1. GOVT 2306 The Texas Budget

2. 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.

3. 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. Legislative Budget Board

4. Click here for the link to info on the LBB in the Texas State Historical Association website.info on the LBB

5. Legislative Reference LibraryLegislative 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.links to the major documents

6. The most thorough resource is this report from the Senate Research Center: Budget 101: A Guide to the Budget Process in Texas.A Guide to the Budget Process in Texas

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

8. Here are useful external sites focused on the Texas Budget: Texas Budget Source State Budget Solutions. Texas Budget Source State Budget Solutions

9. 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.Center for Public Policy PrioritiesBudgetTexas Public Policy FoundationBudgets and Spending

10. And here are good sources for media coverage of the Texas Budget: Texas Tribune: Budget Austin American Statesman: State Budget.BudgetState Budget

11. And an overview of the budgeting process in the 82 nd Legislature – the one that put together the 2012-2013 budget.budgeting process in the 82 nd Legislature

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

13. 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.2012 Texas Fact Book

14. 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.

15. First: What is a budget?

16. 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.

17. 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.

18. If you control the budgeting process, you can control much of what happens in the state.

19. 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.

20. In that period, it passes the biennial budget that is to begin the next fiscal year.

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

22. The LBB’s website has a brief statement on the history of budgeting in Texas. There was no effective system of budgeting until 1949.history of budgeting in Texas

23. 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.Texas Constitution of 1876

24. 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.

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

26. 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.”heavily amended

27. The state of Texas can issue bonds – which create debt – for defined purposes, like building prisons, highways or water development projects.

28. 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...Comptroller of Public Accounts

29. ... 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.”

30. This states that the money appropriated for spending purposes from the treasury cannot exceed the anticipated revenue to be collected during the biennium.

31. Which establishes that the Texas budget is a pay-as-you-go state. At least for the general revenue – more on that later.general revenue

32. 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 82 nd session: HB 1 Enrolled version from the LBB. HB 1 Enrolled version from the LBB

33. As a consequence, the Legislative Budget Board was established to coordinate the budgeting process. This is how it describes itself:

34. 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.

35. 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.Lieutenant Governor of TexasTexas House of Representatives

36. For info TSHA Texas Tribune GTLI Houston Chronicle TSHA Texas Tribune GTLI Houston Chronicle

37. Now a walk through the process. And some links from Texas Politics ( if they help): 1 – Planning and Proposal 2 – Legislative Action 3 – Review and Approval 4 – Implementation and Monitoring 5 – The Budget Cycle.Planning and ProposalLegislative ActionReview and ApprovalImplementation and MonitoringThe Budget Cycle

38. Currently (as of July 2012) the budget for the biennium beginning September 1, 2013 is being assembled.

40. 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. Legislative Budget Board

41. 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. recent statements Here is the request from the LBB

42. Agencies are asked to develop long term strategic plans which state the goals of the agency and where they are in implementing those goals.

43. 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. Sunset Review

44. Governor’s Office of Budget, Planning and Policy 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.advisors specialize

45. Governor Perry’s most recent guidelines includes a request that agencies cut an additional 10% from their budgets. Here’s the letter.most recent guidelines Here’s the letter

46. 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.Texas Budget Compactthe Texas Tribunethe ChronEmpower Texasthe AAS

47. The LBB then sends out Legislative Appropriation Request (LAR) instructions to all state agencies. 2014-15 Legislative Appropriations Request 2014-15 Legislative Appropriations Request

48. 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.the current submissions deadline

49. 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.

50. 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.

51. 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.Biennial Revenue Estimate 2012-13 Biennial Revenue Estimate

52. 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.

53. 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.Democrats wanted to maintain itoverview of the situation from the LBJ School

54. 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.State of the State

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

56. 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.

57. 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.House Committee on AppropriationsSenate Committee on Finance

58. 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.

59. Budgeting during the 82 nd 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,Texas Tribune

60. 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.

61. 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.State Auditors Office

62. 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.

63. 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.details the vetoes the governor made to HB 1

64. Here is text of the 2012-13 budgetHere is text of the 2012-13 budget.

65. The bill goes into effect on the September following the end of the session.

66. 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.rainy day fund

67. What is the Rainy Day FundWhat 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.”Texas Constitution

68. 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.click here Article 3, Section 49-gelection in 1988

69. 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.Topics Is it time to tap Texas' rainy day fund Texas Republicans Make $9 Billion Rainy Day Fund Off Limits

70. Some commentary and detail about the 2012-13 budget

71. Video comment from Texas ImpactVideo comment from Texas Impact. A review from the Texas Public Policy Foundation. Texas Sunshine Review. A review from the Texas Public Policy Foundation Texas Sunshine Review

72. 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.

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

74. Examples of Advocacy: GOVantage Texas Public Employees Association Texas Association of Community Health Centers ACOG Children at Risk GOVantage Texas Public Employees Association Texas Association of Community Health Centers ACOG Children at Risk

75. Recent Facts About the 2010 – 2011 Texas Budget Revenue: $182.188 Billion Outlays: $182.188 Billion

76. 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%)

78. 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%)

80. A few points about each

81. 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.a more detail description of sourcesOverview of Texas Taxes

82. 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.the sales tax

83. Outlays The Comptroller’s office runs www.texastransparency.org which allows you to drill into various categories of spending. www.texastransparency.org categories of spending