1. 1. assess the fairness of texas’s budgeting and taxing policies. 2. describe the sources of...

1.1. Assess the fairness of TexasAssess the fairness of Texas’’s budgeting s budgeting and taxing policies.and taxing policies.

2.2. Describe the sources of TexasDescribe the sources of Texas’’s state s state revenue.revenue.

3.3. Describe the procedure for developing and Describe the procedure for developing and approving a state budget.approving a state budget.

4.4. Evaluate the effectiveness of the financing Evaluate the effectiveness of the financing of education by the state of Texas.of education by the state of Texas.

5.5. Describe the uses of TexasDescribe the uses of Texas’’s state revenue.s state revenue.

Copyright © 2014 Cengage Learning 2

Concerned with taxes, government Concerned with taxes, government spending, public debt, and management spending, public debt, and management of government moneyof government money

Texas Budget CompactTexas Budget CompactPledge to oppose any new taxes, restrict Pledge to oppose any new taxes, restrict

spending, and eliminate using accounting spending, and eliminate using accounting devices to balance the budgetdevices to balance the budget

3Copyright © 2014 Cengage Learning

Taxing PolicyTaxing PolicyTexans traditionally oppose taxesTexans traditionally oppose taxesRegressive taxes the normRegressive taxes the norm

““The less you make, the more the government The less you make, the more the government takestakes””

Texas government depends on sales taxes Texas government depends on sales taxes Rank among the highest in the nationRank among the highest in the nation In addition, more than 60 separate taxes, fees, In addition, more than 60 separate taxes, fees,

and assessments are collected.and assessments are collected.


Budget PolicyBudget Policy Texas Constitution prohibits the state from Texas Constitution prohibits the state from

spending more than its anticipated revenue.spending more than its anticipated revenue. State comptroller must certify revenue and State comptroller must certify revenue and

budgetbudget Four-fifths of Texas legislature is required to Four-fifths of Texas legislature is required to

override state comptrolleroverride state comptroller General Revenue FundGeneral Revenue Fund Dedicated fundsDedicated funds


Spending PolicySpending Policy Texas ranked between 48Texas ranked between 48thth and 50 and 50thth in state in state

spending per capitaspending per capita Little support for spending on social/welfare Little support for spending on social/welfare

programsprograms Greater support for spending on infrastructure Greater support for spending on infrastructure


1.1. What are three characteristics of Texas's What are three characteristics of Texas's fiscal policy?fiscal policy?

2.2. The state of Texas has one of the highest The state of Texas has one of the highest sales tax rates in the nation. It does not sales tax rates in the nation. It does not have a state income tax. Is Texas's tax have a state income tax. Is Texas's tax structure an example of a regressive or a structure an example of a regressive or a progressive tax system?progressive tax system?

3.3. True or False: Dedicated funds must be fully True or False: Dedicated funds must be fully spent each year for the purposes for which spent each year for the purposes for which they were created.they were created.


The Politics of TaxationThe Politics of TaxationSales Taxes – 55% of state tax revenueSales Taxes – 55% of state tax revenue

General Sales Tax General Sales Tax Applied to Applied to ““all tangible personal propertyall tangible personal property”” Many exemptions Many exemptions

Grocery food, water, telephone, goods sold via the Grocery food, water, telephone, goods sold via the Internet, and most professional/business services Internet, and most professional/business services

Selective Sales Tax Selective Sales Tax Highway User TaxesHighway User Taxes Sin Taxes Sin Taxes Miscellaneous sales taxMiscellaneous sales tax


The Politics of TaxationThe Politics of Taxation Business TaxesBusiness Taxes

Sales taxesSales taxes

Businesses are consumers Businesses are consumers Franchise taxesFranchise taxes

Businesses try to limit personal liability of ownersBusinesses try to limit personal liability of owners

Imposed on businesses for doing business in TexasImposed on businesses for doing business in Texas Payroll taxesPayroll taxes

Provides funds for payment of unemployment Provides funds for payment of unemployment insuranceinsurance


The Politics of TaxationThe Politics of TaxationBusiness TaxesBusiness Taxes

Selective taxesSelective taxes Severance taxSeverance tax

■ Death TaxDeath Tax Currently not at federal or state levelCurrently not at federal or state levelTax burdenTax burden

Texas ranked 48Texas ranked 48thth for taxes alone for taxes aloneTax collectionTax collection


Revenue from GamblingRevenue from Gambling Racing Racing

Horse races and dog races taxed Horse races and dog races taxed LotteryLottery

Administered by Texas Lottery Commission Administered by Texas Lottery Commission Profits dedicated to public education spendingProfits dedicated to public education spending

Bingo Bingo Tax divided evenly between state and local Tax divided evenly between state and local

governments governments


Nontax Revenues Nontax Revenues Federal grants-in-aidFederal grants-in-aid

95 percent directed toward three programs95 percent directed toward three programs Health and human servicesHealth and human services Business/economic development Business/economic development Education Education

Voluntary state participation Voluntary state participation

American Reinvestment and Recovery Act American Reinvestment and Recovery Act 20092009 Allocated $22.9 billion to TexasAllocated $22.9 billion to Texas


Nontax Revenues Nontax Revenues Land RevenuesLand Revenues

Nontax revenue from public land sales, rentals, Nontax revenue from public land sales, rentals, royalties, and oil and gas leasesroyalties, and oil and gas leases

Tobacco Suit WindfallTobacco Suit Windfall Tobacco industry must pay Texas an $18 billion Tobacco industry must pay Texas an $18 billion

settlement over twenty-five yearssettlement over twenty-five years Supports variety of health-care programsSupports variety of health-care programs

Miscellaneous SourcesMiscellaneous Sources Fees, permits, and income from investments Fees, permits, and income from investments


Public Debt Public Debt General Obligation Bonds General Obligation Bonds

Borrowing repaid through General Revenue FundBorrowing repaid through General Revenue Fund Revenue BondsRevenue Bonds

Borrowed amounts repaid from a specific revenue Borrowed amounts repaid from a specific revenue sourcesource

Bond ReviewBond Review Must be approved by Must be approved by Texas Bond Review BoardTexas Bond Review Board


Public Debt Public Debt Economic Stabilization Fund (rainy day fund)Economic Stabilization Fund (rainy day fund)

Intended for use when Texas faces an Intended for use when Texas faces an economic crisiseconomic crisis

Financed with excess money in General Financed with excess money in General Revenue Fund at the end of a biennium and Revenue Fund at the end of a biennium and with oil and natural gas taxes with oil and natural gas taxes


1.1. What is the largest source of tax revenue What is the largest source of tax revenue for the state of Texas?for the state of Texas?

2.2. On what government service must lottery On what government service must lottery profits be spent?profits be spent?

3.3. What is the stated purpose of the What is the stated purpose of the ““rainy rainy dayday”” fund? fund?


Budgeting ProcedureBudgeting Procedure Plan of financial operation Plan of financial operation Texas is one of four states that has a Texas is one of four states that has a

biennial budget biennial budget Legislative Budget Board (LBB)Legislative Budget Board (LBB)

10-member body of Texas legislature 10-member body of Texas legislature Prepares a biennial current services-based Prepares a biennial current services-based

budgetbudget Helps draft the general appropriation bill for Helps draft the general appropriation bill for

introduction at each regular session of the introduction at each regular session of the legislaturelegislature


Budgeting ProcedureBudgeting ProcedureGovernorGovernor’’s Office of Budget, Planning, and s Office of Budget, Planning, and

PolicyPolicy Prepares and presents a biennial budget to the Prepares and presents a biennial budget to the

legislature legislature GovernorGovernor’’s plan is policy baseds plan is policy based Separate budgets created by legislative and Separate budgets created by legislative and

executive branchesexecutive branches


Budgeting ProcedureBudgeting ProcedureBudget Preparation Budget Preparation

Begins with development of mission statementBegins with development of mission statement Agencies must submit five-year plan to GOBPP Agencies must submit five-year plan to GOBPP

and LBBand LBB Budgets are reviewed by legislature with LBB plan Budgets are reviewed by legislature with LBB plan

receiving preferencereceiving preference Budget must agree with comptrollerBudget must agree with comptroller’’s revenue s revenue

estimateestimate Sent to committees, then governor signsSent to committees, then governor signs


Budget ExpendituresBudget ExpendituresFunctional expenditures (public education, Functional expenditures (public education,

human services, and highway construction human services, and highway construction and maintenance)and maintenance)

Budget Execution Budget Execution Process by which the governor and the LBB Process by which the governor and the LBB

oversee or modify implementation of the oversee or modify implementation of the spending planspending plan


PurchasingPurchasing State agencies must make purchases State agencies must make purchases

through supervision of Texas Procurement through supervision of Texas Procurement and Support Servicesand Support Services

Council on Competitive Government required Council on Competitive Government required to find cost-effective purchasing methodsto find cost-effective purchasing methods

Texas Facilities CommissionTexas Facilities Commission Provides property management services for Provides property management services for

state facilitiesstate facilities


Accounting Accounting The state comptroller of public accounts The state comptroller of public accounts

oversees the management of stateoversees the management of state’’s moneys money AuditingAuditing

State accounts audited by the appointed State accounts audited by the appointed state auditorstate auditor

Provides random checks of financial records Provides random checks of financial records and transactionsand transactions


1.1. What is a fiscal year?What is a fiscal year?

2.2. Texas has a dual budgeting system. Texas has a dual budgeting system. What does this mean?What does this mean?

3.3. Who has the authority to transfer money Who has the authority to transfer money from one agency to another after a from one agency to another after a budget has been approved?budget has been approved?


Public Education Public Education Accounted for almost 29 percent of state Accounted for almost 29 percent of state

expenditure for 2012-13expenditure for 2012-13 Covered less than 50 percent of the actual cost of Covered less than 50 percent of the actual cost of

education education Costs covered by hybrid of local, state, and Costs covered by hybrid of local, state, and

federal fundingfederal funding Sources of public findingSources of public finding

Gilmer-Aiken Law and the Foundation School Gilmer-Aiken Law and the Foundation School ProgramProgram

Property Tax Relief FundProperty Tax Relief Fund


Public Education Public Education Funding EqualizationFunding Equalization

The The ‘‘‘‘Robin HoodRobin Hood’’’’ plan plan In 2011, the Texas Education Agency reported In 2011, the Texas Education Agency reported

that approximately 60 percent of all public school that approximately 60 percent of all public school students in the Lone Star State were eligible for students in the Lone Star State were eligible for free or reduced-price lunches.free or reduced-price lunches.

The 82The 82ndnd legislature reduced state funding of legislature reduced state funding of public educationpublic education


Higher EducationHigher EducationIncreasing enrollment but declining state Increasing enrollment but declining state

financial support financial support Texas Higher Education Coordinating BoardTexas Higher Education Coordinating Board

Closing the Gaps initiativeClosing the Gaps initiative

HB9HB9 Requires Texas Higher Education Coordinating Requires Texas Higher Education Coordinating

Board to develop an outcomes-based formula for Board to develop an outcomes-based formula for fundingfunding


Higher Education Higher Education Community College Funding Community College Funding

Hybrid of state Hybrid of state ““contact hourcontact hour”” funding, local funding, local property taxes, grants, tuition, and feesproperty taxes, grants, tuition, and fees

University FundingUniversity Funding Legislative funding, tuition, fees, grants, and giftsLegislative funding, tuition, fees, grants, and gifts Permanent University FundPermanent University Fund


Higher EducationHigher Education Tuition Deregulation Tuition Deregulation

Allows universities and community colleges to set Allows universities and community colleges to set tuition and feestuition and fees

From 2003–2011, tuition increased 90%From 2003–2011, tuition increased 90% Texas Tomorrow Funds Texas Tomorrow Funds

Tuition plan provides a way for parents to save for Tuition plan provides a way for parents to save for childrenchildren’’s education and lock in costss education and lock in costs

State Grants State Grants TEXAS Grants ProgramTEXAS Grants Program


Public AssistancePublic Assistance Poverty levels remain above national Poverty levels remain above national

averageaverage Health Care Programs Health Care Programs

Increasing health-care costs and more people Increasing health-care costs and more people becoming eligible for Medicaidbecoming eligible for Medicaid

The cost of Medicaid and CHIP frequently exceed The cost of Medicaid and CHIP frequently exceed budget allocations.budget allocations.

ChildLINK purchases insurance coverageChildLINK purchases insurance coverage


Other NeedsOther Needs Transportation Transportation

““Pay-as-you-RidePay-as-you-Ride”” Increased costs have exceeded funding Increased costs have exceeded funding Texas Mobility FundTexas Mobility Fund

WaterWater Texas drought has had huge impactsTexas drought has had huge impacts Texas Water Development BoardTexas Water Development Board


Other Needs (ContOther Needs (Cont’’d)d)Public Safety ProgramsPublic Safety Programs

State agencies share the responsibility with local State agencies share the responsibility with local governmentsgovernments

Homeland Security Homeland Security Unfunded mandates Unfunded mandates Border securityBorder security


1.1. True or False: Since its inception, the True or False: Since its inception, the Property Tax Relief Fund has been Property Tax Relief Fund has been adequate to meet funding needs for adequate to meet funding needs for public education.public education.

2.2. True or False: Tuition deregulation True or False: Tuition deregulation resulted in lower tuition at the stateresulted in lower tuition at the state’’s s public colleges and universities.public colleges and universities.

3.3. What three programs provide health What three programs provide health insurance for Texas children?insurance for Texas children?


1. 1. assess the fairness of texas’s budgeting and taxing policies. 2. describe the sources of...

Documents

taxes regressive taxes

state of texas

cengage learning slide

state spending

texas payroll taxes

state income tax

state budget

new taxes