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Texas Budget and Taxes Introduction

The budget approved by the Texas Legislature is supposed to be a reflection of the priorities of the people
of this state. However, recent budgets passed by the Republican Legislature have betrayed our values by
failing students, teachers, the elderly and the most vulnerable among us. The Legislature needs to
change the way it budgets our taxpayer dollars to focus on our priorities.
2016-17 STATE BUDGET
Left $13.4 billion on the table and failed to fully restore previous cuts, invest in infrastructure, or
expand healthcare.
Failed to fully restore Prekindergarten grants (Over $200 million cut in 2012-13 biennium). Instead
of expanding eligibility for Pre-k or moving towards full day Pre-k, the Legislature instead
allocated $59 million per year to improve the quality of Pre-k at a limited number of districts.
Failed to restore 2011 education cuts. The Basic Allotment per student is set at $5,140 for state
fiscal 2016 and 2017. Using the Comptrollers forecast of CPI, by 2017, the Basic Allotment will
be $4,947 in 2015 dollars, lower than what it was in 2014 or 2015.i
Cut $100 million to a Medicaid therapy program for poor and disabled children,ii part of $260
million in cuts payments for therapy program over the next two years with another $130 million
in medical policy reductions.
Increased funding for border security by $300 million, to total $800 million. The increased funding
does not come with any sort of accountability or requirements for the increased funding.
Removed funding for primary care doctors in Medicaid. The House initially funded family
physicians at their current rate, but eventually folded to the Senate and allowed a rate cut to
become law. Only 34% of doctors currently accept Medicaid patients, not funding rate increases
will further lower the number of participating doctors.
Spent $3.8 billion on tax cuts and used General Revenue dollars that would have gone to
transportation, water and other state priorities.
Source: 84R HB 1 RV#1663 HJ 5222
Budget Votes
In addition to the impact on the budget, the Texas House of Representatives cast many votes on budget
amendments that demonstrate their priorities:
-Voted against increasing education funding by $800 million - 84R HB 1 RV#92 HJ 1075
-Voted against allocating $15,000,000 per year for 2016/2017 to create a more sustainable
funding source for the Hazelwood Legacy Program. Hazelwood covers some college tuition for
veterans and their family members - 84R HB 1 RV#107 HJ 1081
-Voted against increasing funding for the Texas Ethics Commission to enforce campaign finance
violations. 84R HB 1 RV#108 HJ 1082
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-Voted against allocating $2 million to the Office of the Attorney General, Victims Assistance. The
program provides shelter, crisis centers, hotlines, and advocacy for survivors of crimes, as well as
the Court Appointed Special Advocate (CASA) program and the Childrens Advocacy Centers
(CAC) program - 84R HB 1 RV#109 HJ 1083
-Voted against requiring the Attorney General to discuss settling the school finance lawsuit
against the state - 84R HB 1 RV#110 HJ 1087
-Voted against studying whether Texas state agencies are paying men and women equally for
the same job - 84R HB 1 RV#112 HJ 1090
-Voted against requiring medically accurate, objective sex education materials for students 84R
HB 1 RV#123 HJ 1118
-Voted to reduce HIV/AIDS prevention funding and instead fund abstinence education 84R HB 1
RV#125, 127 HJ 1125
-Voted to leave billions of General Revenue dollars unspent instead of using them to restore the
cuts to public education 84R HB 1 RV#128 HJ 1145
-Voted against funding Pre-k so that all eligible students would be able to enroll - 84R HB 1
RV#129 HJ 1147
-Voted against requiring school districts to report alleged discrimination or harassment of a
school district employee or student on the basis of the actual or perceived ethnicity, color,
gender, gender identity or expression, sexual orientation, disability, religion, or national origin of
the employee or student - 84R HB 1 RV#130 HJ 1148
-Voted against requiring the state the assist local law enforcement to equip officers with body
cameras - 84R HB 1 RV#141 HJ 1195
-Voted against requiring the state to report how $800 million for border security is spent, and the
performance and results of the funding - 84R HB 1 RV#152 HJ 1245

How to read votes:


[Legislative Session Number][R=Regular Session, (1) = 1st Called Special Session][Bill Number][Record
Vote Number][Journal Page Number]
For example: (84R HB 1 RV#1663 HJ 5222) mean 84th Legislature Regular Session (2015), House Bill 1,
Record Vote #1663, House Journal page number 5222.
Journals can be accessed from the Texas Legislative Reference Library:
http://www.lrl.state.tx.us/collections/journals/journals.cfm
Legislation can be accessed from the Texas Legislative Council:
http://www.capitol.state.tx.us
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Budget Primer
The powers to tax, spend, and borrow for the public purpose of Texas lies in the hands of the Texas
Legislature. Unfortunately, over the twelve years the Republican-led Texas Legislature made budgetary
decisions to starve neighborhood schools and higher education institutions, underfund basic health care
and human services, and neglect infrastructure demands.
The 2016-17 Texas Budget appropriates a total of $209 billion in All Funds. Specifically, the budget
appropriates $106.6 billion in General Revenue Funds, $7.5 billion in General Revenue-Dedicated, $68
billion in Federal Funds, and $27.3 billion in Other Funds (e.g. RDF, State Highway Fund, Property Tax
Relief Fund).iii
Where does our money go?
Even though education and health and human services account for over half of the states spending, Texas
ranks amongst the lowest states in education spending per pupil and health care spending per patient.
The bulk of the money that the Legislature controls in the appropriations process is General Revenue
Funds, which is largely spent on education and human services.

General Revenue Funds 2016-17


Biennium
0.6
0.5
0.4
0.3
0.2
0.1
0
Agencies of
Education
Series 1

52.40%

Business &
Public
Health &
Economic Safety &
Human
Developme Criminal
Services
nt
Justice
30.20%
1%
10.70%

General
Natural
Governme
Resources
nt
0.90%

2.90%

Other
1.70%

Every session public school funding is on the front line of budget attacks - from a structural deficit that
now towers at an estimated $10 billion per bienniumiv to a $5.4 billion cut in 2011 from direct school
funding and grant programs, including early education and student success initiatives. Even with litigation
pending against the state that already found the states school finance system unconstitutional, the 201617 budget failed to fully restore cuts to public schools to the same level before 2011. Because the states
school finance system is so inadequate, and because the Legislature diverted funds to pay for tax cuts,
more General Revenue dollars were allocated to education to fill in those holes. This results in fewer
dollars available for healthcare, public safety, natural resources, and other state priorities that rely on
General Revenue funding.

Structural Deficit and Permanent Funding Shortfall for Schools

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In 2006, the Texas Legislature faced a deadline to overhaul the school finance system due to Texas
Supreme Court decision West Orange Cove ISD v. Neeley, which ruled the school finance system in place
as unconstitutional. The Texas Legislature responded by forcing school districts to reduce their school
property tax rates by one-third, but with promises to replace the lost revenue with state funds.
The state intended to cover the cost of the lost revenue primarily with the new franchise tax, and
increased cigarette and used vehicle taxes. However, they acknowledged at the time that the revenue
from those taxes did not fully cover the lost revenue that was estimated at $14.2 billion.v The franchise
tax continually underperformed original estimates, even before the Legislature began scaling it back.
Even today in the recovered economy, the amount of revenue needed to make up for the lost money is
not generated by the sources dedicated by the legislature. This created a $10 billion structural deficit
that appears in every state budget, every Legislative session, requiring the Legislature to fill it with
dollars pulled away from other priorities.vi
Republican legislators have oftentimes mislead voters in recent years by claiming they increased
funding for public education. In reality, they had to increase General Revenue dollars to cover the huge
gaps in funding left by the school finance system and new tax cuts. This did not result in more total
dollars for public schools, Texas per pupil funding is still below prerecession levels. In fact, once inflation
is adjusted, Texas per pupil funding will actually decrease by 2017.
The new franchise tax was estimated to generate approximately $6.8 billion in 2008-09 and $7.7 billion
in 2010-11 but has fallen woefully short of those estimates. With the franchise tax continuing to
underperform and the cost of compressing the local property taxes greater than expected, the
legislature was forced to appropriate general revenue to cover the deficit.
Tax
Collection
Franchise
Tax for
PTRF
Motor
Vehicle
Sales &
Use Tax

2008

2009

2010

2011

2012

2013

2014

2015

$1.58

$1.47

$1.21B

$1.25B

$1.86B

$2.01B

$1.9B

$1.78B

$12.04M

$22.31M

$1.31M

$13.52M

$15.67M

$19.50M

$20.5M

$22.23M

Cigarette
& tobacco

$912.80M

$976.97M

$807.10M

$939.23M

$827.33M

$945.15M

$737.62M

$924.05
M

InterestOther

$6.61M

$64.41M

$7.64M

$0.96M

$0.97M

$0.94M

$0.96M

$1.25M

TOTAL

$2.51B
$2.54B
$2.02B
$2.21B
$2.70B
$2.97B
$2.66B $2.73B
Source: Texas Comptroller of Public Accounts, Annual Cash Report 2008-2015

Over the last three legislative sessions, the Texas Legislature struggled to use funds available in the
Economic Stabilization Fund, commonly known as the Rainy Day Fund, due to political pressure from
outside groups and veto threats from the Governor. By 2017, the Rainy Day Fund is expected to contain
$11.1 billion. The Legislature also left $2.3 billion on the table in extra non-dedicated GR money available
before reaching the states pay-as-you-go limit. All told, the Legislature adjourned without using any of
the $13.4 billion available to them to restore public education, offset harmful Medicaid cuts to therapy
for children with disabilities, or invest in needed infrastructure like transportation and water.
Federal Dollars
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Federal Funds are the second largest revenue source for the state and include grants, allocations, and
matching funds. The Federal Funds budget is critical in allowing Texas to fund vital health services. The
budget also provides considerable funding for education and economic development.
The 2014-15 Federal Funds budget decreased from the previous biennium by $448.8 million and
accounted for 32.4% of funds appropriated. Looking back to 2009, the General Appropriations Act for the
2010-11 biennium heavily relied on federal stimulus funds to maintain state services and programs.
Constitutional Limits
The Texas Constitution limits spending in four ways- pay-as-you-go, rate of growth, welfare spending,
and debt.
The pay-as-you-go limit requires the legislature to balance the budget each biennium by certifying that
the appropriations are within estimates of available revenue for the biennium. However, accounting tricks
are common practice to get around the limit, such as payment delays and use of dedicated funds for other
purposes.
The Texas Constitution limits the biennial rate of growth of appropriations from state revenue not
constitutionally dedicated to the estimated rate of growth of the states economy.
The constitutional welfare spending limit prohibits spending in a biennium more than one percent of the
state budget on assistance grants to or on behalf of needy dependent children and their caretakers.
The Texas Constitution also limits the authorization of additional debt if in any fiscal year the annual debt
service paid from the General Revenue Fund will exceed 5 percent of the average annual General Revenue
Funds for the last three years.
Investing Today in Our Tomorrow
Texas population skyrocketed over the last decade, and with it so did demand. However, with only modest
investments, the state is funding only a fraction of the need projected. By 2016, the state population is
projected to be 26.5 million, with over 26% of the population under the age of 18.
The greatest demand on our budget for the foreseeable future will be education. Texas must prioritize
restructuring the business tax so that our school finance system does not start billions behind every cycle
but instead allows us to invest for the future.

CPPP 2015 Legislative Budget Wrap-Up, May 2015


http://www.texastribune.org/2015/08/26/texas-start-over-cuts-childrens-therapy/
iii Legislative Budget Board, SUMMARY OF 201617 CONFERENCE COMMITTEE REPORT FOR HB 1, May 2015
iv Lavine, Dick, How to Fill the Hole in the Tax Revenue System. Center for Public Policy Priorities. February 2012.pg. 4.
Assessed April 2014. Available online at http://library.cppp.org/files/7/2012_01_BT_FixTexasRevenue.pdf
v Legislative Budget Board. Fiscal Note for HB 2, 80th Legislative Regular Session. 23 May 2007. Pg. 1. Available online at
http://www.legis.state.tx.us/tlodocs/80R/fiscalnotes/pdf/HB00002F.pdf.
vi For an in depth discussion on solutions to the structural deficit, see
http://library.cppp.org/files/7/2012_01_BT_FixTexasRevenue.pdf
i

ii

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