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The Legislative Budget Board Fiscal Size-Up

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1 The Legislative Budget Board Fiscal Size-Up 2012-2013
GOVT 2306

2 The purpose of this set of slides is to get you familiar with a very useful document prepared every two years by the Legislative Budget Board. The LBB Fiscal Size-Up

3 Note: I can’t find a direct link to the document on line, but you can open up the PDF file by going to the Legislative Budget Board’s website and scrolling over “Budget” on the task bar and clicking on Fiscal Size Up, then Size Up on the drop down menu. Try opening it up now.

4 When you open it up, you’ll see that its huge
When you open it up, you’ll see that its huge pages But you won’t have to read all of it. I just want you to get familiar with the information it contains.

5 It provides a thorough look at the scope of Texas government, so looking through it may be the best way to understand its design, costs and the range of issues associated with it. Here’s how it describes itself:

6 Fiscal Size-up is a report produced biennially by the staff of the Legislative Budget Board. Production of this report involves thousands of staff hours. The 2012–13 edition, like previous editions, contains a wealth of information about the structure and operation of Texas state government. Through its comprehensive descriptions of state programs and services, including more than 360 figures, the 2012–13 Fiscal Size-up provides Texas taxpayers with a more complete understanding of how their tax dollars are being used.

7 The first three chapters of Fiscal Size-up include an overview of the 2012–13 state budget (including a summary of the fiscal challenge the Eighty-second Legislature addressed), a description of the major state revenue sources and funds, the economic outlook for Texas and the U.S., and detailed information on population, income, taxes, governmental expenditures, and employment for Texas and other states. The remaining chapters of Fiscal Size-up provide an in-depth examination of the major functions of state government and discuss the significant budget issues, programs, and activities of the agencies and institutions that support each function.

8 Then by simply walking through the Table of Contents, you can get an idea of the scope of functions and agencies in the state. Notice that it is divided into a number of sections that correspond to the major functions of Texas Government. We will touch on each of these below.

9 A quick note: This report covers the budget created by the 82nd Texas Legislature which met in the spring of The budget produced by the 83rd session of the legislature will not be written up in a fiscal size-up until January of 2014.


11 This section provides graphs and numbers associated with the Texas Budget, both on the revenue and spending side as faced by the 82nd Legislature, which met from January o May It also discusses recent controversies regarding the budget including the consequences of the financial crash of It breaks down the source of the various funds in the state. The next slide contains the all funds budgets for the and fiscal years.


13 Here’s a quick look at the breakdown of spending
Here’s a quick look at the breakdown of spending. Note where most money is spent in the state.


15 Note the use of the phrase “All Funds
Note the use of the phrase “All Funds.” Funds in the state come from a variety of sources. Not every item in the state budget is funded in the same way.

16 Some are part of the operational budget, some have unique funding sources, and some are funded primarily by the federal government, through the state of Texas. Here’s a bit from the document:

17 “The 2012–13 biennial budget for Texas state government includes appropriations for state operations that total $173.5 billion in All Funds. The 2012–13 All Funds budget includes estimated appropriations of $81.3 billion from General Revenue Funds, $6.4 billion from General Revenue–Dedicated Funds, $54.7 billion from Federal Funds, and $31.2 billion from Other Funds.”

18 Notice the different types of funds. Let’s walk through them

19 There are two basic types: The General Revenue Fund and Federal Funds
There are two basic types: The General Revenue Fund and Federal Funds. The General Revenue Fund is divided in two categories: Dedicated and Non-Dedicated Funds

20 General Revenue Funds

21 General Revenue Funds All revenues coming into the state treasury that are not allocated by law to a specific fund or purpose are deposited into the General Revenue Fund.

22 “The fund that receives state tax revenues and fees considered available for general spending purposes and certified as such by the comptroller of public accounts.” Here’s a graph of the general revenue funds:



25 From Budget 101: “The non-dedicated portion of the General Revenue Fund serves as the state's primary operating fund. Most state tax revenues, many state fees, and various other revenues are deposited as non-dedicated general revenue The non-dedicated portion of the General Revenue Fund provides legislators the most discretion in spending.”

26 A fuller definition of the General Revenue Funds Budget can be found on Page 7 of the Fiscal Size-Up. For definition purposes, “General Revenue Funds” as used in Fiscal Size-up includes the non-dedicated portion of the General Revenue Fund, as well as three education funds: the Available School Fund, the State Textbook Fund, and the Foundation School Fund.

27 This is the closest the state comes to an operational budget
This is the closest the state comes to an operational budget. And it’s the one legislators have the most control over. Here’s a bit more on the three education funds (from Budget 101) mentioned in the previous slide.

28 Some of these funds are drawn from the Permanent School Fund, which is “a perpetual endowment to support Texas’ public schools. Its original wealth was in land and money, but virtually all of the principal assets are now in securities.”

29 The Available School Fund (ASF) receives interest and dividend income from the Permanent School Fund and one-quarter of motor fuel taxes.

30 A portion of the Available School Fund revenue is transferred to the State Textbook Fund and used to provide textbooks to children attending public schools. After the textbook allocation, remaining revenue in the ASF is allocated to school districts.

31 One-quarter of occupation taxes, which include, among others, the oil production tax, the natural gas production tax, and the gas, water, and electric utility tax, are constitutionally dedicated to public education. The revenue from these taxes is initially deposited to the General Revenue Fund, and then transferred to the Foundation School Account (FSA).

32 General Revenue – Dedicated Funds

33 General Revenue–Dedicated Funds “These accounts receive revenue dedicated for a particular purpose.”

34 “Accounts that can be counted as General Revenue but must be used for the purposes identified in general law to the extent such money is appropriated in the General Appropriations Act.”

35 Legislators have less control over these funds because they are dedicated to a specific purpose. [It’s similar to the distinction between discretionary and non-discretionary spending on the national level]



38 Notice that this is a far smaller part of the budget that the general fund.

39 “There are approximately 200 dedicated accounts maintained in the General Revenue Fund, including for example, the State Parks Account, college operating accounts (which receive tuition revenue), and the Department of Insurance Operating Account. Revenue that is dedicated for a particular purpose is deposited to these dedicated accounts, and in most cases, the Texas Legislature may appropriate revenue from these accounts only for the purpose to which the revenue is dedicated by law.”

40 Here’s an example of a dedicated fund:

41 “The major revenue sources deposited directly to the State Highway Fund include motor vehicle registration fees, federal highway funds, and the sales tax on motor lubricants. Motor fuel tax revenue is deposited to the General Revenue Fund and a portion is allocated to the State Highway Fund. Revenue in the State Highway Fund is used for highway construction and maintenance, acquisition of rights-of way, and law enforcement on public roads.” – Budget 101

42 And now the Federal Funds Budget

43 Federal Funds Budget Federal Funds include grants, allocations, payments, or reimbursements received from the federal government by state agencies and institutions named in the General Appropriations Act (GAA).

44 “Funds received from the United States government by state agencies and institutions that are appropriated to those agencies for the purposes for which the federal grant, allocation, payment, or reimbursement was made.”

45 When we covered federalism early in this class we discussed co-operative federalism, a relationship between the national and state governments where the national government enticed state governments to provide policies that met national objectives by providing funds to the states to do so. This section shows how those funds fit into the Texas budget. The following graph gives us an idea of where the influence of the national government is greatest in the state.



48 About 1/3rd of the Texas budget comes from the national government.

49 This gives you a clearer idea of where federal funds are spent in the state. Top 100 Federal Funding Sources in the Texas State Budget.

50 As discussed in a previous section, these funds can be used by the national government to entice the states to provide certain services, and to create certain standards for those services. Example: in the 1980s, the national government forced all states to raise their drinking ages to 21 by threatening to stop highway funding to those states that refused to do so. Funding provides leverage.

51 Other Funds

52 “Other Funds consist of any funds not included in the other methods of financing. Other Funds include the Texas Mobility Fund, trust funds, bond proceeds, interagency contracts, certain revenue held in higher education “local” accounts, and constitutional funds.”



55 This section concludes by outlining the four constitutional spending limits placed on the budget.

56 “Texas has four constitutional limits on spending: the “pay-as you- go,” or balanced budget limit; the limit on the rate of growth of appropriations from certain state taxes; the limit on welfare spending; and the limit on debt service. The 2012–13 biennial budget is within all of these limits.”

57 Pay-As-You-Go

58 “Article III, Section 49a, of the Texas Constitution sets out the “pay-as-you-go” limit. It requires that bills making appropriations be sent to the Comptroller of Public Accounts (CPA) for certification that appropriations are within available revenue.”

59 Limitation on the growth of certain appropriations

60 “Article VIII, Section 22, of the Texas Constitution limits the biennial rate of growth of appropriations from state tax revenue not dedicated by the Constitution to the estimated rate of growth of the state’s economy.”

61 Welfare Spending Limit

62 “Article III, Section 51-a, of the Texas Constitution provides that the amount that may be paid out of state funds for assistance grants to or on behalf of needy dependent children and their caretakers (i.e., Temporary Assistance for Needy Families [TANF]) shall not exceed 1 percent of the state budget in any biennium.”

63 Debt Limit

64 “Article III, Section 49(j) of the Texas Constitution limits the authorization of additional state debt if in any fiscal year the resulting annual debt service payable from the unrestricted General Revenue Fund—which excludes revenues constitutionally dedicated for purposes other than payment of state debt—exceeds 5 percent of the average annual unrestricted General Revenue Funds for the previous three years.”

65 The section also discusses a variety of trends in spending, notably trends in spending on health care, and state workers. A few highlights:





70 State Indebtedness Even though Texas is restricted in its ability to get into debt, constitutional exceptions have been made in order to provide funds for dedicated items.


72 “Texas continues to have a low state debt burden compared with other states, ranking last among the 10 most-populous states in state debt per capita in 2009, according to the U. S. Census Bureau. The U.S. Census Bureau further indicates Texas’ per capita debt burden was $1,228 in 2009 while the U.S. average was $3, Texas had approximately $36.2 billion in state bonds outstanding as of August 31, 2011.”


74 Figure 35 shows that debt service expenditures for the 2012–13 biennium are expected to exceed the 2000–01 biennial spending level by $2,328.4 million in All Funds, or percent. This increase is primarily related to debt service requirements for debt issuances related to highway improvements and water projects. Debt service costs included in the state budget for the 2012–13 biennium total $3,265.5 million, or 1.9 percent of total appropriations.


76 This section digs deeply into where the revenue for the state comes from. It provides a comprehensive list of the types of taxes and other funding sources that exist in the state and how much money is projected to be earned from them.

77 The content of this section is covered in the separate set of slides on taxes in Texas. But just so you have some idea of where these funds come from, here’s a graph that outlines it:



80 This section runs through various indicators of how Texas compares with other states – including the 15 most populous states - and the nation as a whole. This material is also covered elsewhere, but here are a few things to chew on:


82 This section details how much it costs the executive agencies in the state to run. This does not include those agencies which are covered in separate sections, such as education, health and human services and criminal justice.

83 From the Fiscal Size-Up: “General Government agencies provide a wide array of public and state administrative support services. Included in the General Government functional area are executive branch offices established by the Texas Constitution such as the Governor, Comptroller of Public Accounts, and the Attorney General

84 In addition to the executive offices, other General Government agencies are responsible for oversight and management of state debt; administration of employee healthcare and retirement benefits; oversight of state and federal election laws; preservation of the state’s cultural and historic resources; claims administration for veterans federal benefits and veterans’ education and job training programs; management of information technology and telecommunications services; oversight of building construction and maintenance programs; as well as administration of cancer prevention and research programs.”



87 The section continues to describe funding issues within each of the agencies in the chart above.


89 This is the second largest area of state government and includes the Texas Medicaid program. 56% of the funding for this section comes from Federal funds. The budget was $55.6 billion.



92 Health and Human Services is covered more thoroughly in a separate section.


94 This is where most spending in the state occurs
This is where most spending in the state occurs. The budget was $72.8 billion. The Texas Education Agency falls under this section.



97 Education policy is also covered in a different section
Education policy is also covered in a different section. No need to go further here.


99 This section details all the funding received by the judicial department. And its not much. Only $643 million was spent on the judiciary in the state.


101 Notice that the bulk of the funding comes from General Revenue Funds, and about 1/4th comes from Other Funds. The other funds are “comprised mainly of criminal court costs and civil filing fees.”


103 Most of the spending is on: Judiciary Section, Comptroller’s Department Office of Court Administration, Texas Judicial Council Supreme Court of Texas Court of Criminal Appeals


105 Much of the content of this section is covered in the section on criminal justice policy. This outlines and describes the agencies involved public safety and criminal justice and their funding sources.

106 From the document: “Eight state agencies and commissions provide public safety and criminal justice services: the Adjutant General’s Department, the Texas Alcoholic Beverage Commission, the Texas Department of Criminal Justice, the Texas Commission on Fire Protection, the Texas Commission on Jail Standards, the Texas Juvenile Justice Department, the Texas Commission on Law Enforcement Officer Standards and Education, and the Department of Public Safety.”

107 This is the third largest area of spending in the state
This is the third largest area of spending in the state. The bulk of the spending comes from general revenue funds. $11.5 billion



110 Here are links to the largest agencies: Department of Criminal Justice Department of Public Safety


112 A significant amount of the wealth generated in the state of Texas came from, and continues to come from, the natural resources found within it. This section details the agencies that have been established to help develop those resources.

113 budget: $3.8 billion

114 “Natural Resource agencies play a major role in the state’s economy and in maintaining a healthy environment for Texans. State agencies in Texas charged with the responsibility of influencing the management and development of these resources do so through scientific research, education, preservation, regulation, and remediation. The largest agency in this function of state government is the Texas Department of Agriculture, which works to make Texas the nation’s leader in agriculture, fortify the economy, empower rural communities, promote healthy lifestyles, and cultivate winning strategies for rural, suburban and urban Texas. The second largest agency in this function of government is the Texas Commission on Environmental Quality, which protects the state’s human and natural resources in a manner consistent with economic development through the goals of clean air, clean water, and the safe management of waste.”

115 The largest agency listed here is the Texas Department of Agriculture
The largest agency listed here is the Texas Department of Agriculture. The second largest is the Texas Commission on Environmental Quality.

116 Notice the sharp drop in funding for the Commission on Environmental Quality.

117 This section also contains: General Land Office Veterans’ Land Board Parks and Wildlife Department Railroad Commission Water Development Board




121 These agencies are held to provide the basic services that allow for business and economic development in the state. Most importantly it includes agencies related to transportation, as well as developing the workforce.

122 Budget: $23.6 billion This makes it the third largest spending area in the state, which can be taken as evidence of the importance of business development in the state.



125 From the document: “Five state agencies provide services supporting the Texas economy through business development, transportation, and community infrastructure. These agencies include the Department of Housing and Community Affairs (TDHCA), the Texas Lottery Commission (TLC), the Department of Motor Vehicles (DMV), the Texas Department of Transportation (TxDOT), and the Texas Workforce Commission (TWC).”

126 Notice that they are primarily funded by “Other Funds” and Federal Funds. Very little General Revenue Funds are used for these agencies.

127 Read through the document for detail on these programs
Read through the document for detail on these programs. You notice that each tends to have its own independent funding source, or exists principally – as is the case with the Department of Housing and Community Affairs and the Texas Workforce Commission – because of incentives created by the national government.

128 For a good look at what these “other funds” look like, here’s a description of the source of funds for the Texas Department of Transportation.


130 Note the amount of funding that comes from State Highway Funds
Note the amount of funding that comes from State Highway Funds. The next slide contains detail about where its funding comes from. Click here for a primer on funding Texas highways from the LBB:


132 Peruse through the rest of the material on your own
Peruse through the rest of the material on your own. But I’d appreciate input on why The Texas Lottery Commission is listed here. How does the lottery help business and economic development?


134 This describes the funding necessary to run the various regulatory agencies in the state. It also provides a good overview of those agencies.

135 budget: $677.8 million

136 “A wide range of industries and occupations are regulated by the 24 regulatory agencies included in Article VIII of the 2012–13 General Appropriations Act (GAA). Regulated industries include insurance, worker’s compensation, health related occupations, non-health-related occupations, telecommunications, electric utilities, securities, and pari-mutuel racing. The appropriations and indirect costs for 20 of the regulatory agencies are supported by fees generated from the industries and occupations they regulate. These agencies are subject to a special provision expressing legislative requirements that agency revenues cover the cost of agency appropriations as well as an amount equal to other direct and indirect costs appropriated elsewhere in the 2012–13 GAA.”


138 Notice that these are funded mostly by dedicated funds
Notice that these are funded mostly by dedicated funds. These are drawn from the regulated industries. It also creates the potential for regulatory capture. This occurs when the interest being regulated is able to capture the agency that is to regulate it, which allows the interest to regulate itself – which is a very sweet thing.


140 The previous graph provides a good overview of the regulatory agencies in the state. The document walks through each of these agencies, so it gives you a good looks at what they are and do.


142 budget: $339.9 million Almost all the funding come from general funds. This is the smallest area of spending in Texas government.



145 This details how much each of the parts of the legislative branch cost to run – or at least how much the state chooses to fund it. This might lend support to the idea that the state deliberately minimizes the amount of money the state has to spend on law making in order to retrain it.

146 And it provides a good additional walk through the legislature.

147 That’s it. Peruse the document on your own if you want to get additional detail about whatever aspect of Texas government that might strike your interest.

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