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The Budget

The Budget. The Budget. Budget is passed to make sure that government has means to provide services to the citizens Appropriations bill establishes expenditures for the biennium State provides for what taxes can be levied and who can use them. The Budget Process.

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The Budget

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  1. The Budget

  2. The Budget • Budget is passed to make sure that government has means to provide services to the citizens • Appropriations bill establishes expenditures for the biennium • State provides for what taxes can be levied and who can use them

  3. The Budget Process • Texas uses a biennial (2-year) budget, with a fiscal year beginning each September 1st • While the governor does not control the budget, he or she can influence the process • If March of even-numbered years, both the Legislative Budget Board (LBB) and the Office of Budget and Planning (OBP) request budget submissions from state agencies

  4. The Budget Process • OBP produces governor’s budget which reflects his or her priorities, and is usually introduced by a “friendly” legislator • The LBB prepares a budget which is the one usually used • Several budget bills covering different state agencies may be presented and passed

  5. The Budget Process • Once the budget bills have been passed (which is often late in the session) the governor may take one of four actions: • Veto one or more of the bills • Use a line item veto • Allow the bill to take effect without signing • Sign the bill

  6. The Budget Process • The courts rarely intervene in budget matters, although some taxes or expenditures have been declared unconstitutional

  7. Appropriations • Top four areas of expenditures, in order of magnitude, are: • Education • Health and human services • Transportation (highways) • Public safety

  8. Education • Elementary and high schools receive approximately 60% of the education budget • Balance is distributed among higher ed institutions • About 39% of total budget is education-related • When matched with local funding, more than $40 billion is spent annually

  9. Health and Human Services • More than $24 billion is spent annually for a wide variety of programs • Comes in a close second to education (35%) • Almost 50% of the expenditures come from federal funds

  10. Transportation • About 9% of the budget is spent here • Most comes from fuel taxes we pay at the pump – 75% of the taxes are spent directly on highways • Funds for alternative methods (light rail, etc.) of transportation must come from general fund

  11. Public Safety and Corrections • Texas’s prison population is the largest • 6% of the budget total is devoted to corrections

  12. Sources of Revenue • Non-tax revenue • Intergovernmental transfers are funds received from other governmental units • Grants-in-aid make up the greatest amount of such transfers • Presently, about 35% of state revenues come from the federal government (more than one-half of which is for health and human services)

  13. Sources of Revenue • Non-tax revenue • License and user fees are received by those using services and benefits • License fees are also generated for the privilege of doing business, such as attorneys, CPA’s, physicians • Borrowing is permitted through bond elections

  14. Sources of Revenue • Non-tax revenues • Lottery proceeds were originally intended to help fund education, but it is now part • Rents and royalties are collected from natural resources and from leases on state land

  15. Sources of Revenue • Tax Revenues • Various state taxes make up about one-half of the revenue received each year • “Sales tax” accounts for about 55% of total tax receipts, but other “sales-type” taxes contribute to make up over 80% of the revenues

  16. Sources of Revenue • Types of Taxes • General sales tax is set at 6.25% but has some exemptions • Property taxes are collected by local governments and schools • Excise taxes (“sin” taxes) are levied on such things as tobacco and alcohol

  17. Sources of Revenue • Types of Taxes • Franchise taxes are levied on corporations doing business in Texas and are based on profits or net worth – not levied on other types of business organizations • Severance taxes come from removal of natural resources

  18. Evaluating Tax Systems • Tax systems are the mix of revenue-raising methods used by governments • Texas’ system of sales tax is criticized because it does not fully exempt daily needs • Also criticized as being regressive, which means burden is more heavily weighted to low-income persons

  19. What’s Up for the Future? • There is impetus to have the franchise tax applicable to all businesses • Income tax idea was floated by Lt. Gov. Bullock in the 90’s, which was met with strong resistance • Constitutional amendment was passed to require voter approval of income tax • Income tax would permit taxpayers to deduct on federal returns, and would possibly create more equity

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