Unit 4 Texas Budget and Finance Texas Budget System Financing Texas Government Topics in Governmental Budgetin Governmental budgeting Functions of budget Budget process Limitation on budgeting Taxation Theories of taxation Language of taxation Types of taxes Taxation systems Spending Functions Amounts 2 Functions of a Budget Planning of expenditures Authorization of programs employees salaries and benefits Establishing standards of accountability for programs and agencies 3 1 Unit 4 Texas Budget and Finance Budget Process in Texas Institutions involved Legislative Budget Board Legislative Audit Committee Governor s Budget Office Comptroller of Public Accounts Spending Agencies 4 Steps in Budget Cycle Planning Authorization Appropriations Budget Execution Spending Auditing 5 Planning Considerations Two year budget only major urban state with a biennial budget Balanced budget most states require Dedication of funds sources Federal funds restrictions Constitutional and statutory restrictions on state funds Constitutional limitations on taxation Art III sect 49a pay as you go Art III sect 51a limits on welfare spending Art VIII sect 22 limit on growth from revenue not to exceed rate of growth of state s economy Art VIII sect 1 limits types of taxes state may levy 6 2 Unit 4 Texas Budget and Finance Planning the State Budget Agencies involved Legislative Budget Board Legislative Audit Committee Governor s Budget Office Comptroller of Public Accounts Cost Centers State Agencies 7 Legislative Budget Board http www lbb state tx us COMPOSITION Co Chairs Lieutenant Governor Speaker of the House of Representatives Automatic Members Chairman House Committee on Appropriations Chairman House Committee on Ways and Means Chairman Senate Finance Committee Appointed Members Two House members appointed by the Speaker Three Senate members appointed by the Lieutenant Governor 8 Main Steps in the Budget Process Major steps Budget requests by agencies Sept odd year to Jan even year LBB EBO review of requests combined staff reviews during periods from January even to September even Comptroller s Estimate of Funding periodic estimates of available revenues Preparation of LBB EBO recommendations Independent preparation September even to January odd Presentation to Legislature in January of odd year 9 3 Unit 4 Texas Budget and Finance Authorization Process Committees involved House Ways and Means taxation House Appropriations Senate Senate Finance Committee Senate Committee of the Whole on Finance Steps Committee hearings on budget recommendations Committee recommendations on appropriations Floor action by each chamber Conference Committee Report Comptrollers Certification Governor s Action item veto possible 10 Budget Execution Agencies involved Spending Agency Comptroller of Public Accounts Executive Budget Office LBB in event of need to alter existing budget 11 Legislative Audit Committee State Auditor http www sao state tx us Legislative Audit Committee State Auditor s Office 12 4 Unit 4 Texas Budget and Finance Legislative Audit Committee Co Chairs David Dewhurst Lt Governor of Texas Joe Strauss Speaker of the House Senate Members Sen Steve Ogden Chair Senate Finance Cmt Sen Thomas Tommy Williams House Members Rep Jim Pitts Chair House Appropriations Cmt Rep Rene Oliveria Chair House Ways and Means Cmt 13 State Auditor s Office State Auditor is selected by the Legislative Audit Committee Functions of the State Auditor s Office Financial Compliance Audits Economy Efficiency Audits Effectiveness Audits State Personnel Classification Audits Legislative Committee Support 14 Taxation Theories of taxation benefits received ability to pay Terms incidence defines the sectors of the economy on whom tax falls progressivity of taxing system Criteria efficiency economy convenience sufficiency fairness certainty 15 5 Unit 4 Texas Budget and Finance Per 1000 Personal Income Per Capita State Tax Revenue Fifteen Urban States 2005 TX 42 34 0 10 20 30 40 50 CA 73 71 MI 71 NC 69 24 MA 64 37 WA 66 48 NY 65 01 US Ave 63 41 OH 65 69 IN 65 81 GA 55 52 PA 62 9 NJ 60 12 VA 56 11 Il 57 05 Fl 56 11 60 70 80 16 Revenue Sources 2008 2009 Lottery 2 0 Land income 0 7 Other receipts 2 8 Interest 4 0 Fines Fees 7 8 Taxes 50 5 Federal funds 32 2 17 Percent of Taxes 2009 Corp Franchise 14 7 Motor Vehicle 8 4 Other 11 0 Sales Tax 52 0 Motor fuel 7 7 Oil gas taxes 6 2 18 6 Unit 4 Texas Budget and Finance Texas Spending Rank Per Capita Spending US Census Bureau Overall spending per capita 50 State employee wages Parks and recreation Cash welfare Mental health 50 48 48 47 Public welfare Medicaid Public health Highways Education Corrections 46 45 42 37 17 19 State Expenditures per capita State Governmental Expenditures 15 Urban States FY 2005 TX 3027 FL 3070 GA 3314 IN 3523 IL 3608 VA 3722 NC 3854 PA 4185 OH 4204 NJ 4425 WA 4643 MI 4663 CA 4927 MA 5067 NY 5586 0 1000 2000 3000 4000 5000 6000 20 Budget by Function Nat Res 1 9 Gen Govt 2 4 Judicary 0 4 Public Safety 6 2 Business Eco Dev Health Human 12 2 Services 31 7 Legislature 0 2 Regulatory 0 5 Education 44 5 21 7 Unit 4 Texas Budget and Finance Allocation of Federal Funds 2008 2009 Nat Resources 1 7 Bus Eco Dev 17 4 Regulatory 0 1 Judiciary 0 1 Gen Govt 1 4 Public Safety 1 1 Health HR 61 0 Education 17 3 22 Education Expenditures Colleges Univ 25 Two year schools 3 Employee Benefits 7 Public Schools 67 23 State Debt General Obligation Bonds Youth Cms 3 Higher Ed 13 Water Dev 16 MHMR 3 Natl Research Criminal Lab Justice 1 38 Veterans Land 26 24 8 Unit 4 Texas Budget and Finance Major Challenges Additional revenues Educational Funding Public schools Robin Hood Higher education growth quality Health Benefits State employees health insurance Public school teachers health insurance Health costs for uninsured Medicaid 25 Reasons for Spending Growth Growth in population Inflation New state services expansion of existing services Federal mandates 26 9