Finance and Fiscal Policies Chapter Eleven Finance and Fiscal Policies

Fiscal Policies Fiscal policy is public policy that concerns: Taxing Government spending Public debt Management of government money

Fiscal Policies Texas’s fiscal policy includes: A regressive, land and product-based tax system A pay-as-you-go government spending program that requires a balanced budget A public debt system that requires voter approval Restrictive laws for the management of government money

Percent of Income Paid in Local and States Taxes by Average Annual Family Income

Revenue Sources General Sales Tax Franchise Tax Payroll Tax A tax applied largely to the sale price of tangible personal property or its use. Franchise Tax A tax levied on the annual receipts of businesses for the privilege of doing business in Texas. Payroll Tax A tax levied against employee wages to provide funds for unemployment insurance benefits.

Revenue Sources Gambling Nontax Revenues Horse racing Lottery Bingo Federal grants-in-aid Tobacco suit windfall Fees and permits Investment income

Sources of State Revenue, (2006-2007)

Revenue Sources-Public Debt Bonded Debt Borrowings obtained through the sale of bonds. General Obligation Bonds Amounts borrowed are repaid from the General Revenue Fund and must be approved by a constitutional amendment. Revenue Bonds Amounts borrowed are repaid from a specific revenue source, such as student loan bonds which are repaid by students, and therefore do not require voter approval.

Revenue Sources-Savings Account “Rainy day” fund Fund used to stabilize state finance when revenue is insufficient to cover state-supported programs.

Annual Federal Grants (FY2001-FY2005) (in billions)

Texas Biennial Budget Cycle

Biennial Budget for Fiscal Years 2006–2007

Budgeting and Fiscal Management Plan indicating how much money a government expects to collect during a period and how much spending is authorized for agencies and programs. Dual budgeting system Separate budgets created by the legislative branch and the executive branch.

Budgeting and Fiscal Management Budget execution The process by which the governor and the Legislative Budget Board oversees, and sometimes modifies, the spending plan approved by the Texas Legislature. Auditing The review of records and accounts of disbursing officers to assure compliance and integrity of spending and accounting systems.

Comparison of Funding Sources for Public Education (1998-2004)

Tuition Rates for Selected Years (FY1999 through FY2006)

Rate of Tuition Increases from 1999 Base Year for Selected Years (FY1999 through FY2006)

Future Demands Medicaid Children’s Health Insurance Program Health care benefits for the poor paid by a federal-state government partnership. Children’s Health Insurance Program A program that provides medical insurance for children of low-income families. Trans-Texas Corridor A 50-year development plan to provide more than 4,000 miles of new rights-of-way in Texas that will include highways, railways, and utility easements.