This is my presentation to a graduate class at the LBJ School at the University of Texas.
A simpler and efficient school finance system would be one that provides equitable student-centered funding paid for by taxes collected from a reformed sales tax.
Video of my testimony begins at times 3:08:20: http://tlcsenate.granicus.com/MediaPlayer.php?view_id=42&clip_id=11595.
Here is the handout of my testimony: http://www.texaspolicy.com/content/detail/revamping-texas-school-finance-system.
VIDEO of @TPPF Policy Orientation Panel on why the #TXLege should pass the 2nd straight conservative #Texas Budget
Texas Comptroller Glenn Hegar released the Biennial Revenue Estimate 2018-19 report on January 9, 2017, which acts as a guidepost for how much revenue the 85th Texas Legislature has available. Given the state’s constitution requires a balanced budget, the report sets the stage for legislators on the amount of revenue available to appropriate and cut taxes in the 2017 Legislative Session.
The report shows that there is an estimated 2.7 percent decline to $104.9 billion in general revenue (GR)-related funds available for certification. However, the Comptroller notes that GR-related funds would be up 1.7 percent to $109.6 billion without the constitutionally-dedicated funds of $4.7 billion in sales tax revenue for transportation, which notes the importance of leaving GR available for legislative priorities.
When you include GR, GR-dedicated, and other funds, total state funds amounts to $149.9 billion. State funds plus federal funds equals the amount of all funds of $224.8 billion. The Conservative Texas Budget Coalition, composed of the Texas Public Policy Foundation and 12 other member organizations, has set maximum limits on appropriations of these funds for a conservative budget. These limits are $147.5 billion in state funds and $218.5 billion in all funds. These amounts are increases of 4.5 percent above the current budget based on population growth plus inflation during the last two fiscal years.
Therefore, the Comptroller’s revenue estimates highlight that the 85th Legislature can effectively prioritize taxpayer dollars to pass a conservative budget and cut taxes.
Baked in the Comptroller’s revenue estimates include oil price projections of $47.73 in fiscal 2017, $54.11 in 2018, and $59.26 in 2019. Although the U.S. Energy Information Administration (EIA) forecasts over calendar years and not fiscal years, the Comptroller’s oil price projections are in the same ballpark as the EIA. These oil prices during the upcoming budget period contribute to a 32.3 percent increase to $4.7 billion in oil production and regulation taxes compared with the current period.
Another part of the revenue picture is the Economic Stabilization Fund (ESF), known as the “rainy day fund,” that’s primarily funded by severance taxes (oil and natural gas production and regulation taxes). The ESF is expected to increase to $11.9 billion at the end of the 2018-19 budget period, which is below its constitutional cap of 10 percent of certain GR funds of $16.9 billion. Although some legislators may try to appropriate these dollars, there are plenty of GR-related funds available without touching ESF dollars, which should be used for only essential purposes.
When legislators use these revenue estimates to craft the 2018-19 budget, the Comptroller notes that they should also consider the uncertainty surrounding federal economic policy, oil prices, global economic growth, and other factors. Given these known and unknown variables, legislators must restrain spending by passing a historic second consecutive conservative Texas budget. This would allow them to allocate any extra dollars to killing the business margins tax, adhering to the overwhelming research showing elimination would boost personal income and employment for Texans.
The 85th Legislature has a grand opportunity to follow the proven recipe of restraining spending and cutting taxes to best support greater economic prosperity in Texas.
TPPF recommends passing the second straight conservative Texas budget.
AUSTIN – Today, Texas Comptroller Glenn Hegar released the report Biennial Revenue Estimate 2018-19 that provides the 85th Texas Legislature with an estimate of revenues available to be appropriated for the upcoming 2018-19 budget. Given the state’s constitution requires a balanced budget, this report sets the stage for how much legislators have available for spending and tax cuts in the 2017 Legislative Session that begins tomorrow.
The report notes that the 2018-19 budget will have available $224.9 billion in all funds (state funds and federal funds) and $149.9 billion in state funds. Included in both amounts is an available fund balance of $1.5 billion from the 2016-17 budget. The Conservative Texas Budget Coalition, which includes the Texas Public Policy Foundation (TPPF) and 12 other member organizations, has set conservative spending limits on the 2018-19 budget of $218.5 billion in all funds and $147.5 billion in state funds, based on a 4.5 percent increase in population growth plus inflation during the previous two fiscal years.
TPPF’s Center for Fiscal Policy Director Talmadge Heflin and Economist Dr. Vance Ginn made the following statements:
“The Comptroller’s revenue estimate today notes the importance of the 84th Legislature leaving money on the table, as there remains an expected $1.5 billion fund balance available for the 85thLegislature,” said The Honorable Talmadge Heflin. “By assuring that the 2016-17 budget remains conservative by not appropriating more than a total of $142.3 in state funds, legislators will be well on their way to passing a historic second consecutive conservative budget this session.”
“The 84th Legislature shows the benefits of leaving money on the table while passing a budget that included large tax cuts and keeping spending to no more than population growth plus inflation so that the economy has the best chance to grow,” said Dr. Vance Ginn. “This recipe will be an important mix this session to assure that the 2018-19 budget doesn’t increase by more than $218.5 billion based on the 4.5 percent increase in population growth plus inflation.”
The Honorable Talmadge Heflin is Director of the Center for Fiscal Policy at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. In the 78th Session, Heflin served as chairman of the House Committee on Appropriations and navigated a $10 billion state budget shortfall through targeted spending cuts that allowed Texans to avoid a tax increase. He may be reached at email@example.com.
Vance Ginn, Ph.D., is an Economist at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. He may be reached at firstname.lastname@example.org.
The Texas Public Policy Foundation is a non-profit free-market research institute based in Austin.Primary website: www.TexasPolicy.com
Facebook page: www.Facebook.com/TexasPublicPolicyFoundation
Twitter feed: www.Twitter.com/TPPF
News of the day around the Texas Capitol was the Comptroller's Biennial Revenue Estimate that sets the stage for how much the Legislature can appropriate in the session that starts tomorrow.
My interview in the video below is on the budget situation and how the Legislature must prioritize taxpayer dollars by starting government programs at zero dollars and then find those that are deemed effective. We need more reforms rather than budget inertia.
It should be a wild ride as legislators seek to cut taxes so more money is in your pocket while funding essential government services.
Excellent book with chapters written by different experts who are wisely skeptical of the "nudges" offered by behavioral economists. They explain how the major assumption made by behavioral economists that individuals act irrationally is incorrect because those individuals are purposefully acting to satisfy their desires given scarce resources and the rule of law.
To an outsider's perspective, a person's actions may seem irrational, but this determination is made ex-post by a third-party and not the individual making the decision. According to many behavioral economists, they would help nudge the individual, often through government intervention, to a more preferred choice that would help them act rationally. However, this can lead to many problems because the third-party, such as the government, doesn't have complete information or knowledge available.
There's also a relevant point made that in a free society we are able to "live freely" but we are also able to "fail freely."
If the government or some third-party is constantly nudging or directing someone towards a certain subjective outcome, there may be fewer times to fail freely so that they can learn by doing and thereby improve their livelihood over time without being forever dependent on the government or others. Self responsibility by sane individuals is essential for human flourishing.
These sort of nudges and decisions are made by private companies as well to incentivize people to purchase their products. While this may also lead individuals to outcomes that aren't ultimately in their best interest, in a free enterprise system, individuals are able to choose other options and not be locked into a decision or a maze of decisions put in place by government. We must also remember that government officials are human and fallible, so they may act irrationally given this line of thinking.
The key point is that irrationality is in the eyes of the beholder. Too often the decisions determined or incentivized for sane people by government, which is composed of people acting in their own best interest, reach a sub-optimal outcome that satisfies the desires of the third-party instead of the acting person.
There's no doubt that behavioral economics is an important field of economics with an insightful theory of how humans act that needs to be researched further, but the policy solutions so far often lead to worse outcomes than the subjectively determined problem.
I give this book 5 stars because it finally provides an excellent overview of behavioral economics with a sense of skepticism of nudges and the assumptions they are based on. Read it for yourself.
Ph.D. Economist at the Texas Public Policy Foundation. Blog posts are publications by the author.