1. Texas Budget Process
GOVT 2306, Module 12

2. Performance-Based Budgeting
The state of Texas uses performance-based budgeting, which is a system of budget preparation and evaluation in which policymakers identify specific policy goals, set performance targets for agencies, and measure results.

3. Budgeting Philosophy
The philosophy behind performance-based budgeting is that agency budgets are tied to measurable goals. Agencies establish goals, identify quantitative measures to assess progress, and prepare a budget designed to support their efforts.

4. Goals for Higher Education
In recent years, colleges and universities have established goals related to the number of students earning degrees.

5. Governor Starts
The governor begins the budget process in the spring of the year before the legislature meets by defining the mission of state government, setting goals, and identifying priorities.

6. Agencies Respond
Each state agency develops a strategic plan for accomplishing one or more of the goals. A strategic plan defines the mission of the agency, states its philosophy, and presents a strategy for achieving the goal. The agency also creates a budget to support its strategic plan.

7. Agencies Submit Budgets
In June, July, and August, agencies submit their plans and budgets to the governor and the Legislative Budget Board (LBB).

8. Rules of the Budget Game
Agencies ask for more money than they received the year before and more money than they expect to get, so that they will have room to cut their budget requests later.
Agencies insert some items into their budgets that are obvious targets for spending cuts, in hopes that the items they really want included in the budget will survive the cuts.

9. More Rules of the Game
When agencies want large amounts of additional money, they present the requests as extensions of existing programs because it is easier to justify expanding a current program than it is to begin a new initiative.
When asked to recommend spending reductions, agencies propose cutting programs that are politically popular.

10. Preparing the Budget
After agencies submit their budgets, the LBB and the governor’s staff hold hearings, at which agency administrators explain and defend their requests. During the last few months of the year, the LBB drafts an appropriation bill, a legislative authorization to spend money for particular purposes.

11. Budget Proposals LBB Budget Governor’s Budget
Both the LBB and the governor present budgets to the legislature. In practice, the legislature only considers the LBB document.

12. No Deficit Spending
The Texas Constitution, similar to most other state constitutions, prohibits the adoption of a budget that is in deficit. A budget deficit is the amount by which budget expenditures exceed budget receipts.

13. Role of comptroller
The state comptroller estimates state revenues for the upcoming biennium at the beginning of each legislative session. Any spending bill the legislature approves must fall within the comptroller's revenue projections.
This process is the implementation of the state’s balanced budget requirement.

16. Spending Cap
The Texas Constitution also caps state spending to the rate of economic growth. The rate of growth in state spending may be no greater than the projected rate of economic growth unless a majority of legislators agree that an emergency exists that warrants additional spending.

17. Matching Funds
The federal government provides money for welfare, highway construction, children’s healthcare, and other purposes. States are required to provide matching funds to draw down the federal money.

18. Dedicated Funds
Dedicated funds are constitutional or statutory provisions that set aside revenue for particular purposes. The state has more than a hundred dedicated funds setting aside money for highways, parks, university construction, public schools, retirement funds, and other purposes.
Constitutional or statutory dedications accounted for 45 percent of general revenue appropriations.

19. Legislative Process
The budget must pass the legislature in a fashion similar to other bills. The House and Senate pass their own budgets. A conference committee works out the final document and both chambers must pass it again.

20. Line-item veto
On appropriation bills, the governor of Texas (and the governors of most states) has the line-item veto, which is the governor’s power to veto sections or items of an appropriation bill while signing the remainder of the bill into law.

21. Budget Execution
The governor and the LBB share budget execution authority, the power to cut agency spending or transfer money between agencies during the period when the legislature is not in session. Between legislative sessions, either the LBB or the governor may propose reductions or shifts in state spending. If the LBB proposes a change, the governor must approve the transfer before it can take effect, and vice versa.

22. Quiz Which official estimates future state revenues?
Lieutenant governor
Comptroller
Governor
Attorney general
The answer is B.

23. What role do each of the following play in the state budget process: performance-based budgeting, governor, state agencies, Legislative Budget Board, comptroller, dedicated funds, federal matching funds, the line-item veto, incremental budgeting, and budget-execution authority?
What You Have Learned