here are good sources for media coverage of the Texas

Budget:

Texas Tribune: BudgetAustin American Statesman: State Budget.

And an overview of the budgeting process in the 82nd Legislature – the one that put together the

2012-2013 budget.

And links to all blog posts on the blog tagged with “Texas Budget.”

And finally, The 2012 Texas Fact Book, a document produced by the

LBB compiling various facts associated with the states, some related to the budget, some not.

Its a great general resource about the state.

Suffice to say, there’s lots of material on the Texas budget out there. If you get familiar with the

material in the previous link, you’ll come close to being an expert on

the process.

Now let’s take a look at the budget itself.

First:

What is a budget?

Simple definitions:

1. an estimate, often itemized, of expected income and expense for a given period in the

future.

2. a plan of operations based on such an estimate.

3. an itemized allotment of funds, time, etc., for

a given period.

Beyond that, a government’s budget contains the vision that the

state has for its future.

The vision begins with the governor, who establishes guidelines for what executive

agencies will submit, and is adjusted by the legislature, which has to approve the

budget in order for it to become binding.

If you control the budgeting process, you can control much of

what happens in the state.

A quick, major clarifying point.

Texas has a two year budgeting cycle. The legislature – if you recall

– only meets 140 calendar days beginning the first Monday the year following each election.

In that period, it passes the biennial budget that is to begin the

next fiscal year.

Here’s a quick early look at the process in the 82nd Session of the legislature:

The LBB’s website has a brief statement on the history of

budgeting in Texas.

There was no effective system of budgeting until 1949.

The Texas Constitution of 1876 did not establish a budgeting process,

but it did put limits on the ability of the state to assume debt.

Article 3, Section 49 – as originally written – states: SEC. 49. No debt shall be created

by or on behalf of the State, except to supply casual deficiencies of revenue, repel invasion, suppress insurrection, defend the State in war, or pay existing debt and the debt created to supply deficiencies in the

revenue, shall never exceed in the aggregate at any one time two hundred

thousand dollars.

This falls short of requiring a balanced budget, but it ensures that spending stays in line with

revenues.

As with much of the Constitution, it has been heavily amended.

One of the amendments allows for the legislature to “submit to the eligible voters

of this State one or more propositions that, if approved by a majority of those voting on the question, authorize the

legislature to create State debt for the purposes and subject to the limitations stated in the applicable proposition.”

The state of Texas can issue bonds – which create debt – for defined

purposes, like building prisons, highways or water development

projects.

1942 the constitution was amended to mandate that the Comptroller of Public Accounts “in advance of each Regular

Session of the Legislature to prepare and submit to the Governor and to the

Legislature upon its convening a statement under oath showing fully the financial

condition of the State Treasury at the close of the last fiscal period and an estimate of the probable receipts and disbursements

for the then current fiscal year. . .

. . . Except in the case of emergency and imperative public

necessity and with a four-fifths vote of the total membership of each House, no appropriation in

excess of the cash and anticipated revenue of the funds from which such appropriation is to be made

shall be valid.”

This states that the money appropriated for spending

purposes from the treasury cannot exceed the anticipated revenue to be collected during the biennium.

Which establishes that the Texas budget is a pay-as-you-go state.

At least for the general revenue – more on that later.

It also establishes that Texas must have a budget if it is to function at all. The first bills introduced in the Texas

House and Senate each session are the general appropriations bills. These

must pass.

From the 82nd session: HB 1

Enrolled version from the LBB.

As a consequence, the Legislative Budget Board was established to

coordinate the budgeting process.

This is how it describes itself:

The Legislative Budget Board (LBB) is a permanent joint committee of the Texas

Legislature that develops budget and policy recommendations for legislative appropriations for all agencies of state government, as well as

completes fiscal analyses for proposed legislation. The LBB also conducts evaluations and reviews for the purpose of identifying and

recommending changes that improve the efficiency and performance of state and local

operations and finances.

Design details: The Texas Legislative Budget Board is governed by a five person Board that is co-chaired by the Lieutenant Governor of Texas and the Speaker of the Texas House of Representatives. The Chairman of the Texas House Appropriations and Ways and Means

Committees are also on the Board along with the Chairman of the Texas Senate Finance Committee. Two

more House members are appointed by the Texas House Speaker while the remaining three Senate

members are appointed by the Lieutenant Governor. There is an Executive Director and four Assistant

Directors that oversee a 117 person staff.

For info

TSHATexas Tribune

GTLIHouston Chronicle

Now a walk through the process.

And some links from Texas Politics ( if they help):

1 – Planning and Proposal2 – Legislative Action

3 – Review and Approval4 – Implementation and Monitoring

5 – The Budget Cycle.

Currently (as of July 2012) the budget for the biennium beginning

September 1, 2013 is being assembled.

The process begins when the governor develops a statewide vision for the future of Texas

government. The guidelines are developed in cooperation with the

Legislative Budget Board.

This allows the governor to establish a vision for the state.

Here’s on of Governor Perry’s recent statements.

Here is the request from the LBB.

Agencies are asked to develop long term strategic plans which state

the goals of the agency and where they are in implementing those

goals.

Notice that this is a smaller version of a more exhaustive process each

agency has to undergo every 12 years when they are subject to

Sunset Review.

Governor’s Office of Budget, Planning and Policy issues guidelines to all agencies in how to prepare their requests. Different advisors

specialize on different agencies.

Click here for the agency’s history. It was established in 1976 in an effort to enhance the

governor’s power. He became the Chief Planning Officer of the State.

Governor Perry’s most recent guidelines includes a request that

agencies cut an additional 10% from their budgets.

Here’s the letter.

Governor Perry has also proposed the Texas Budget Compact.

Details from the Texas Tribune.More from the Chron.

Support from Empower Texas.Criticism from the AAS.

The LBB then sends out LegislativeAppropriation Request (LAR)

instructions to all state agencies.

2014-15 Legislative Appropriations Request

Agencies then return their requests, which are then evaluated

by the Legislative Budget Board.

This is done in the summer prior to the election. Here is the current

submissions deadline.

Public hearings are then held by the Legislative Budget Board and the Governor’s Office of Budget,

Planning and Policy to discuss the proposals.

This is where the public has the best chance to offer input on the

merit of the agencies.

The LBB then drafts the appropriations bills that will be

filed in the House and the Senate when the next session convenes.

These are the first bills filed and are designated HB1 and SB1.

By law, about this time (just before the legislature convenes), the Comptroller

unveils the Biennial Revenue Estimate. This is a projection of how much the state is projected to collect during the biennial.

This can be a controversial process. Under estimating revenue can lower the amount

the legislature can spend.

2012-13 Biennial Revenue Estimate.

In the last legislative session, the Comptroller’s office announced that

revenues were likely to be over $25 billion short of projected expenditures.

This led to a fight between those who wanted to acquire the additional revenue

to maintain programs at the projected level, and those who wanted to trim back

spending to fit the projected revenues.

Republicans – controlled over 2/3rds of the seats – wanted to cut

spending, Democrats wanted to maintain it.

Here’s an overview of the situation from the LBJ School.

The governor submits the bill to the legislature – usually along with

a State of the State address to justify the requests contained in

the bill.

Here’s Governor Perry’s Budget for fiscal year 2012-13.

Then each bill goes through the normal legislative process. Each is

subject to modification, but ultimately the House and the

Senate must pass the same bill.

In the House, the bill is reviewed by the House Committee on

Appropriations

In the Senate, the bill reviewed by the Senate Committee on Finance.

These are very competitive committees. Everyone wants to be

on them, as you would imagine. The Speaker and the Lieutenant Governor make those decisions, which makes them very popular.

Budgeting during the 82nd Session was especially contentious given the cuts that were being made to the budget. A special session was necessary to resolve those issues

and produce a budget.

Stories in Texas Tribune,

Once it is passed, the Comptroller has to certify the bill in order to

determine that there will be enough revenue to cover the spending contained in the bill.

Once this occurs, the bill can be signed by the governor and

funding can be appropriated for state agencies.

Their expenditures are monitored for the next two years by the LBB

as well as the State Auditors Office.

The Texas Governor has line items veto authority which allow him to

cross out specific spending items in the veto.

This gives the governor power the president does not have over the

nation budget.

The following document from the governor’s office details the vetoes

the governor made to HB 1 on June 17, 2011. Since the vetoes

happen after the legislature adjourns, they cannot override these vetoes, so they are final.

Here is text of the 2012-13 budget.

The bill goes into effect on the September following the end of

the session.

While the budget is presented as a rigid document, there is opportunity for funds

to be shifted from agency to agency in order to make any adjustments that might

be necessary.

There is also a rainy day fund to make up for shortfalls that might occur when

revenues slip. This happens often when the economy is in recession.

What is the Rainy Day Fund?

Its boring (real) name is the Economic Stabilization Fund. It was established in 1989 after the oil bust, and it's basically a giant

savings account. The fund is replenished every year with natural gas and oil tax revenues. Any tax revenue taken in above the

amount collected in 1987 is split: 25 percent goes into the state's general fund and 75 percent is deposited in the Rainy Day

Fund. The comptroller estimates the fund will have $9.4 billion available for the 2012-13 budget that lawmakers are currently

writing. The Texas Constitution says money from the fund can be spent to “prevent or eliminate a temporary cash deficiency in

general revenue.”

For more information on the Economic Stabilization Fund, click

here, and here. It was added to the Texas Constitution (Article 3, Section 49-g) in an election in

1988.

For recent controversies regarding the rainy day fund:

Texas Tribune: Topics.Is it time to tap Texas' rainy day fund?

Texas Republicans Make $9 Billion Rainy Day Fund Off Limits.

Some commentary and detail about the 2012-13 budget

Video comment from Texas Impact.

A review from the Texas Public Policy Foundation.

Texas Sunshine Review.

Commonly, various groups comment on how the budget impacts their interests

after the budget is released.

Many hire lobbyists whose principle purpose is to maintain whatever benefits

they already have written into the existing budget.

Note: Budgets are never written from scratch. Each builds off the

previous one.

Examples of Advocacy:

GOVantageTexas Public Employees Association

Texas Association of Community Health Centers

ACOG Children at Risk

Recent Facts About the 2010 – 2011 Texas Budget

Revenue: $182.188 BillionOutlays: $182.188 Billion

Revenues

General Revenue Funds: $80.6 B (44.2%)Federal Funds: $65.5 B (36%)Other Funds: $29.6 B (16.3%)

General Revenue – Dedicated Funds: $6.3 B (3.5%)

Outlays

Education: $75.4 B (41.4%)Health and Human Services: $59.7 (32.8%)Business and Econ. Dev: $20.7 B (11.4%)

Public Safety and Criminal Justice: $10.7 B (5.9%)

ARRA: $5.6 B (3.1%)General Government: $4.4 B (2.5%)

A few points about each

Revenue Collection

Click here for a more detail description of sources of revenue from the Comptroller’s office, and an Overview of Texas Taxes here.

22.8% of total revenue in the state comes from the sales tax. Texas

charges a 6 ¼% sales tax on many items sold in the state. Counties

can tack on another ½% - 1 ¼% at their discretion. Transit and special purpose districts can add some as well. Click here for an overall look

at sales taxes in the United States.

Outlays

The Comptroller’s office runs www.texastransparency.org which

allows you to drill into various categories of spending.