chapter 11 - finance and fiscal policy

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    2008 Financial Crisis2008 Financial CrisisConcerned with taxes,Concerned with taxes,government spending,government spending,

    public debt, andpublic debt, andmanagement of government moneymanagement of government money

    Texas udget CompactTexas udget Compact!ledge to oppose any new taxes,!ledge to oppose any new taxes,

    restrict spendingrestrict spending rainy dayrainy day fund,fund, reduce expenditures and programs, andreduce expenditures and programs, andeliminate using accounting devices to balanceeliminate using accounting devices to balance

    the budget"the budget"

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    Taxing !olicyTaxing !olicyTexans traditionally oppose taxesTexans traditionally oppose taxes

    &egressive taxes 'sales tax(&egressive taxes 'sales tax( a tax in which the effective tax rate falls as the taxa tax in which the effective tax rate falls as the tax

    base increases" )isproportionately impacts lowerbase increases" )isproportionately impacts lowerincome earners"income earners"

    !rogressive taxes 'income tax(!rogressive taxes 'income tax(

    a tax where the effective tax rate increases as thea tax where the effective tax rate increases as thetax base increasestax base increases

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    Taxing !olicyTaxing !olicyTexas government depends on sales taxesTexas government depends on sales taxes

    &an+ among the highest in the nation&an+ among the highest in the nation

    n addition, more than -0 separate taxes, fees,n addition, more than -0 separate taxes, fees,and assessments are collected"and assessments are collected"

    ingo gamesingo games

    .il and gas servicing.il and gas servicing

    /nnual attorney occupation fee/nnual attorney occupation fee %egal services fee%egal services fee

    andatory state bar duesandatory state bar dues

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    udget !olicyudget !olicy Texas Constitution prohibits the state fromTexas Constitution prohibits the state from

    spending more than its anticipated revenue"spending more than its anticipated revenue"

    &euired balanced budget3&euired balanced budget3 The state can only borrow money for4The state can only borrow money for4

    casual deficiencies3 of revenuecasual deficiencies3 of revenue

    to repel an invasionto repel an invasion

    suppress an insurrection, andsuppress an insurrection, and

    to defend the state in the event of war"to defend the state in the event of war"

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    udget !olicyudget !olicy 6eneral &evenue Fund6eneral &evenue Fund

    7onrestricted state funds7onrestricted state funds

    available for general appropriationsavailable for general appropriations )edicated funds)edicated funds

    &estricted state funds&estricted state funds

    only to be used for designated purposes"only to be used for designated purposes"

    &ainy )ay Fund&ainy )ay FundFunds to be used for unexpected revenueFunds to be used for unexpected revenue

    shortfalls"shortfalls"

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    9pending !olicy9pending !olicy Texas ran+ed between $8Texas ran+ed between $8ththand 50and 50ththin statein state

    spending per capitaspending per capita

    6reater support for spending on infrastructure6reater support for spending on infrastructure :ighways:ighways roads, androads, and

    other public improvements"other public improvements"

    %ittle support for spending on social;welfare%ittle support for spending on social;welfareprogramsprograms

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    Taxes are the primary source ofTaxes are the primary source ofgovernment revenue"government revenue"

    .ther revenue sources include4.ther revenue sources include4 %icenses%icenses 9ale of assets9ale of assets nvestment incomenvestment income

    6ambling6ambling orrowingorrowing

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    The !olitics of TaxationThe !olitics of Taxation9ales Taxes = 55> of state tax revenue9ales Taxes = 55> of state tax revenue 6eneral 9ales Tax6eneral 9ales Tax

    /pplied to/pplied to all tangible personal property3all tangible personal property3 any exemptionsany exemptions

    6rocery food, water, telephone, goods sold via the6rocery food, water, telephone, goods sold via thenternet, and most professional;business servicesnternet, and most professional;business services

    9elective 9ales Tax9elective 9ales Tax :ighway ?ser Taxes:ighway ?ser Taxes 9in Taxes9in Taxes

    iscellaneous sales taxiscellaneous sales tax

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    The !olitics of TaxationThe !olitics of Taxation usiness Taxesusiness Taxes

    9ales taxes9ales taxes

    usinesses are consumersusinesses are consumers Franchise taxesFranchise taxes

    usinesses try to limit personal liability of ownersusinesses try to limit personal liability of owners

    mposed on businesses for doing business in Texasmposed on businesses for doing business in Texas

    !ayroll taxes!ayroll taxes !rovides funds for payment of unemployment!rovides funds for payment of unemployment

    insuranceinsurance

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    The !olitics of TaxationThe !olitics of Taxationusiness Taxesusiness Taxes

    9elective taxes9elective taxes

    9everance tax9everance taxA )eath Tax)eath Tax

    Currently not at federal or state levelCurrently not at federal or state level

    Tax burdenTax burden

    Texas ran+ed $8Texas ran+ed $8thth

    for taxes alonefor taxes aloneTax collectionTax collection

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    http://danieljmitchell.files.wordpress.com/2012/10/death-tax-cartoon.jpghttp://danieljmitchell.files.wordpress.com/2012/10/death-tax-cartoon.jpghttp://danieljmitchell.files.wordpress.com/2012/10/death-tax-cartoon.jpg
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    &evenue from 6ambling&evenue from 6ambling &acing&acing

    :orse races and dog races taxed:orse races and dog races taxed

    %ottery%ottery /dministered by Texas %ottery Commission/dministered by Texas %ottery Commission

    !rofits dedicated to public education spending!rofits dedicated to public education spending

    ingoingo Tax divided evenly between state and localTax divided evenly between state and local

    governmentsgovernments

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    7ontax &evenues7ontax &evenuesFederal grantsinaidFederal grantsinaid

    @5 percent directed toward three programs@5 percent directed toward three programs

    :ealth and human services:ealth and human services usiness;economic developmentusiness;economic development

    BducationBducation

    oluntary state participationoluntary state participation

    /merican &einvestment and &ecovery /ct/merican &einvestment and &ecovery /ct200@ 'a+a 9timulus ill(200@ 'a+a 9timulus ill( /llocated D22"@ billion to Texas/llocated D22"@ billion to Texas

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    7ontax &evenues7ontax &evenues %and &evenues%and &evenues

    7ontax revenue from public land sales, rentals,7ontax revenue from public land sales, rentals,

    royalties, and oil and gas leasesroyalties, and oil and gas leases Tobacco 9uit EindfallTobacco 9uit Eindfall

    Tobacco industry must pay Texas an D18 billionTobacco industry must pay Texas an D18 billionsettlement over twentyfive yearssettlement over twentyfive years

    9upports variety of healthcare programs9upports variety of healthcare programs iscellaneous 9ourcesiscellaneous 9ources

    Fees, permits, and income from investmentsFees, permits, and income from investments

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    !ublic )ebt!ublic )ebt 6eneral .bligation onds6eneral .bligation onds

    orrowing repaid through 6eneral &evenue Fundorrowing repaid through 6eneral &evenue Fund

    &evenue onds&evenue onds orrowed amounts repaid from a specific revenueorrowed amounts repaid from a specific revenue

    sourcesource

    ond &eviewond &eview ust be approved byust be approved by Texas ond &eview oardTexas ond &eview oard

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    !ublic )ebt!ublic )ebtBconomic 9tabiliation Fund 'rainy day fund(Bconomic 9tabiliation Fund 'rainy day fund(

    ntended for use when Texas faces anntended for use when Texas faces an

    economic crisiseconomic crisis Financed with excess money in 6eneralFinanced with excess money in 6eneral

    &evenue Fund at the end of a biennium and&evenue Fund at the end of a biennium andwith oil and natural gas taxeswith oil and natural gas taxes

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    udgeting !rocedureudgeting !rocedure !lan of financial operation!lan of financial operation Texas is one of four states that has a biennialTexas is one of four states that has a biennial

    budgetbudget.pposition to a biennial budget is based on too.pposition to a biennial budget is based on too

    freuent economic fluctuationsfreuent economic fluctuations9upporters argue that a biennial budget9upporters argue that a biennial budget

    is a model that forces strategic planning,is a model that forces strategic planning,allows for program evaluation, andallows for program evaluation, andpermits agencies to spend less time onpermits agencies to spend less time on

    budgeting and more time on delivering service"budgeting and more time on delivering service"

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    udgeting !rocedureudgeting !rocedure%egislative udget oard '%(%egislative udget oard '%(

    10member body of Texas legislature10member body of Texas legislature

    !repares a biennial current servicesbased!repares a biennial current servicesbasedbudgetbudget

    :elps draft the general appropriation bill for:elps draft the general appropriation bill forintroduction at each regular session of theintroduction at each regular session of the

    legislaturelegislature

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    udgeting !rocedureudgeting !rocedure6overnor6overnorGs .ffice of udget, !lanning, andGs .ffice of udget, !lanning, and

    !olicy!olicy

    !repares and presents a biennial budget to the!repares and presents a biennial budget to thelegislaturelegislature

    6overnor6overnorGs plan is policy basedGs plan is policy based

    9eparate budgets created by legislative and9eparate budgets created by legislative and

    executive branchesexecutive branches

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    udgeting !rocedureudgeting !rocedureudget !reparationudget !reparation

    egins with development of mission statementegins with development of mission statement

    /gencies must submit fiveyear plan to 6.!!/gencies must submit fiveyear plan to 6.!!and %and %

    udgets are reviewed by legislature with % planudgets are reviewed by legislature with % planreceiving preferencereceiving preference

    udget must agree with comptrollerudget must agree with comptrollerGs revenueGs revenueestimateestimate

    9ent to committees, then governor signs9ent to committees, then governor signs

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    udget Bxpendituresudget BxpendituresFunctional expenditures 'public education,Functional expenditures 'public education,

    human services, and highway constructionhuman services, and highway construction

    and maintenance(and maintenance(.bHective expenditures 'goods and services.bHective expenditures 'goods and services

    purchased to render functional services(purchased to render functional services(

    udget Bxecutionudget Bxecution!rocess by which the governor and the %!rocess by which the governor and the %

    oversee or modify implementation of theoversee or modify implementation of thespending planspending plan

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    !urchasing!urchasing 9tate agencies must ma+e purchases9tate agencies must ma+e purchases

    through supervision of Texas !rocurementthrough supervision of Texas !rocurement

    and 9upport 9ervicesand 9upport 9ervices Council on Competitive 6overnment reuiredCouncil on Competitive 6overnment reuired

    to find costeffective purchasing methodsto find costeffective purchasing methods

    Texas Facilities CommissionTexas Facilities Commission !rovides property management services for!rovides property management services for

    state facilitiesstate facilities

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    /ccounting/ccounting The state comptroller of public accountsThe state comptroller of public accounts

    oversees the management of stateoversees the management of stateGs moneyGs money

    aHor accounting tas+ include4aHor accounting tas+ include4 preparing chec+s to pay the stateGs obligationspreparing chec+s to pay the stateGs obligations

    ac+nowledging receipts from state revenueac+nowledging receipts from state revenuesourcessources

    recording information concerning receipts andrecording information concerning receipts andexpenditures in ledgers and other accountingexpenditures in ledgers and other accountingboo+s"boo+s"

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    /uditing/uditing 9tate accounts audited by the appointed9tate accounts audited by the appointed

    state auditorstate auditor

    !rovides random chec+s of financial records!rovides random chec+s of financial recordsand transactionsand transactions

    Bxamining the activities of agencies toBxamining the activities of agencies to determine the uality of services,determine the uality of services,

    determine whether duplication of services exist,determine whether duplication of services exist,andand

    recommend changes"recommend changes"

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    !ublic Bducation!ublic Bducation/ccounted for almost 2@ percent of state/ccounted for almost 2@ percent of state

    expenditure for 20121*expenditure for 20121* Covered less than 50 percent of the actual cost ofCovered less than 50 percent of the actual cost of

    educationeducation Costs covered by hybrid of local, state, andCosts covered by hybrid of local, state, and

    federal fundingfederal funding

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    !ublic Bducation!ublic Bducation 9ources of public finding9ources of public finding

    6ilmer/i+en %aw and the Foundation 9chool6ilmer/i+en %aw and the Foundation 9chool!rogram!rogram

    the /vailable 9chool Fundthe /vailable 9chool Fund the 9chool Taxing /bility !rotection Fundthe 9chool Taxing /bility !rotection Fund

    the Texas %otterythe Texas %ottery

    the 6eneral &evenue Fundthe 6eneral &evenue Fund

    !roperty Tax &elief Fund!roperty Tax &elief Fund

    ncreased franchise taxesncreased franchise taxes

    &educed property taxes&educed property taxes

    2

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    !ublic Bducation!ublic BducationFunding BualiationFunding Bualiation

    TheThe II&obin :oodGG planII&obin :oodGG plan

    &euires wealthier districts to transfer funds to&euires wealthier districts to transfer funds topoorer school districtspoorer school districts

    Eealthier districtsEealthier districts

    a+a Chapter $1 districts3a+a Chapter $1 districts3

    Tax base eual to D*1@,500 or more per studentTax base eual to D*1@,500 or more per student

    7umerous court challenges7umerous court challenges

    Found to be constitutionalFound to be constitutional

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    :igher Bducation:igher Bducationncreasing enrollment but declining statencreasing enrollment but declining state

    financial supportfinancial support

    Texas :igher Bducation Coordinating oardTexas :igher Bducation Coordinating oard Closing the 6aps initiativeClosing the 6aps initiative

    :@:@ &euires Texas :igher Bducation Coordinating&euires Texas :igher Bducation Coordinating

    oard to develop an outcomesbased formula foroard to develop an outcomesbased formula forfundingfunding

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    :igher Bducation:igher BducationCommunity College FundingCommunity College Funding

    :ybrid of state:ybrid of state contact hour3 funding, localcontact hour3 funding, local

    property taxes, grants, tuition, and feesproperty taxes, grants, tuition, and fees?niversity Funding?niversity Funding

    %egislative funding, tuition, fees, grants, and gifts%egislative funding, tuition, fees, grants, and gifts

    !ermanent ?niversity Fund!ermanent ?niversity Fund

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    :igher Bducation:igher Bducation Tuition )eregulationTuition )eregulation

    /llows universities and community colleges to set/llows universities and community colleges to set

    tuition and feestuition and fees From 200*=2011, tuition increased @0>From 200*=2011, tuition increased @0>

    Texas Tomorrow FundsTexas Tomorrow Funds Tuition plan provides a way for parents to save forTuition plan provides a way for parents to save for

    childrenchildrenGs education and loc+ in costsGs education and loc+ in costs 9tate 6rants9tate 6rants

    TBJ/9 6rants !rogramTBJ/9 6rants !rogram

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    !ublic /ssistance!ublic /ssistance !overty levels remain above national!overty levels remain above national

    averageaverage

    :ealth Care !rograms:ealth Care !rograms ncreasing healthcare costs and more peoplencreasing healthcare costs and more people

    becoming eligible for edicaidbecoming eligible for edicaid

    The cost of edicaid and C:! freuently exceedThe cost of edicaid and C:! freuently exceed

    budget allocations"budget allocations" Child%7K purchases insurance coverageChild%7K purchases insurance coverage

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    .ther 7eeds.ther 7eeds TransportationTransportation

    !ayasyou&ide3!ayasyou&ide3

    ncreased costs have exceeded fundingncreased costs have exceeded funding Texas obility FundTexas obility Fund

    EaterEater Texas drought has had huge impactsTexas drought has had huge impacts

    Texas Eater )evelopment oardTexas Eater )evelopment oard

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    .ther 7eeds 'Cont.ther 7eeds 'ContGd(Gd(!ublic 9afety !rograms!ublic 9afety !rograms

    9tate agencies share the responsibility with local9tate agencies share the responsibility with local

    governmentsgovernments:omeland 9ecurity:omeland 9ecurity

    ?nfunded mandates?nfunded mandates

    order securityorder security