In this #LetPeopleProsper episode, I discuss my last two very busy days.
With the proposed U.S.-Mexico trade deal yesterday, I was on multiple radio stations today across the nation talking about the costs and benefits of the deal and the implications for Americans. I'm still waiting to see all of the details and am lukewarm about it at this point because of the trade barriers imposed on the auto sector that will lead to higher auto prices for consumers and higher transportation prices for many businesses. However, I'm optimistic that much of NAFTA remained intact, e-commerce provisions were included to modernize the agreement, and the contract is for 16 years instead of the 5 years the Trump administration suggested. Here's my recent commentary at The Hill on this issue.
I testified today before the Texas Senate Business & Commerce on deregulating occupational licensing, which is the most onerous form of labor market regulation (here's my testimony). I discussed the high costs of these and made recommendations on taking a broad look at eliminating many of them or reducing their requirements along with moving towards having employers complete a registration or certification with the state government or a private association to signal that they are able to do the job, which signaling is about all many of these licenses are good for. I'll have a paper published on this soon with Dr. Ed Timmons of St. Francis University.
I also testified today before the Texas Senate Administration on the benefits of program-based budgeting and the need for zero-based budgeting. I explain this in detail in the episode, but basically our state budget today is organized by strategy that lacks transparency and makes it difficult to find granular data in the budget, especially to weed out unnecessary programs. By moving to a program-based budget that's been used in Texas before, this granular data would be available to add transparency for taxpayers and legislators while making it easier to start each program at zero and make decisions whether it should be included--otherwise known as zero-based budgeting.
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In addition to this fiscal recap of the 85th Legislative Regular Session, the file below provides an overview of the 2018-19 Texas Government Budget while avoiding any smoke and mirrors. Transparency and accountability are essential for the use of taxpayer dollars.
The Conservative Texas Budget (CTB) limits the Legislature’s increase in appropriations for the 2018-19 biennium to no more than population growth plus inflation. As the budget heads to the conference committee for final negotiations before consideration by both chambers, the passed versions of SB 1 by the Senate and the House indicate that they can keep appropriations below the CTB limits.
Testimony before the Senate Finance Committee in support of SB 1831.
Testimony before the House Appropriations Committee in support of HB 3849.
Testimony before the Senate Finance Committee on Budget Transparency
By Vance Ginn, Ph.D.
Chair Nelson and Members of the Committee:
My name is Dr. Vance Ginn and I am an economist in the Center for Fiscal Policy at the Texas Public Policy Foundation, a non-profit, non-partisan free market think tank based here in Austin. Thank you for taking the time today to investigate the important issue of improving budget transparency. My remarks today will focus on ways to provide Texans and their legislators with a clearer picture of how their tax dollars are spent.
The current strategic budget format of Texas’ budget makes it challenging for experts much less ordinary citizens to track funds in the budget. This format was first used in the 1993 appropriations bill with the goal of providing legislators with a longer-term view of budget goals beyond the two-year appropriation cycle.
Although this is a reasonable goal, the strategic budget format provides only broad goal statements instead of providing a line item for the funding amount of each agency program that the public could use to determine the effectiveness of their tax dollars. The problems associated with this format lead to reduced budget transparency contributing to less accountability and efficiency in the appropriations process.
For example, it was clear in the 1989 appropriations bill that the Legislature appropriated $2.9 million for legal services and $26.2 million for enforcing tax compliance in field operations. However, there was no way to determine these line items in the 1993 appropriations bill—or thereafter. One could determine from the 1993 appropriations bill that $177 million was appropriated for tax compliance and within that number was $98 million for “Ongoing Audit Activities,” but it is not possible to see how much was appropriated for legal services.
The lack of transparency poses a major challenge for taxpayers and legislators. By obscuring the amount of funds approved for each agency program or service, there is little incentive to remove programs that are ineffective because it is almost impossible to single them out. This makes it difficult for Texans to communicate with their legislator on what spending to vote for and makes it difficult for legislators not directly involved with writing the budget to determine their spending priorities.
To overcome the shortcomings of the strategic budget format, the state should convert to a program-based budget format. The budget should be written so that each agency’s income and expense is listed by program, as is done in the agency’s own internal budget. In addition, the source of funds should be listed for each line item. This change is a way to simplify the budget process for taxpayers and legislators to review programs that may need to be eliminated, reduced, or increased and more easily identify and deal with any waste, fraud, and abuse.
During the 82nd Texas Legislature, HB 2804 and SB 1653, along with the first part of SB 1433 during the 84th Legislature that did not receive a hearing, would have taken steps toward program-based appropriations. Although neither bill passed, a scaled-down version of HB 2804 placed in Section 34.06 of Senate Bill 1 directed the Legislative Budget Board (LBB) to put program-funding details online. This contributed to the development of an online application that presents the budget in a program-based format on the LBB’s website. This provides an example of what the program-based budget could look like.
While this online application provides valuable information, it is updated months after the appropriations bill is approved, providing neither taxpayers nor legislators with timely budget details on specific programs within state agencies during the appropriations process.
Our second recommendation remedies this issue by requiring budget information to be online in real time or near real time throughout the budget process. Taxpayers would be able to access past spending for each budget line item along with the proposed appropriations levels for the upcoming biennium. If it is not too cumbersome, the data could be originally posted when state agencies submit their funding requests, then updated once appropriation bills are drafted and filed. Updates should be made online throughout the legislative process as changes are made during hearings and after final adoption of the appropriation bill. This information should be available in an online application and downloadable as a spreadsheet.
It is reasonable to expect the Legislature to provide transparency and accountability of taxpayer dollars so Texans understand the benefits achieved with their money. As the next session approaches, the Legislature would do a great service to Texas taxpayers and legislators by converting from a strategic budget format to a program-based budgeting layout and provide budget information online in real time throughout the budget process. Until this is accomplished, we recommend the LBB put the program-based budget format online throughout the legislative process.
In summary, the Foundation recommends the following to achieve increased budget transparency:
Thank you for your time and I look forward to answering your questions.
Vance Ginn, Ph.D.
Free market economist with leanings towards Chicago/Austrian schools of economics. Hard rock drummer. Classical liberal. First generation college graduate at Texas Tech University. Hometown: Houston. Recovering academic. Work at the Texas Public Policy Foundation in Austin to research ways to #LetPeopleProsper. Live the dad life in Round Rock, TX. Views=mine.