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The Budget
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  1. The Budget

  2. The Budget • Budget is passed to make sure that government has means to provide services to the citizens • Appropriations bill establishes expenditures for the biennium • State provides for what taxes can be levied and who can use them

  3. The Budget Process • Texas uses a biennial (2-year) budget, with a fiscal year beginning each September 1st • While the governor does not control the budget, he or she can influence the process • If March of even-numbered years, both the Legislative Budget Board (LBB) and the Office of Budget and Planning (OBP) request budget submissions from state agencies

  4. The Budget Process • OBP produces governor’s budget which reflects his or her priorities, and is usually introduced by a “friendly” legislator • The LBB prepares a budget which is the one usually used • Several budget bills covering different state agencies may be presented and passed

  5. The Budget Process • Once the budget bills have been passed (which is often late in the session) the governor may take one of four actions: • Veto one or more of the bills • Use a line item veto • Allow the bill to take effect without signing • Sign the bill

  6. The Budget Process • The courts rarely intervene in budget matters, although some taxes or expenditures have been declared unconstitutional

  7. Appropriations • Top four areas of expenditures, in order of magnitude, are: • Education • Health and human services • Transportation (highways) • Public safety

  8. Education • Elementary and high schools receive approximately 60% of the education budget • Balance is distributed among higher ed institutions • About 39% of total budget is education-related • When matched with local funding, more than $40 billion is spent annually

  9. Health and Human Services • More than $24 billion is spent annually for a wide variety of programs • Comes in a close second to education (35%) • Almost 50% of the expenditures come from federal funds

  10. Transportation • About 9% of the budget is spent here • Most comes from fuel taxes we pay at the pump – 75% of the taxes are spent directly on highways • Funds for alternative methods (light rail, etc.) of transportation must come from general fund

  11. Public Safety and Corrections • Texas’s prison population is the largest • 6% of the budget total is devoted to corrections

  12. Sources of Revenue • Non-tax revenue • Intergovernmental transfers are funds received from other governmental units • Grants-in-aid make up the greatest amount of such transfers • Presently, about 35% of state revenues come from the federal government (more than one-half of which is for health and human services)

  13. Sources of Revenue • Non-tax revenue • License and user fees are received by those using services and benefits • License fees are also generated for the privilege of doing business, such as attorneys, CPA’s, physicians • Borrowing is permitted through bond elections

  14. Sources of Revenue • Non-tax revenues • Lottery proceeds were originally intended to help fund education, but it is now part • Rents and royalties are collected from natural resources and from leases on state land

  15. Sources of Revenue • Tax Revenues • Various state taxes make up about one-half of the revenue received each year • “Sales tax” accounts for about 55% of total tax receipts, but other “sales-type” taxes contribute to make up over 80% of the revenues

  16. Sources of Revenue • Types of Taxes • General sales tax is set at 6.25% but has some exemptions • Property taxes are collected by local governments and schools • Excise taxes (“sin” taxes) are levied on such things as tobacco and alcohol

  17. Sources of Revenue • Types of Taxes • Franchise taxes are levied on corporations doing business in Texas and are based on profits or net worth – not levied on other types of business organizations • Severance taxes come from removal of natural resources

  18. Evaluating Tax Systems • Tax systems are the mix of revenue-raising methods used by governments • Texas’ system of sales tax is criticized because it does not fully exempt daily needs • Also criticized as being regressive, which means burden is more heavily weighted to low-income persons

  19. What’s Up for the Future? • There is impetus to have the franchise tax applicable to all businesses • Income tax idea was floated by Lt. Gov. Bullock in the 90’s, which was met with strong resistance • Constitutional amendment was passed to require voter approval of income tax • Income tax would permit taxpayers to deduct on federal returns, and would possibly create more equity