Chapter 11

LOCAL AND COUNTY GOVERNMENTS AND SPECIAL DISTRICTS

Copyright (c) 2011 Pearson Education, Inc. All rights reserved

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Learning Objectives

• Identify how Texans can have an impact on their local governments

• Differentiate among the two types of cities and several forms of city government

• Explain the impact of grassroots politics on local government

Learning Objectives • Explain why counties were established

and how they have evolved

• Analyze the importance of special districts abound in Texas

• Explain the impact of regional councils of governments

Introduction

• Local government includes 3 levels:

– Municipal (city), county, and special district

• Although local government is the essence of American democracy –

• Most people cannot identify the type of local government in their hometowns, much less name their county commissioners or city council members

Introduction • Local governments perform a wide range of

services, e.g. –

• Building roads and keeping them clean and safe, to collecting garbage and providing health care for the homeless

• Many of today’s successful local government leaders are managing and operating more like businesspeople than politicians

• 80% of Texans live within the boundaries of some 1,200 municipalities

Municipal Government • TYPES OF MUNICIPALITIES

• GENERAL LAW - A highly restrictive, and the most fundamental type of, legal status for municipal government

• HOME RULE - Gives municipalities more autonomy in establishing tax rates and providing services

– Must be approved by a majority of the voters in municipalities of 5,000 or more persons

3 Forms of Municipal Government

• 1) Mayor-Council

• 2) Council-Manager

• 3) Commission

• 1) MAYOR-COUNCIL: most widely used in less populated and rural cities

• Simplest form: most of the day-to-day operations are carried out by either the mayor or city council

• Most have only a few departments - a fulltime, administrator or manager’s salary is not justified

Municipal Government • 2) COUNCIL-MANAGER: used most by medium

and larger-sized cities

• Voters elect a city council and a mayor who hire a city manager –

– Controls the day-to-day operations, and carries out the council’s policies

• Allows for both professional management and local political control –

• Cost-effective and efficient management without considering the political implications

Municipal Government • 3) COMMISSION: used by very few cities

• There is an elected “commissioner” for each of the city’s departments

• Rather than using a council to oversee the operation of the city as a whole –

• The commission form requires officeholders to oversee the day-to-day operations of their respective departments

Municipal Elections • All municipal elections are nonpartisan

• Successful candidates attempt to form COALITIONS -Alliances of various individuals and groups in support of a particular candidate for elected office

• Most candidates wish to fulfill a sense of civic duty – because the salary is minimal at best

Types of Municipal Elections

• 1) AT LARGE: No districts or precincts are drawn, candidates draw votes from the entire area

• 2) PLACE SYSTEM: Candidates campaign for a particular seat

• 3) SINGLE-MEMBER DISTRICTS: Specific geographic area with a population equal to other districts - elects one person (a single member) to represent that area

The Effects of Group Participation

• Locally based groups have made great strides in local government by affecting some of the most important decisions made by city leaders

– Ethnic Groups

–Neighborhood Associations

–Municipal Employee Groups

• Continue to play a major role in formulating local government policy1

Municipal Finance • Revenue: most Texas municipalities rely

heavily upon property taxes - AD VALOREM - assessed “according to value”

• OTHER SOURCES: State sales tax rebates

• Franchise taxes - paid by businesses

• User fees - paid by those who utilize a particular government service

• Special taxes - e.g. Economic Development Tax

Municipal Finance • CAPITAL IMPROVEMENTS - Long-term

infrastructure improvements often built with bond money

• BONDS – 2 TYPES: General obligation bonds - sold to raise money to build or improve city-owned facilities

• Revenue bonds - sold for construction or improvement of a city-owned property that is expected to generate revenue

© Bob Daemmrich Photo, Inc.

This extension of the bikeway in Austin over Cesar Chavez

Street was funded with bond money. Why do governmental

entities generally borrow funds for projects such as this?

Municipal Finance • EMINENT DOMAIN: CAN IT BE USED IN THE NAME OF

ECONOMIC DEVELOPMENT?

• Right to reclaim private property in the name of the government if the property is needed for the greater public good

• 2007: law was passed preventing local governments from using eminent domain solely for the purpose of generating a larger tax base

© Tom Fox/Dallas Morning News/Corbis

Dallas Cowboys owner Jerry Jones and Arlington officials

wisely avoided eminent domain issues when clearing the way

for the new stadium.

Municipal Finance • BUDGETING - Requires extensive research and

planning, as cities strive to maintain the lowest tax rates possible while maintaining the highest level of service

• ABATEMENTS AND TAX INCENTIVES – Offered by cities to business and commercial interests to lure them to set up operations and do business within a city

County Government • Texas Constitution calls counties

“administrative arms of state government” –

• STRUCTURE OF COUNTY GOVERNMENT

• Unlike home rule cities, counties do not have home rule charters and cannot adopt ordinances, also -

• No single executive or officer controls or is accountable for the county’s policy-making personnel

County Government • County populations range from fewer than

70 [Loving County] to more than 3 million [Harris County]

• Despite stunning geographical and population diversity – the Constitution mandates that all 254 counties be governed in essentially the same manner

• A commissioners court and all elected county officials serve 4-year terms

County Government • COMMISSIONER’S COURT – 5 member governing

body of each Texas county

• All counties are divided into 4 precincts of equal population - each elects a commissioner

• Presided over by the county judge – elected countywide [at large]

• No trials are held in the Commissioners Court and its members serve no judicial functions – (see next slide)

County Government • COMMISSIONER’S COURT – Strictly

Administrative:

• Appoints administrators and personnel; sets the county tax rates; adopts the county budget; awards contracts for construction, repair, and maintenance of county buildings and roads; provides medical care for the indigent; and performs other related administrative tasks as required by the Texas Constitution and legislature

Other Elected Officials • DISTRICT OR COUNTY ATTORNEY

• County’s legal officer and adviser

• Prosecutes criminal offenses occurring in the county - has sole discretion in determining whether to pursue a criminal conviction or not, also

• Decides what punishments to seek, if any, including whether to pursue the death penalty in a capital murder case

Other Elected Officials • SHERIFF - Provides law enforcement services to

areas of the county that are not served by a police department, and oversees the county jail

• Any person eligible to vote in a given county may run for and be elected sheriff – Doesn’t have to be a licensed peace officer

• DISTRICT CLERK - Registrar, recorder and custodian of all records regarding district court criminal, juvenile, family court, and civil actions

Other Elected Officials • COUNTY CLERK - maintains legal records and

vital statistics, such as birth and death certificates, marriage licenses, and real estate transactions

• Elections officer in some counties

• TAX ASSESSOR-COLLECTOR – no longer “assesses” property value, but does identify taxable property, and collects taxes that are due to the state and county

Other Elected Officials • TREASURER - Official bookkeeper

• Responsible for tracking all collections and expenditures, and has considerable input in formulating the county’s budget

• Most urban counties have eliminated this elected office (a process that requires a constitutional amendment) -

• The Commissioners Court then appoints a county auditor to handle these duties

County Government Finance

• Compared to municipalities and special districts - counties are subject to stringent restrictions

• Ad valorem taxes are the counties’ largest single source of revenue, however –

• Constitutionally imposed maximum tax rate of 80¢ per $100 valuation is a significant restriction

County Government Finance

• To raise the tax rate above 80¢, the Commissioners Court must obtain legislative approval –

– After approval, the increase must be approved by county voters

• May, under certain circumstances, issue bonds like the municipalities

• Many counties are eligible for federal grants-in-aid for construction of hospitals, airports, flood control projects etc.

County Government Finance • Counties operate on a yearly budget cycle

• Usually prepared by the county auditor or budget officer with input from all department heads and interested residents

• Like municipal budgeting - public hearings are sparsely attended

• The final draft is forwarded to the Commissioners Court for review and acceptance before it is put into effect

© Bob Daemmrich Photo, Inc.

Firework stands often locate just outside of city limits,

escaping the reach of municipal law. Should county

or government be granted ordinance making powers?

Criticism of County Government and Proposed Reform

• THE LONG BALLOT - Voters are required to elect as many as 6 individuals to perform executive and administrative functions, yet -

• No single person can be held accountable for the efficiency of the overall operation

• INABILITY TO ESTABLISH HOME RULE - Prohibited from tailoring their system to the needs and desires of local residents

Criticism of County Government and Proposed Reform

• INABILITY TO PASS ORDINANCES – e.g. nearly every city has ordinances banning sale and possession of fireworks, and regulating the operation of sexually oriented businesses – counties can’t do this

• SPOILS SYSTEM - still a fact of life in many counties, but some have transitioned to the civil service system

© Bob Daemmrich/The Image Works

Rush hour in Austin, only partially alleviated by a city bus.

How does the individualistic nature of most Texans ingrain

resistance toward mass transit?

Special Districts • A governmental entity established to deliver a

specific service to a limited geographic area – – vary in size, function, and scope

• 3 UNIQUE FEATURES: – 1) Substantially independent - provide a

product or service no other government does

– 2) “Governmental character”- source of funding

– 3) “Recognized existence” - chartered by the state or otherwise approved by the legislature

Special Districts • NATURE OF SPECIAL DISTRICTS

• Fastest growing form of government

• Over 2,800 in Texas - more governments than the number of cities and counties combined

• Most transcend political boundaries and serve larger regions of the state

Types of Special Districts • EDUCATION DISTRICTS • Most common form of special district

INDEPENDENT SCHOOL DISTRICT (ISD) -

• Local-level limited purpose government that determines public school policy

• Each of Texas’s approximately 1,000 ISDs is governed by a school board –

– 4 to 9 members chosen in local nonpartisan elections

Types of Special Districts • SUPERINTENDANT – manager of a public

school system, hired by the board

• Approximately 50 COMMUNITY COLLEGE DISTRICTS offer academic and vocational programs

– Majority of their funding comes from property taxes and tuition

– Typical tax rate is between 10-20¢ per $100

Types of Special Districts • NONEDUCATION DISTRICTS

• Hundreds of special districts have been established for delivering services –

• Water and utilities, public housing, hospitals, public transportation and flood control etc.

• Primarily funded by property taxes

• Other sources? Fees, sales taxes, grants

Councils of Government • A regional voluntary cooperative with no

regulatory or enforcement powers – Consortium of local governments – Assesses the needs of the area as a whole

• 24 COGs provide training for elected and appointed officials, also -

• Assess future environmental, transportation, economic development, labor, and land use issues, as well as other regional social needs

Chapter 12

FINANCE, BUDGETING, AND PUBLIC POLICY

Copyright (c) 2011 Pearson Education, Inc. All rights reserved

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Learning Objectives

• Explain what is meant by the term ‘public policy’

• Describe the steps in the public policy model

• Analyze the constraints on the budget process in Texas

• Explain the role of the Legislative Budget Board

Learning Objectives • Differentiate among the major source of

tax revenue in Texas • Explain how nontax revenue has

surpassed tax revenue • Describe the top three areas of

expenditure in Texas • Explain how some policy-making

decisions have few or no fiscal implications

Public Policy

• Any act, law, legislation, or program enacted by a public entity –

–Laws, statutes, regulations, rules, and legislation

• Public policy is created by every branch of government

• Public policy analysis is the study of power, distribution, and outcomes

Types of Policy • 3 broad categories: • REDISTRIBUTIVE - Usually the most

controversial; e.g. subsidized school lunches

• DISTRIBUTIVE - Intended to be neutral for taxpayers, everyone pays, and everyone benefits; e.g. gas tax to improve roads

• REGULATORY - Most common, regulate, and often limit, specific activities; e.g. city zoning restrictions

The Policy Model • 4-stage model for how an idea becomes an

actual policy or law • AGENDA SETTING - Brought to government

attention and resolution sought

• FORMULATION - Deciding what will be done about it and who will do it

• ADOPTION/IMPLEMENTATION - Response to an issue is finalized and enacted

• EVALUATION – Effectiveness of the action

The Texas Budget • BALANCED BUDGET PROVISION – Texas

Constitution mandates that the government not spend more than it receives in revenues

• Comptroller certifies revenue and estimates how much money will come into state coffers

• State tax revenues are constitutionally barred from rising faster than the estimated growth of the Texas economy

The Biennial Budget System

• Ability of the comptroller to accurately predict revenue is limited and difficult

• Uncertain revenue flow restricts the ability of the legislature to spend effectively

• Must map priorities over a 30-month period

• Changing social, political, economic, and technological conditions can quickly make policy inadequate or obsolete

Public Sentiment • The Texas antitax sentiment is ingrained

• Citizens expect quality education, good highways, and an effective prison system, but – believe this can be achieved keeping spending to a minimum

• The individualistic nature of Texans makes many suspicious of social spending

• Even programs that might save money in the long term, are subject to intense scrutiny

Dedicated Funds • Revenues earmarked for a certain purpose

from the moment they are collected, e.g. –

– Part of the gasoline tax can only be used for highway construction

• Texas has about 200 separate dedicated funding categories

• Dedicated funds and federal mandates account for over 80% of the state’s general revenue

Congressional and Court Mandates

• MANDATES - Regulations set by Congress that state and local government must meet

• Federally mandated programs ate up almost $19 billion of the 2008 - 09 budget – Another $10 billion in state spending was

influenced by federal matching fund formulas1

• Texas must also meet federal court-ordered standards, e.g. prison requirements

The Budget-Making Process • Texas has a dual budget process

• Budget proposals are drafted by the Governor and the LEGISLATIVE BUDGET BOARD (LBB)

– LBB includes House and Senate members and the 2 presiding officers, plus staff

• In reality – the governor’s proposal is usually ignored in favor of the LBB proposal

The Budget-Making Process • Budget creation begins at the agency level

with appropriations requests

• LBB may direct agencies to hold or reduce current spending levels, or produce separate budgets for various levels of spending

• House and Senate adjust the LBB’s budget

• The Appropriations Committee in the House and the Finance Committee in the Senate create spending bills

State Revenue • $182 billion biennial budget for 2010 - 11 is

vastly different from past fiscal habits

• 1977 - total revenue was $7.37 billion

• 1998 - rose to $44.5 billion, and by 2009 - almost $80 billion

• Adjusting the current budget for population growth and inflation - Increased from $73 billion in 1994-95 biennium to $91 billion [1994 dollars] in 2008-09

Tax Collection • Texas sales tax has often been criticized for

its alleged regressive tendencies • REGRESSIVE TAX - Tax rate increases as

income decreases • PROGRESSIVE TAX - Tax rate increases as

income increases, see the following Tables -

• Table 12.1 shows the effect of a flat sales tax, and Table 12.2 presumes a tax system under which no deductions are allowed

Tax Collection • Largest source of tax revenue - sales tax

• TAX REVENUE - Funds generated through the tax system

• SALES TAX - Tax paid on goods and services; collected at the point of sale and forwarded to the state treasury

• 2009 – Texas collected $21 billion through one of the highest sales tax rates in the U.S. - 6.25% [8.25% with local sales taxes]

Tax Collection • FRANCHISE TAX - A specific tax paid by

businesses operating in Texas

• 2006 – Texas Franchise tax is a “margin tax,” assessed on the lesser of the following:

– 70% of a business’s total revenue

– A business’s revenue minus its cost of goods sold

– A business’s revenue minus employee compensation

Tax Collection • MOTOR VEHICLE SALES AND RENTAL TAX –

essentially a sales tax

• 6.25% on sales and long-term leases

• 10% on short-term car rentals, lasting fewer than 30 days

• Manufactured homes are taxed at just over 3% of their value

• Brought in just over $2.6 billion in 2009

Tax Collection • MOTOR FUELS TAX – A tax on gasoline, diesel,

and other motor fuels – Over $3 billion in revenue in 2009

• The state’s share of the gas tax is 20% per gallon on diesel and gasoline - – 15% percent per gallon on liquefied gas

• 400% increase since 1981, but total revenue from the motor fuels taxes has increased even more

Tax Collection • OIL AND GAS PRODUCTION TAXES

• Paid by oil and gas producers

• 1985 - oil and gas taxes each brought more than $1 billion

• 2009 - natural gas revenue was about $1.4 billion, while the oil reached $880 million

• Less than 3% of total state revenue

© Matt Slocum/AP Images

With higher oil prices the rule over the last several years,

working oil wells have, once again, become a common

sight. Why do oil prices have less impact on the Texas

budget than they had three decades ago?

Tax Collection • “SIN” TAXES - Levied on selected goods and

services, such as alcoholic beverages and tobacco products

• Smokeless tobacco or tobacco sold for pipes or self-rolled cigarettes is taxed at 40%

– 2009 tobacco income - almost $1.6 billion

• Alcoholic beverage taxes generated almost $800 million

Tax Collection • INSURANCE AND UTILITY TAXES

• Insurance occupation tax increases brought in almost $1.3 billion in 2009

• Rate varies due to the type of insurance and amount of the insurance company’s investment within the state

• Utility taxes are based on a company’s gross receipts –

– Generated about $500 million in 2009

Tax Collection • OTHER TAXES

• Include inheritance taxes, hotel and motel taxes, amusement fee taxes, and other minor revenue sources

• In total, these taxes brought in about $500 million in 2009

Reforming Texas Taxes • THE CASINO OPTION

• Texas’ horse racing is in trouble -

• In other states, tracks have been able to supplement their purses with slot money -“racinos”

• Slot machines could bring upward of $1.5 billion a year into state coffers

• The pressure is on for legalization - it is up to the Texas Legislature

© Bill Frakes/Sports Illustrated/Getty Images

Ghostzapper - shown here in the lead - won the Breeder’s Cup Classic

at Lone Star Park in 2004. How are Texas horse tracks on unequal

footing when compared to operations in neighboring states?

Reforming Texas Taxes • OTHER REVENUE RAISING OPTIONS

• In recent years, Texas has received more revenue from nontax than from tax sources

• Largest source of this nontax revenue is federal grants

• Significant income also comes from licenses, fees, interest income, and the lottery

Reforming Texas Taxes • THE LOTTERY - In its early days, the lottery

exceeded all expectations for raising revenue – $1.2 billion in profit in 1997

• KILLING THE CASH COW: A QUICK LESSON IN BUDGET POLICY CONSEQUENCES

• Legislature got greedy – tried to increase profits by cutting the lottery’s advertising budget and reducing the gambler’s return

© Jack Plunkett/AP Images

The state clears over a

billion dollars a year in

net lottery revenue.

What effect do you think

legalized casino

gambling would have on

lottery sales?

Expenditures • Texas spends much less on government

services, per person, than the average state

• THE BIG THREE - claim almost 86% of total state spending

• 1) Education - 41.4%

• 2) Public Health and Human Services - 32.7%

• 3) Business and Economic Development -11.4%

Other Expenditures • Prisons, public safety, general government

operations, and administration of various regulatory agencies are among the other major state expenditures –

– Combined - less than 12% percent of total state spending

• Since 1984, the cost of incarcerating prisoners has doubled –

– Also, almost 350,000 Texans are under some form of probation or parole

Nonfiscal Policy • Some policy decisions do not have a direct

impact on the state’s fiscal plan, e.g. –

– The Castle Law

– Abortion policy, and

– Tort reform

• Sometimes, the policy process is fueled by ideological values

• More often, there is a tangible, economic interest, even if it has no bearing on state finances, as with tort reform