The Legislative Budget Board Fiscal Size-Up 2012-2013

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 2012-13 Size Up on the drop down menu. Try opening it up now.

4. When you open it up, you’ll see that its huge. 668 pagesBut 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 ofthis report involves thousands of staff hours. The 2012–13 edition, like previous editions, contains a wealthof information about the structure and operation of Texas state government. Through its comprehensivedescriptions of state programs and services, including more than 360 figures, the 2012–13 Fiscal Size-upprovides 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 (includinga summary of the fiscal challenge the Eighty-second Legislature addressed), a description of the majorstate revenue sources and funds, the economic outlook for Texas and the U.S., and detailed informationon 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 stategovernment and discuss the significant budget issues, programs, and activities of the agencies and institutionsthat 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 2011. The budget produced by the 83rd session of the legislature will not be written up in a fiscal size-up until January of 2014.

10. 1. STATE BUDGET OVERVIEW

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 2011. It also discusses recent controversies regarding the budget including the consequences of the financial crash of 2008-9. It breaks down the source of the various funds in the state. The next slide contains the all funds budgets for the 2010-2011 and 2012-2103 fiscal years.

13. 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.” 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.The General Revenue Fund is divided in two categories: Dedicated and Non-Dedicated Funds

20. General Revenue Funds

21. General Revenue FundsAll 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-dedicatedgeneral 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. 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 theAvailable 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 BudgetFederal 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.