JR

Finance and Fiscal Policy Summary✅

Chapter 11: Finance and Fiscal Policy

Biennial Revenue Estimate

  • Texas Comptroller Glenn Hegar submitted the Biennial Revenue Estimate in January 2019.

  • Forecast included cautious optimism; concerns over oil and gas, investment markets, and trade policies.

  • Anticipated 245,500 new jobs and unemployment below 4%, but did not consider pandemic impacts.

COVID-19 Impact

  • Statewide emergency declared in March 2020; significant job losses (~475,000 jobs) and increased unemployment (>8%).

  • By FY2020 end, tax collections were $2.1 billion lower than the previous year.

  • Federal relief supported state revenue despite a falling local economy.

Budget Overview

  • Balanced budget approach focusing on low taxes and spending, maintaining historical positions.

  • Low-income reliance on sales taxes creates a regressive tax structure; high school finance reforms were prioritized.

Fiscal Policies

  • Texas has low state taxes and high sales tax rates; no state income tax.

  • Legislative efforts focus on reducing local property taxes while increasing state funding for public education without raising state taxes.

Revenue Sources

  • Major revenues from sales taxes (approx. 60% of state tax revenue), franchise and severance taxes.

  • Federal grants provide significant support; budgetary constraints necessitate savings measures.

Budgeting Process

  • Biennial budgeting requires input from the Legislative Budget Board (LBB) and Governor’s Office, focusing on strategic plans and compliance with constitutional limits.

  • Budget proposals are reviewed and certified for revenue availability by the Comptroller.

Education Funding

  • Public education funding is shared between state and local districts; significant reforms have sought to increase state support while reducing property tax burden.

  • Higher education financing struggles with increasing tuition costs and declining state support, particularly for community colleges.

Public Assistance

  • State funding for healthcare services is critical, especially post-COVID-19; many residents remain uninsured.

  • Access to Medicaid has been limited; Texas has rejected Medicaid expansion, leading to funding challenges for health services.

Infrastructure Needs

  • Texas faces infrastructure challenges in transportation and water supply, compounded by environmental instability from droughts and floods.

  • Legislative amendments have aimed to secure additional funding for transportation projects to address underfunding.

Conclusion

  • The state's economic recovery post-COVID-19 remains uncertain, underscoring the importance of effective budgeting and finance strategies to meet future demands.