Public Policy in Texas

Chapter 8

Introduction

Economic Policies Policies that affect economic activities or

have economic consequences for individuals or groups

Social Policies Policies that guide our development as

human beings and our relationships with other humans and our broader environment

Roots of Public Policy

Leader and straggler in economic regulation: Railroad Commission provided leadership; PUC developed late

Economic assistance during the New Deal Great Society programs expanded support for

social welfare and economic regulation Deregulation during the 1990s

Public Policy Process Agenda setting

Getting an issue to be considered by the government

Policy making Making public policy through one of the branches of

government Implementation

Bureaucracy makes rules and regulations for a policy’s implementation

Evaluation Assessing the policy’s effectiveness

Policy Actors

Economic, political, and governmental elites Wealthy Texans

Foundations and Think Tanks Texas Research League Texas Public Policy Foundation

Media Newspapers, magazines, Blogs

Academia Universities

Policy Outcomes

Political Economy Web of economic, social, governmental, and political

institutions and processes Subsidy – grant of economic resources by government Regulation – government restriction on economic

activities Roles of Government

Nourish the elements that make innovation possible: skilled workers, investment money, system that fosters innovation and change

Bring the poor into the growth process

State Finance

Budgeting A plan for how much money one expects to receive and

how much one proposes to spend

Biennial budget

Fiscal year: September 1 – August 31

State Finance Budgeting Restrictions Balanced budget Bonds and debt Comptroller’s revenue estimate and certification Dedicated funds Constitutional spending limit based on economic

growth calculated by the LBB (1978) Limit on welfare spending: 1 percent of budget

(1982) Budget execution authority (1985)

State Revenues: FY 2008 $86.98 Billion

State taxes (47.5.3%) Federal funds: grants-in-aid (30.2%) Licenses, fees, permits, fines, and penalties (11.8%) Interest and investment income (2.7%) Lottery (1.8%) Land income (1.2%) Sales of Goods and Services (0.6%) Settlement of claims (0.6%) Contribution to employee benefits 0.0%) Other (3.6%)Source: http://www.window.state.tx.us/taxbud/revenue.html

Principles of Taxation

Adequacy—raises enough money Equity—everyone pays their share according to

ability to pay Economic competitiveness—enhances state and

local economic development Balance—avoids over-reliance on any one tax or

set of taxes Stability—withstands shifts in economy Simplicity—minimal compliance and enforcement

costs

State Taxes: FY 2008 $41.36 Billion

Sales tax (54.2%) Franchise tax (10.8%) Motor vehicle sales tax

(8.1%) Motor fuels taxes

(7.5%) Natural gas production

tax (6.5%) Insurance Occupation

Taxes (3.5%)

Source: Texas Comptroller

Cigarette and tobacco taxes (3.5%)

Oil production tax (3.5%)

Alcoholic beverages taxes (1.9%)

Utility taxes (1.2%) Hotel and motel tax

(0.9%) Inheritance tax Other taxes (0.4%)

State and Local Tax Burden, 2008

Level of Taxation in Texas

Texas state and local taxes took 8.4 percent of Texans’ personal income in 2008.

Texas ranks 43th in state and local tax burden (2008).

Federal taxes took $22,539 per household in 2007.

Texas ranked 20th in federal tax burden in 2007.

Source: Tax Foundation, http://www.taxfoundation.org/

Effects of Taxation

Progressive taxes Percentage of individual’s income paid in taxes

increases as individual’s income increases

Regressive taxes Percentage of individual’s income paid in taxes

decreases as individual’s income increases

Proportional taxes Percentage of individual’s income paid in taxes is the

same for all income levels

Effects of Taxation—Texas

Effects of Taxation—Texas

State Expenditures: FY 2008$81.94 Billion

• Education• $30.8 billion (37.6%)

• Health and Human Services• $29.7 billion (36.2%)

• Transportation• $7.7 billion (9.4%)

• Public Safety and Corrections• $4.0 billion (4.9%)

• Employee Benefits (3.6%)• General Government (3.1%) • Natural Resources/Recreation Service (2.6%)Source: http://www.window.state.tx.us/taxbud/expend.html

Public Education

Structure of Elementary and Secondary Education Texas Education Agency (TEA) Independent School Districts

(ISDs)

Education Funding

San Antonio ISD v. Rodriguez (1973) Edgewood ISD v. Kirby (1989) 1990, legislature increased allocation to poor

districts. Supreme Court declared unconstitutional in 1991.

1991, legislature created property tax, which the Supreme Court invalidated as a statewide property tax.

1993, current system adopted. Ruled constitutional in 1995.

Education Funding

Property rich districts ($305,000 in assessed valuation per pupil) distribute funds to poor districts Consolidate with a poor district Detach property and transfer it to poor district (tax

purposes only) Send money to the state (attendance credits) Pay for education of students in poor district Consolidate tax bases with poor district

Funding Public Education

West Orange-Cove CISD v. Alanis (2001) Issues

Adequacy: The plaintiffs argued that the state did not provide sufficient funding to meet the requirement that students pass the TAKS test.

Cap on Property Tax for M & O: The plaintiffs argued that the state created an unconstitutional statewide property tax by setting the ceiling on school districts’ property tax.

Equity: The plaintiffs argued that the state did not provide sufficient funds for building maintenance and construction.

Neeley v. West Orange-Cove CISD (2005)

Education Funding

Legislative Solution Retained Revenue Sharing New Business Tax—”Business Margins Tax”

Up to 1 percent of gross receipts minus payroll costs or costs of goods sold

Shifts burden from capital-intensive businesses to service providers

Increased cigarette tax Cut property taxes for 2007-2008

$1.00/$100 assessed valuation by 2008

Higher Education

Institutions of Higher Education Public Universities Community Colleges

Funding Higher Education Permanent University Fund (PUF) Available University Fund Higher Education Fund Tuition deregulation

Access to Higher Education “Closing the Gaps” initiative HECB

Health and Human Services

Federal-State Partnership Temporary Assistance for Needy Families

(TANF) Block Grant Limits on eligibility

Food, Shelter, Clothing, Protection Food stamps Women, Infant, and Children nutrition

program (WIC)

Health and Human Services

Health Care Medicaid Children’s Health Insurance Program

(CHIP) Adequacy of Health and Human

Services Programs

Transportation Policy

Texas Department of Transportation Texas Good Roads Association (TGRA)

Toll Roads Regional Mobility Authorities (CTRMA)

Trans-Texas Corridor

Join the Debate: Privatizing Public Assistance

Arguments for Privatization Reduction in time to receive services Reduction in personal time Increased accuracy of eligibility

Arguments against Privatization Concerns about client’s rights and company

accountability Loss of state jobs Insufficient employees to handle demands