Unit 4 Texas Budget and Finance1Texas Budget SystemFinancing Texas Government2Topics 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• Amounts3Functions of a Budget• Planning of expenditures• Authorization of programs, employees salaries and benefits• Establishing standards of accountability for programs and agenciesUnit 4 Texas Budget and Finance24Budget Process in Texas• Institutions involved• Legislative Budget Board• Legislative Audit Committee• Governor’s Budget Office• Comptroller of Public Accounts• Spending Agencies5Steps in Budget Cycle• Planning• Authorization (Appropriations)• Budget Execution (Spending)• Auditing6Planning 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 levyUnit 4 Texas Budget and Finance37Planning the State Budget• Agencies involved-• Legislative Budget Board• Legislative Audit Committee• Governor’s Budget Office• Comptroller of Public Accounts• Cost Centers (State Agencies)8Legislative Budget Boardhttp://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 Governor9Main 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 yearUnit 4 Texas Budget and Finance410Authorization 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)11Budget Execution• Agencies involved• Spending Agency• Comptroller of Public Accounts• Executive Budget Office/LBB in event of need to alter existing budget12Legislative Audit Committee& State Auditorhttp://www.sao.state.tx.us/• Legislative Audit Committee• State Auditor’s OfficeUnit 4 Texas Budget and Finance513Legislative 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 Cmt14State 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 Support15Taxation • 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, certaintyUnit 4 Texas Budget and Finance616Per Capita State Tax RevenueFifteen Urban States, 2005TX 42.34Fl 56.11Il 57.05VA 56.11NJ 60.12PA 62.9GA 55.52IN 65.81OH 65.69US Ave 63.41NY 65.01WA 66.48MA 64.37NC 69.24MI 71CA 73.710 1020304050607080Per $1000 Personal Income17Revenue Sources, 2008-2009Land income0.7%Fines, Fees7.8%Interest4.0%Lottery2.0%Federal funds32.2%Other receipts 2.8%Taxes50.5%18Percent of Taxes, 2009Sales Tax52.0%Oil/gas taxes6.2%Motor fuel7.7%Motor Vehicle8.4%Corp Franchise14.7%Other11.0%Unit 4 Texas Budget and Finance719Texas Spending RankPer Capita Spending- US Census Bureau• Overall spending per capita 50 State employee wages 50 Parks and recreation 48 Cash welfare 48 Mental health 47 Public welfare/Medicaid 46 Public health 45 Highways 42 Education 37 Corrections 1720State Governmental Expenditures,15 Urban States FY 2005NY 5586MA 5067CA 4927MI 4663WA 4643NJ 4425OH 4204PA 4185NC 3854VA 3722IL 3608IN 3523GA 3314FL 3070TX 30270 1000 2000 3000 4000 5000 6000State Expenditures per capita21Budget by Function, Regulatory0.5%Nat Res1.9%Gen Govt2.4%Judicary0.4%Business & Eco Dev12.2%Public Safety6.2%Legislature0.2%Education44.5%Health & Human Services31.7%Unit 4 Texas Budget and Finance822Allocation ofFederal Funds, 2008-2009Judiciary 0.1Gen Govt 1.4Regulatory 0.1Health & HR 61.0Education 17.3Public Safety 1.1Nat Resources 1.7Bus & Eco Dev 17.423Education ExpendituresPublic Schools67%Two year schools3%Colleges/Univ25%Employee Benefits7%24State DebtGeneral Obligation BondsWater Dev16%Higher Ed13%Veterans Land26%Criminal Justice38%MHMR3%Youth Cms3%Natl Research Lab1%Unit 4 Texas Budget and Finance925Major 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- Medicaid26Reasons for Spending Growth• Growth in population• Inflation• New state services/ expansion of existing services• Federal