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Balancing State Budgets
Since 1996, the Texas population has grown faster than that of the U.S., increasing the demand for state services, especially in health care, education and transportation. Rising Medicaid caseloads and costs have placed substantial pressure on the state budget.
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BALANCING STATE BUDGETS
Since 1996, the Texas population has grown faster than that of the U.S., increasing the demand for state services, especially in health care, education and transportation. Rising Medicaid caseloads and costs have placed substantial pressure on the state budget. The state’s public school student population also ballooned in the last two decades, while enrollment in our higher education institutions continues to climb.
Nonetheless, state appropriations have risen more slowly than state personal income. The Legislature has succeeded in repeatedly balancing budgets even when revenue growth was expected to fall short of anticipated spending needs.
The relatively slow growth of state spending is due to a number of factors. For example, the state has tried to restrain growth by improving the efficiency of agency spending.
This is perhaps best demonstrated by shrinking state government employment (Exhibit 12). From 1996 to 2019, the Texas population rose by more than 50 percent, from 19.3 million to an estimated 29.1 million. In the same period, state full-time equivalent (FTE) jobs funded by state appropriations fell by about 4 percent, from 225,500 in 1996 to an estimated 215,700 in 2019.
As with the private sector, state government has relied on technology to deliver more services with fewer employees. Consolidation of agencies, outsourcing to private providers and changes in the delivery of state services also helped restrain rising costs.EXHIBIT 12: TEXAS STATE GOVERNMENT EMPLOYMENT, 1996-2019
Exhibit 12: Texas State Government Employment, 1996-2019 (1996=100)
Fiscal Year Texas Population Texas State Employment
1996 100.0 100.0 1997 102.1 99.5 1998 104.2 95.3 1999 106.3 95.3 2000 108.3 96.6 2001 110.3 96.2 2002 112.2 96.3 2003 114.0 96.3 2004 115.8 95.6 2005 117.9 95.2 2006 120.9 94.4 2007 123.2 93.6 2008 125.7 96.6 2009 128.2 97.0 2010 130.6 98.8 2011 132.7 98.8 2012 134.9 97.7 2013 137.0 97.6 2014 139.4 96.8 2015 142.0 96.9 2016 144.3 96.1 2017 146.4 96.2 2018 148.6* 95.5 2019 150.8* 95.7 * Estimated
Note: State government employment numbers do not include health-related institution staff funded by patient fees and other sources not appropriated by the state.
Sources: IHS Markit and Legislative Budget Board
Another factor constraining state spending has been cost shifting, which occurs when changing funding patterns impose greater financial responsibility on other levels of government or end users.
Public school funding provides a good example. Despite a substantial commitment of new state funding for public schools with the passage of the 2006 school finance legislation, rising local property values have reduced state formula assistance. Local property tax revenue has risen significantly faster than state funding and accounts for a growing share of all Texas funding for public schools.
An example of shifting costs to users is higher education funding; state funding has grown more slowly than population and inflation, while tuition and fees have surged by more than 545 percent since 1996.
Despite a relatively robust economy, Texas’ economic growth is not always steady and can fluctuate substantially from year to year (Exhibit 13). Sometimes, expected revenues fall short of meeting budget needs.
EXHIBIT 13: CHANGE IN GRR REVENUE AND APPROPRIATIONS FROM PREVIOUS BIENNIUM, 1998-99 TO 2018-19
REVENUE (click to hide)
APPROPRIATIONS (click to hide)
GENERAL COST INDEX (click to hide)
1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 2018-19 -10% -5% 0% 5% 10% 15% 20% 25%
Exhibit 13: Change in GRR Revenue and Appropriations From Previous Biennium, 1998-99 to 2018-19*
Biennium Revenue Appropriations General Cost Index
1998-99 14.9% 16.8% 8.3%
2000-01 10.4% 13.7% 9.9%
2002-03 1.6% 3.5% 7.9%
2004-05 11.0% 4.7% 8.7%
2006-07 19.6% 9.6% 11.3%
2008-09 4.9% 16.2% 9.7%
2010-11 -5.7% 5.4% 6.7%
2012-13 24.3% 5.8% 8.0%
2014-15 11.7% 8.3% 6.2%
2016-17 -1.2% 12.4% 5.5%
2018-19 10.7% -1.1% 7.3%
Notes: Changes in state revenue accounting in 1996 prevent comparisons with the 1994-95 biennium. Appropriations for 2018-19 do not include supplemental appropriations as none have been made at this writing; 2019 revenue is estimated.
Sources: Legislative Budget Board and Texas Comptroller of Public Accounts
Texas Government 2.0, Financing State Government, State Government Spending in Texas
State Government Spending in Texas
State Government Spending in Texas Overview
State Government Spending in Texas
By the end of this section, you will be able to:
Discuss state government spending in Texas
This section explores in a broad sense where Texas spends its revenue.
Where Does Texas Spend its Money?
In economics and political science, fiscal policy is the use of government revenue collection (mainly taxes) and expenditure (spending) to influence the economy.
While the U.S. Government has the power to borrow money - even for operating expenses, the state government of Texas cannot. The Texas Constitution requires that Texas operate under a balanced budget. The state may only spend as much as it estimates it will receive in revenue during any fiscal biennium.
Figure 13.2 Education and health care are the two largest categories for state spending. Image Source: Senate Research Center: Budget 101
The state government in Texas has budgeted to spend $251 billion over the 2020-21 biennial budget cycle, a significant increase over the $217 billion budget for the previous two-year cycle. Lawmakers agreed to increase spending by $11.1 billion on public education and to oﬀset mandated local property tax cuts.
In Figure 13.2, above, note that public education is the state’s single largest spending category, followed closely by health and human services. While most of the health care portion of the budget is paid with federal funds, nearly every public education dollar must be raised locally through state taxes.
Public School Finance with Emily Sass
Key budget items for Texas include the foundation school program, which covers the state’s share of public K-12 education, Medicaid and Medicare, Child Protective Services, transportation, mental health, higher education criminal justice, border security, teacher retirement and health benefits, and state employee retirement.
Texas' 2020-21 budget includes significant increases in spending from the previous budget. An optimistic revenue forecast from State Comptroller Glen Hegar allowed legislators to spend 16% more than in budget approved by the House and Senate in 2017.
Much of the additional spending went to the Republican leadership's two top legislative priorities - public education and property tax reduction. The $94.5 billion allocated to education includes colleges and universities as well as K-12 public schools - an overall 10% increase in education spending from the previous budget cycle.
Meanwhile, the $84 billion appropriation for health and human services programs increased only 1% from the previous budget, with Medicaid receiving a $900 million cut - mostly in federal funding.
While governors generally use their line-item veto power to trim at least a few programs, Governor Greg Abbott approved the budget adopted by Representatives and Senators without a single line-item veto—the first time a Texas governor has approved an entire state budget since Governor Allan Shivers signed a budget without changes in 1955.
References and Further Reading
Senate Research Center (2019, January). Budget 101: A Guide to the Budget Process in Texas
Cameron, D. & Walters, E. (2019, May 31). From property taxes to teacher pay, here's how the Texas Legislature handled spending priorities. The Texas Tribune. Retrieved October 23, 2019.
Legislative Reference Library (n.d.). Legislation. Retrieved October 23, 2019.
Roldan, R. (2019, June).Texas Gov. Greg Abbott signs $250 billion budget with no line-item vetoes. The Texas Tribune. Retrieved October 23, 2019.
Licensing and AttributionCC LICENSED CONTENT, ORIGINAL
State Government Spending in Texas. Authored by: Andrew Teas. License: CC BY: Attribution
Fiscal Policy. Authored by: Kris S. Seago. License: CC BY: Attribution