​Check out episode 76 of This Week's Economy. I discuss whether the Fed will cut interest rates, the anti-growth message by Harris-Walz, problems with tariffs by Trump-Vance, support by RFK, Jr. of Trump, school choice in Texas, and a boom in cities in red states, and much more. Get the show notes at vanceginn.substack.com.

Originally published by Real Clear Health.

By Vance Ginn & Deane Waldman
August 27, 2024

Affordability of health care in the U.S. has been declining, reaching its lowest point since 2022, with no signs of improvement. This stark reality underscores the urgent need for a healthcare system that prioritizes timely access to affordable, high-quality care. To achieve this goal, the government needs to step aside and empower We the Patients.

In fact, Americans need exactly the opposite of what Candidate Harris intends to do if she gains the oval office. She plans to expand Washington’s role in Americans’ health (medical) care.

The U.S. spends an astonishing $4.8 trillion annually on healthcare. But here's the truly shocking part: more than half of that huge expense produces NO patient care! It does not pay for essential services like doctor visits, hospital stays, medications, mental health care, and home health care!

Two point four trillion “healthcare” dollars are wasted on administrative costs and regulatory compliance. This useless spending not only inflates costs but also diverts resources away from patients, contributing to delays in care and, tragically, to what is known as "death-by-queue," where Americans die while waiting for care they desperately need.

Many healthcare providers find themselves trapped in a system driven by perverse incentives. The third-party payment structure rewards dollar efficiency over medical effectiveness, and volume over value. This misalignment leads to unnecessary tests and procedures, over-treatment, and a general focus on quantity rather than quality of care.

We need a shift to value-based care, where the definition of value is determined by patients and providers—not by an externally imposed financial metric. When patients have control over what is considered valuable, providers are incentivized to focus on their patients rather than following federal rules. The result is better health outcomes at lower costs. This approach aligns patient well-being with financial rewards, promoting preventative care and chronic disease management, which can reduce hospitalizations and improve overall health.

However, a significant obstacle to achieving this vision is the heavy hand of government regulation. The regulatory environment in healthcare dramatically increases costs and restricts access to care by siphoning money away from patients to fund bureaucratic overhead. Streamlining and eliminating unnecessary regulations could foster a more competitive market, driving efficiency, effectiveness, and innovation.

Restoring financial control to patients is crucial. While price transparency is often touted as a solution, it won't lead to real savings unless patients—not third parties—control their health care spending. Currently, third-party payers make most of the medical decisions, stripping patients of their autonomy and resulting in frustration and poor outcomes. Eliminating restrictions on Health Savings Accounts (HSAs) and other consumer-directed health options can empower patients with financial control, incentivizing them to seek cost-effective care.

The employer-supported health insurance model is another area ripe for reform. This system, a relic from World War II when wage freezes forced companies to offer health insurance as a benefit, is outdated, limits patient choice, and increases costs. Today, the average cost of employer-provided health insurance is $18,328 per employee. This money would be better spent if given directly to employees, still tax-advantaged, and made available for deposit into an unlimited Family HSA. With these funds, Americans would have the financial freedom to shop for direct-pay care, creating competition among providers and driving prices down.

Technology also holds great promise for revolutionizing healthcare delivery. Telemedicine, for example, was a critical lifeline during the COVID-19 pandemic, providing access to care while reducing the strain on traditional healthcare facilities. It has also proven invaluable in reaching rural and underserved urban areas, where access to healthcare is often limited or non-existent. By fostering technological innovation, we can further increase the effectiveness and efficiency of healthcare delivery, lower costs, and expand access to those who need it most.

The U.S. healthcare system is plagued by a "cancer" of ever-expanding bureaucracy and a third-party payment system with misaligned incentives. To cure this, we must reduce government over-regulation and return financial as well as medical control to We the Patients. This shift will instantly align incentives, reduce wasteful government spending on bureaucracy, and deliver timely, affordable care to many more Americans.

The path forward is clear: give control back to the patients and doctors. Let them decide what care they need and how they want to pay for and provide it. For the medically vulnerable, state-created and -run, not federal one-size-fits-all, safety nets. By doing so, we can finally achieve the goal of delivering high-quality, affordable care to everyone.

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, host of the Let People Prosper Show, and previously chief economist of the Trump White House's OMB. Follow him on X.com at @VanceGinn.

Deane Waldman, M.D., MBA is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of New Mexico Health Insurance Exchange; and author of 12 books, including multi-award winning, Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine. ​

This research was originally published at Iowans for Tax Relief Foundation. 

Join me for Episode 111 of the Let People Prosper Show with Dr. Paul Tice, Adjunct Professor of Finance at the Leonard N. Stern School of Business at New York University, to hear his take on the costs of ESG actions and mandates on energy and our future from his book “The Race to Zero.”

Subscribe, share, and rate the Let People Prosper Show, and visit vanceginn.substack.com for more insights.

Parents rightfully demand transparency from their school districts, and too often schools hide how much they're spending and what they're spending taxpayer dollars on. Join Mandy Drogin as she sits down with Vance Ginn, dad of 3, founder of Ginn Economic Consulting, and formerly an economist in the Trump administration, as they break down school finance and dive into how much our schools are spending and what they're spending it on. ​

Originally published at American Institute for Economic Research.

​The school choice revolution shines a bright light on an otherwise dire situation caused by COVID and draconian government efforts, including shutting down schools with little to no sound reason. But it woke a sleeping giant in parents across the country: their kids were learning little at public schools and it was time for them to stand up. Since then, parents have spoken loudly and clearly, with more than 30 states now having a school choice program, including 12 states with a universal or near-universal education savings account (ESA) program.

But Texas is not yet on that list.

Texas is the largest red state and has more than six million school-age kids but has yet to follow the lead of other states with school choice, even when there is overwhelming support for it. Given the recent primary election victories for school choice proponents against incumbents, which rarely happens, there is an opportunity for a big win in the Lone Star State for students, parents, teachers, and taxpayers.

According to the NAEP test, only 24 percent of eighth graders are proficient in math and 23 percent in reading. Texas’s public education system is failing kids. The time for bold action is now: Texas must embrace universal education savings accounts (ESAs) to reclaim its position as a leader in educational excellence.

As states like Arizona, Florida, and ten other states with universal or near-universal ESAs demonstrate the transformative power of school choice, Texas’s delay in adopting ESAs is becoming increasingly urgent. Amid the heated debate over school choice legislation in Texas, the stark reality is that while these states are witnessing improved student outcomes and a more competitive educational landscape, Texas continues to lag despite pouring billions into public education. 

Despite a $20.3 billion increase in the latest two-year state budget for public education — a 33.3 percent boost — student performance in Texas has stagnated. Less than 20 percent of classroom expenditures reach teachers, with much of the budget consumed by bloated administrative costs. The average classroom receives about $340,000 annually, yet teachers, the backbone of our education system, see only a fraction of this amount in their paychecks. 

This inefficiency is a clear sign that the current system is broken.

Economist Milton Friedman’s vision of school choice as a means to dismantle the government’s monopoly on education is more relevant than ever. States that have implemented ESAs are seeing better student outcomes and improvements in public schools due to the competitive pressure of school choice. 

In contrast, Texas remains stuck in a system that fails to deliver its promises, leaving students underperforming, teachers underpaid, and taxpayers questioning where their money is going. As I recently highlighted in my testimony before the Texas House Committee, this stagnation is untenable.

The economic case for universal ESAs in Texas is equally compelling. 

By moving to an ESA model, Texas could reduce its per-student spending from $17,000 for 5.5 million students at public schools to $12,000 for all 6.3 million school-age kids, potentially saving taxpayers $18 billion annually. These substantial savings could then be returned to Texans through lower property taxes, providing much-needed relief as the cost of living rises. 

Moreover, a competitive education system would compel schools to pay quality teachers more, with estimates suggesting salary increases of up to $28,000 annually. The benefits of ESAs extend beyond education; they represent a broader commitment to economic freedom and efficient use of taxpayer dollars.

Recent primary election results show that public support for school choice is overwhelming. 

Yet, despite this mandate, Texas lawmakers have not acted. The path forward is for Texas to pass a universal ESA bill that gives every parent the freedom to choose the best educational environment for their children. This is about more than just improving education — it’s about empowering parents, raising teacher salaries, and ensuring that our taxpayer dollars are spent wisely.

Beyond education, the benefits of ESAs would reverberate throughout the Texas economy. 

A well-educated, adaptable workforce is essential for maintaining Texas’s competitive edge in attracting businesses and fostering innovation. By providing students with the education that best suits their needs, ESAs prepare them for success in a rapidly changing job market, support higher property values, and spur job creation.

Having grown up in a low-income, single-mother household in South Houston, attending private, public, and home schools, I understand firsthand the transformative power of educational choice. Texas has always been a leader, but the state is falling behind in education. 

​Texas must stop following and join the school choice journey across the country to ensure every child has access to a high-quality education tailored to their unique needs. The future of our children, teachers, and economy depends on it. It’s time for lawmakers in every state to act, so universal ESAs become not just a revolution but the norm, empowering Americans for generations to come.

Fox News contributor Gary Kaltbaum and former Trump Office of Management and Budget chief Vance Ginn on the latest economic developments coming from the Federal Reserve and White House.

More here.

​Don’t miss episode 75 of This Week's Economy. I discuss price controls and handouts to Americans being pushed by Harris and, in some ways, Trump, free-market energy policies in states, whether Google should be broken up, the economy being a top election issue, income tax elimination in Louisiana, and a state-level jobs report after Hurricane Beryl.

Get show notes in my newsletter and subscribe to vanceginn.substack.com.

​Economist Vance Ginn joined "The Joe Pags Show" to highlight the stark contrasts between a Trump-led economy and the current Biden/Harris administration's approach.

Ginn began by criticizing the Democrats' anti-growth agenda, pointing out the dangers of Kamala Harris’s push for price controls, which he argued would hurt businesses and raise costs for consumers. He explained that the Biden/Harris administration has been increasing the national debt at an alarming rate, and excessive spending remains the top issue facing America. Ginn expressed concern over Harris's plans to continue this trend, warning that it could further destabilize the economy.

On taxes, Ginn highlighted Harris’s proposal to raise corporate tax rates to 28%, which he said would lead to business closures, reduced hiring, and companies moving operations overseas. In contrast, Trump’s focus on deregulation and lower taxes helped the economy thrive before the pandemic. Ginn suggested that if Trump wins in 2024, his administration would likely prioritize deregulation and tax cuts to boost economic growth.

The conversation also covered global trade and supply chain issues, with Ginn advocating for a balanced approach that promotes U.S. production by reducing regulations. He concluded by comparing Trump’s and Harris's stances on economic issues like eliminating taxes on tips, emphasizing the broader economic philosophies at play.

To hear Vance Ginn’s full interview with Joe Pags, click the link below.
https://news.iheart.com/featured/the-joe-pags-show/content/2024-08-22-trump-vs-bidenharris-economy-explained-by-vance-ginn/

Originally published at Kansas Policy Institute.

​Like many states, Kansas has a complex economic situation in 2024. The latest Bureau of Labor Statistics (BLS) data provide a blurry picture of the state’s employment situation. While nonfarm employment numbers offer some signs of stability, a closer look at the household employment data reveals potential challenges that warrant careful attention.

Understanding Nonfarm and Household Employment Data

To fully grasp Kansas’s employment trends, it’s essential to differentiate between nonfarm and household employment data. 

Nonfarm employment, reported through the Current Employment Statistics (CES) program called the establishment report, tracks payroll jobs in nonfarm establishments, excluding agricultural workers, the self-employed, and private household employees. This measure is a key indicator of jobs in major industries. This BLS survey excludes agriculture and farm jobs because they are difficult to measure due to high volatility and lack of reporting. 

On the other hand, household employment data collected via the Current Population Survey (CPS), called the household survey, includes jobs for the self-employed and those in private households but not separated by industry. This latter data set captures shifts in labor force participation and underemployment, often offering a more comprehensive view of economic health.

Historical Employment Trends in Kansas

Kansas’s employment trends provide insights into the state’s economic trajectory. Since the 1990s, Kansas has experienced periods of moderate job growth punctuated by significant downturns, such as the early 2000s recession and the Great Recession of 2007-2009. 

For example, nonfarm employment grew from 1.08 million in 1990 to 1.12 million by the mid-1990s, reflecting the state’s overall economic growth. However, the early 2000s saw a dip in employment due to the dot-com bubble burst, with a more substantial decline during the Great Recession. Post-recession recovery was slow but steady, with household and nonfarm employment regaining much of their lost ground by 2015. 

By 2019, Kansas had reached new employment highs. However, the COVID-19 pandemic disrupted these gains, causing sharp declines in employment across the state. Although there has been a recovery since then, the 2024 employment trends show a divergence that mirrors broader national patterns.

Nonfarm vs. Household Employment: A Comparative Analysis

Since the COVID-19 lockdowns, U.S. employment trends have shown a divergence between household and nonfarm jobs. Initially, household employment rebounded more swiftly as individuals turned to self-employment and gig work to navigate the economic uncertainty. However, nonfarm employment took longer to recover as traditional businesses faced prolonged disruptions and slow rehiring processes. Over the last year, household employment has slowed and remained flat, while nonfarm jobs increased by 2.5 million nationwide. 

These trends were similar in Kansas, where household employment bounced back faster than nonfarm jobs in the immediate aftermath of the lockdowns. Since July 2019, household employment has increased by 3,100 jobs, while nonfarm employment has increased by 40,800. Like the national trend, household employment has lost 13,146 jobs over the last year, while nonfarm jobs are up by 21,100. 

Household employment has declined in 12 of the last 14 months, with a decline of 14,475 jobs to the lowest level of 1.460 million since January 2022, but nonfarm employment has increased in 10 of those 14 months, increasing by 21,400 jobs to 1.462 million.

In July 2024, Kansas lost 1,700 nonfarm jobs, a slight decline of 0.1%. However, over the past year, the state added 21,100 nonfarm jobs, marking a 1.5% increase, primarily driven by gains in the leisure, hospitality, and professional services sectors. In contrast, household employment declined by 1,200 in July, raising concerns about broader economic well-being. 

At the national level, the U.S. added only 114,000 jobs in July 2024, far below expectations and reflective of a broader slowdown in the labor market. This weak performance suggests that Kansas’s challenges are part of a larger national trend.

Unemployment Rates: Kansas and Neighboring States

As of July 2024, Kansas’s unemployment rate is 3.2%, ranking 17th nationally, with the U.S. rate at 4.3%. The state’s unemployment rate reflects a relatively stable labor market, but the losses in household employment that go into the unemployment rate calculations highlight the need for Kansas to remain vigilant in its economic policies to ensure continued competitiveness. 

The differences in unemployment rates are notable when comparing Kansas to its neighboring states. For instance, Nebraska boasts one of the lowest unemployment rates in the country at 2.6%, ranking 5th nationally, while Missouri’s unemployment rate is slightly higher at 3.8%, ranking 30th. Iowa is in a better position than Kansas with an unemployment rate of 2.8%, ranking 8th. 

These comparisons emphasize that while Kansas performs reasonably well, there is room for improvement, particularly in creating a more dynamic and resilient labor market.

Improving Economic Vitality and Competitiveness

Kansas must prioritize economic freedom and fiscal discipline to enhance its economic competitiveness. Reducing government spending, revamping the tax system, and promoting regulatory reform are essential. By adopting strict spending limits tied to inflation and population growth, Kansas can create a more predictable fiscal environment and attract businesses. Streamlining regulations will encourage entrepreneurial activity and job creation, especially for small businesses and startups.

Kansas’s current economic challenges are not new. The state has faced long-term economic stagnation, with private sector job growth lagging behind national trends since the 1980s. 

Addressing these issues requires a concerted effort to reduce government spending and improve the business climate. Embracing reforms that promote economic freedom and pro-growth policies is crucial for ensuring long-term prosperity for all Kansans.

Originally published at Austin American-Statesman. ​

Texas remains a magnet for people and businesses, attracting more newcomers than most states. To sustain this influx and support a growing economy, the state must strengthen the infrastructure required to meet Texas’ expanding energy needs.

The Electric Reliability Council of Texas (ERCOT) projections indicate that Texas’ energy demand will nearly double by 2030, increasing from 85 to 150 gigawatts in just six years. This revelation has sparked significant concern among state policymakers and industry leaders.

The expansion of cryptocurrency mining, data centers, and the burgeoning artificial intelligence industry drives a significant portion of this anticipated growth. These sectors, often viewed skeptically, are integral to the modern economy and are poised to drive the next economic revolution.

With the right free-market policies, Texas can maintain its leadership in technological advancement and ensure abundant energy for Texans. By removing barriers that impede energy production and disincentivize entrepreneurs from investing in Texas, the state can look forward to a bright future.

Even former skeptics recognize these industries' importance, as seen in President Trump's recent emphasis on Truth Social: "We want all the remaining Bitcoin to be MADE IN THE USA!!! It will help us be ENERGY DOMINANT!!!”

Texas has the potential to lead in this arena. The state’s abundant land and natural resources support the technology sector's growth. However, this growth necessitates a reliable, abundant energy supply, a potential that Texas is well-positioned to fulfill.

Texas is already a national leader in renewable energy production, with significant contributions from wind and solar. However, reliable natural gas remains the cornerstone of the state’s energy supply, providing power regardless of weather conditions. Furthermore, Texas has a bright path forward with the potential for expanding nuclear energy, providing a solid energy mix through market forces, not government planning.

Texas must leverage the free market's incentives to foster an environment conducive to building new power plants, including nuclear power. Policymakers should signal that Texas is open for business and ready to meet its rising energy demands efficiently.

Discouraging capital investment in power generation through increased government intervention or propping up some generation over others is counterproductive. Rather than picking winners and losers, Texas should let market competition drive the provision of abundant, reliable energy.

By embracing free-market policies, Texas sets a powerful example for other states. As states experiment with different approaches, the best ideas can emerge, fostering a competitive environment that drives progress and prosperity.

For starters, Texas needs to show free-market leadership by fighting back against onerous federal regulations that impede the energy industry's growth. The state should remove itself from the bondage of the Biden administration’s flawed green energy agenda items from the so-called “Inflation Reduction Act.” This could be done by rejecting federal funds, tax breaks, and other measures while pushing for Congress to end the IRA.

The Biden administration’s industrial policy distorts the market. Texas should not fall into the trap of picking another industrial policy and instead provide a level playing field where all forms of energy can compete.

Texas has a bright future, likely leading the nation in economic and technological advancement. By adhering to free-market principles, reducing unnecessary spending, taxes and regulations, and fostering a competitive energy market, Texas can continue to attract people to open businesses, work and raise families.

See Full Research on the Texas Budget.

Introduction
The Texas Legislative Budget Board (LBB) publishes the "Fiscal Size-Up" report after every session to comprehensively review the state's budget and fiscal actions for the biennium. The latest report, covering the 2024-25 budget period, offers crucial insights into how tax dollars are allocated following the 88th Texas Legislature's regular and special sessions in 2023. The following are key highlights.

Budget Inconsistencies and Excesses

• Appropriations vs. Expenditures: The report inconsistently compares the budget with estimated, budgeted amounts in 2022-23 and appropriated amounts in 2024-25. This means that the 2022-23 budget includes initial appropriations, supplemental appropriations, and other expenditures, while 2024-25 includes only initial appropriations. The report’s comparisons are informative but incomplete. The discrepancy makes it challenging to accurately assess the state's fiscal health, so only initial appropriations should be used for a consistent comparison. 

• Largest Budget Increase: The 2024-25 biennium saw the largest budget increase in Texas history, driven by a significant rise in appropriations across various areas. The initial appropriations for 2024-25 were $321.7 billion in all funds, a 21.5% increase in state and federal funds from the previous biennium. State funds were $219.4 billion, a 32% increase.

Tax Revenue, Economic Situation, and Spending Cap

• Tax Revenue Collection: The report details how much tax revenue was collected, showing a robust revenue performance driven by strong economic growth and higher tax receipts in various categories, including sales tax, oil and gas production taxes, and motor vehicle sales taxes​.
• Economic Indicators: Texas' economy showed strong growth indicators, with rising employment rates and increased personal income levels, although inflationary pressures and supply chain disruptions posed challenges​.

• Spending Growth Cap: The LBB set the spending growth cap at 12.33%, based on the average rate of population growth and inflation. This cap aims to control excessive government spending and ensure fiscal sustainability​.

Funding by Major Categories

• Public Education:
  • Foundation School Program: Received substantial increases, including $5.3 billion to maintain past property tax relief efforts and $12.3 billion in new property tax relief to reduce school district M&O property tax rates by 10.7 cents per $100 valuation and raise the homestead exemption from $40,00 to $100,000. There was also a nearly $7 billion increase in new funding for public education despite poor student outcomes.
• Health and Human Services:
  • Medicaid: The main driver of healthcare costs at the state level. There were changes in how much the federal government provided, and the state expanded the program by allowing mothers to receive benefits for up to 12 months after giving birth.
• Infrastructure and Transportation:
  • Transportation Projects: Significant expenditures on transportation infrastructure to help address the state’s growing need for improved roadways and systems.

Corporate Welfare and New Constitutional Funds

• Texas Energy Fund: Allocated $5 billion for low-interest loans in this voter-approved fund, primarily for natural gas projects, marking a significant increase in corporate welfare​.
• Property Tax Abatement Program: After the old program rightfully expired, a new program was unfortunately created, continuing incentives for local government property tax abatements​.
• Texas Water Fund: Established with $1 billion to address water infrastructure needs through a voter-approved fund, reflecting the state's attempt to improve water shortages.

Specific Budget Insights

• State Employee Retirement and Health Benefits: Funding for state employee retirement and health benefits was increased to ensure the sustainability of these programs​.
• Debt Service: Increased to cover the state’s obligations and maintain its credit rating​.

• Tax Relief: The budget included measures for the second-largest property tax relief in Texas history, $12.3 billion, using part of the $33 billion in surplus money, and $600 million to raise the franchise tax exemption level for businesses with income below $2.47 million.
• Economic Stabilization Fund: Expected to reach nearly $24 billion by the end of FY 2025​.

Fiscal Challenges and Recommendations

• Frozen Budget Approach: Texans for Fiscal Responsibility proposed a "Frozen Texas Budget" to curb unsustainable spending by maintaining the current budget levels and returning surplus funds to taxpayers, which would eliminate property taxes over time and promote fiscal responsibility.

• 2025 Legislative Session: The 89th Texas Legislature is encouraged to adopt stricter budgetary controls to sustain property tax relief efforts and reduce the overall spending burden. Recommendations include freezing the budget, cutting unnecessary expenditures, and continuing property tax reductions​.

Conclusion
The Fiscal Size-Up for the 2024-25 biennium provides a detailed snapshot of Texas' budgetary landscape, highlighting significant increases in appropriations and strategic investments in key areas. While the budget reflects robust growth and substantial investments, it also underscores the need for continued fiscal discipline to ensure sustainable economic prosperity for all Texans. As the state navigates these fiscal challenges, adopting prudent budgetary practices and prioritizing taxpayer relief will be crucial for maintaining Texas' economic vitality.

​

Overview

• The 2024-25 Frozen Texas Budget would have kept the state’s budget from growing as it is already too big, thereby excessively burdening taxpayers. This also helps quickly achieve the three-step process to eliminate all property taxes over the next decade by limiting government spending at the state and local levels and returning surplus collected taxpayer dollars to taxpayers.

 

• The 88th Texas Legislature passed the 2024-25 budget in 2023, which resulted in the largest budget increase and second-largest property tax relief in Texas history after a regular and four special sessions. The 89th Texas Legislature in 2025 must practice better budget restraint to reduce the growing spending burden, sustain past property tax relief efforts, and provide more tax relief.

 

• Freezing the Texas budget and returning “surplus” money to taxpayers by reducing school district maintenance and operations property tax rates will provide a path to eliminate nearly half of property taxes in Texas. Combining this with spending restraint by local governments and returning “surplus” money to taxpayers by reducing property tax rates will provide a reasonable path to eliminating immoral property taxes that tax unrealized gains in Texas so Texans can have their right to own property.
• See an Overview of the Texas Budget.

 
Introduction
​Recently, the Texas Legislative Budget Board released the Fiscal Size-Up 2024-25 Biennium report with the latest estimated or budgeted amounts in the prior 2022-23 budget and the appropriated 2024-25 budget. The results from the 88th Texas Legislature’s efforts after a regular and four special sessions resulted in the largest budget increase, the largest corporate welfare increase, the largest social safety net increase, and the second largest property tax relief in Texas history.
 
These results are not what one expects in the red state of Texas, but the appropriate ways to evaluate the latest budget data provided here show much room for fiscal improvements in the Lone Star State. If these efforts last session continue, Texas will not have sustainable budgeting, nor will Texans be as prosperous because of higher taxes, less economic growth, and fewer well-paid jobs. Fortunately, the path forward to achieve fiscal sustainability can happen by at least passing a frozen budget for the next biennium and returning excess collected taxes, called a “surplus,” to taxpayers by reducing school district maintenance and operations (M&O) property tax rates.
 
The genius of America’s republic with federalism provides laboratories of competition among the states that Texas will not lead if this recent trend of excessive spending continues. Texas can overcome these challenges and provide the fiscally conservative path forward for Texans to benefit and other states, countries, and local governments to follow for maximum human flourishing.
 
Texas Budget as Reported by the Legislative Budget Board

The Legislative Budget Board comprises elected state officials and staff who evaluate, report, and determine key components of the state’s budget. These components include determining the growth rate of the constitutional spending limit, budget totals for each period to report to the public, and other factors. Unfortunately, the LBB reported the budget figures relatively late, giving the author and other Texans less time to evaluate the budget before the next session, which begins in January 2025.
 
The amounts in the LBB’s latest report for the 2024-25 budget provide appropriated amounts for that period and expended or budgeted amounts for the previous 2022-23 budget. While the LBB uses these amounts and shares them with legislators to help evaluate budgeting decisions, the amounts have problems.
 
Problems with Comparisons in the LBB’s Fiscal Size-Up

The primary issue is that the amounts in the 2022-23 budget are not comparable with those in the 2024-25 budget. This is because the 2022-23 budget includes initially appropriated amounts passed in 2021, supplemental appropriated amounts in 2023 to backfill any underfunded programs, and other expenditures during the budget period. However, the 2024-25 budget includes only initially appropriated amounts during 2023 until any supplemental appropriated amounts in 2025 and other expenditures later. This paper addresses this by considering the calculations in the Conservative Texas Budget and Frozen Texas Budget approaches below.
 
While this is an issue for appropriately comparing the budget over time, the LBB’s approach is useful because it determines the amounts for the constitutional and statutory spending caps when the LBB meets the fall before a regular session. The constitutional spending limit is on certain general revenue not dedicated by the constitution (about 40% of the total budget), and the statutory spending limit covers consolidated general revenue (about 50% of the total budget). The spending growth cap determined by the LBB for the 2024-25 budget was 12.33% based on the average rate of population growth times inflation over the last two fiscal years and the upcoming two fiscal years.
 
Given this information, we can better understand the LBB’s report, which compares spending to appropriations, which is like comparing apples with oranges and not appropriate accounting. Table 1 provides the budget information from Figures 1 to 14 in the LBB’s report that state officials can claim shows the budget is well below the spending limit. Still, these comparisons are incomplete and need further evaluation.

​Even with these calculations, Figure 24 of the LBB’s report shows the available amounts of $16.8 billion under the Constitutional pay-as-you-go limit, $5.1 billion under the Constitutional and statutory tax and spending limit, and $13.8 billion under the statutory consolidated general revenue limit. Given that the data in Table 1 provides an inconsistent apples-to-oranges budget comparison, the tables below are more accurate ways for an apples-to-apples comparison from initial appropriations to initial appropriations.

Consistent Comparisons of the Texas Budget

Any growth in a government’s budget is an expansion of the role of government in our lives, potentially reducing our liberty. But there can be legitimate reasons for the growth of limited government if it preserves liberty by not overburdening taxpayers with funding excessive spending with costly taxes.

Conservative Texas Budget

The first comparison is based on a long-held view of fiscal conservatism that the budget should not grow by more than the average taxpayer’s ability to pay for it, as measured by the rate of population growth plus inflation. Limiting a government’s budget growth to this metric essentially freezes the budget in inflation-adjusted per capita terms. This approach has been considered in my research for the Conservative Texas Budget, Sustainable Budget Project, and responsible budget approaches in other states. The Conservative Texas Budget approach uses the rate of population growth plus inflation in the two prior years before 2023 for a biennial spending limit of 16%. This rate is not a target but a maximum, especially considering elevated inflation rates created by the Federal Reserve. excludes tax relief that does not grow the government, including the $6.2 billion in general revenue for the 2022-23 appropriations and $18.2 billion in general revenue for the 2024-25 budget. The property tax relief amount for the 2024-25 budget period is in the budget, SB 2, and HJR 2. This included $5.3 billion to maintain past property tax relief efforts in the budget. It also includes $12.3 billion in new property tax relief through reducing the school district M&O property tax rates by an additional 10.7 cents per $100 valuation, raising the homestead exemption from $40,000 to $100,000, and excluding property tax relief amounts from the Constitutional spending limit. Finally, it includes $600 million to raise the income exemption for businesses to pay franchise taxes to $2.47 million. This approach also excludes $13.3 billion in federal funding for COVID-related relief efforts, as these were one-time funding sources that should not go into ongoing budget items.
 
Table 2 shows what the Conservative Texas Budget looks like when excluding tax relief and one-time federal funding amounts in initial appropriations in both budget periods.

​Using the CTB approach above, Figure 1 highlights how the budget has improved since the implementation of the CTB started with the 2016-17 budget. This looked much better before the 2024-25 budget, but the massive growth of the current budget raised the growth of initial appropriations even as the rate of population growth plus inflation rose slightly during the latter five budget period. If the growth of the budget is not controlled, it will soon surpass the rate of population growth plus inflation like it did during the prior six budget periods, which is unsustainable.

​While the state’s budget has improved over the last decade compared with rates of population growth plus inflation, the state’s budget is up well above the rates since the 2004-05 budget. The cumulative annual difference above these rates since then is $262.5 billion, meaning a family of four owes, on average, $17,300 more in taxes than otherwise.
 
Frozen Texas Budget
​
The CTB is an important approach but has limitations because Texas taxpayers are already paying too much for their government. This is a good reason to freeze or even cut the Texas budget. Considering the initial appropriations in 2022-23 and 2024-25, with tax relief and COVID-related funding included in both periods, Table 3 compares the budget with a Frozen Texas Budget.

​These increases in initial appropriations to initial appropriations for general funds, general-revenue-related funds, state funds, and all funds are substantial and likely the largest in Texas history, as not all years of Texas history are available. The Legislature provided $12.3 billion in new property tax relief, $600 million in new franchise tax relief, and $5.3 billion to maintain old relief for the 2024-25 budget. This $18.2 billion in tax relief did not grow the government so that it could be removed from these figures, but the $6.2 billion in tax relief in 2022-23 must also be removed for consistency. After removing these tax relief amounts in both budget periods, the increases remained excessive at 25.7% in state funds, like for the CTB above, and 17.4% in all funds, which is different than the CTB because the CTB excludes the $13.3 billion amount for COVID-related federal funds in 2022-23.
 
Budget Increases by Article, Including Public Education
​
With these unsustainable budget increases, it is important to consider where these appropriations are throughout the budget. While some consider declines in funding for public education, also known as government schooling, the amount is up substantially when appropriately considering the Frozen Texas Budget approach. Table 4 shows the increases in initial appropriations for general revenue, state funds, and all funds, respectively, from 2022-23 to 2024-25.

​Conclusion

The comparisons above highlight how the LBB’s report is informative but incomplete and misleading as it provides an inconsistent comparison of spending-to-appropriations. By appropriately accounting for appropriations-to-appropriations like the above for the Conservative Texas Budget and Frozen Texas Budget, the increase in the budget is far greater than the average taxpayer can afford to pay for and is well above what is needed to correct past budget excesses. While the LBB shows that general revenue-related funds increased by 8.8% and all funds increased by 2.7%, this inconsistent approach finds that state funds increased by 17.2%. However, the consistent approaches prove that the budget increased by 25.7% in state funds for the CTB, excluding the amounts for tax relief and COVID-related funding, or by 32% for the Frozen Texas Budget, including those amounts. Moreover, the budget increased by 23.7% in all funds for the CTB or by 21.5% for the FTB. Therefore, it is highly likely that when the supplemental appropriations and other expenditures happen during the 2024-25 budget, there can be a consistent spending-to-spending comparison, showing much larger increases in the LBB’s figures that look more similar to the CTB or FTB.

​Digging into these budget amounts provides a better understanding that the latest Texas budget is unsustainable and must be corrected in 2025. This is why the Frozen Texas Budget should be the maximum for the 2026-27 budget in 2025, making the maximum amounts appropriated be $219.4 billion in state funds and $321.7 billion in all funds. However, the Texas Legislature should strongly consider substantial cuts in appropriations, given the historic budget increases in the last session. The starting point should be 10% cuts across the board, but 20% cuts should not be out of the question. Recall that the government has no money; every dollar it spends comes from taxpayers. If the government is going to spend more than 20% each biennium like it did last session, Texans have less liberty and less opportunity to flourish.

 Places to start cutting would be massive increases in corporate handouts and safety net programs expanded last session. In addition to getting rid of pork, there should be no increases in public education after record increases in the last session, and the Legislature should consider replacing the arcane school finance system with funding through universal education savings accounts (ESAs). This approach could substantially reduce expenditures on K-12 schooling from about $17,000 for each of the 5.5 million students in public education to about $12,000 for each of the 6.3 million school-age kids in Texas. This could bring spending on K-12 schooling down from about $93 billion to $75.6 billion per year. These savings should reduce school district maintenance and operations property tax rates to put them on a fast path to elimination. This approach would also better empower every parent with the opportunity to school their kids in a way that best meets their unique needs. It would also help keep more money in their pocket for transportation to schooling, tutoring, books, and more, whether they choose public, private, home, co-op, or other types of schooling. School choice helps empower parents, improve student outcomes, increase teacher pay, and expand economic output.
 
Finally, instead of passing the second largest property tax relief last session, property taxes still increased by $165 million last year despite the state appropriating more than $6 billion to reduce school district M&O property taxes by reducing the property tax rate by an additional 10.7 cents per $100 valuation and raising the homestead exemption to $100,000. In the next session, the Legislature should better limit government spending, reform school finance, and use the “surplus” to reduce school district M&O property tax rates as much as possible. Add to this spending restraint by local governments so they can use “surplus” funds to return to taxpayers by reducing their property tax rates until they are zero. This process of passing a frozen state budget, using 90% of surplus dollars to compress school district M&O property tax rates until they are zero, and having local governments eliminate the rest of their property taxes with surplus dollars above a new local spending limit will eliminate property taxes in Texas soon. This will help Texans own their property and have more liberty so that they have opportunities to prosper. ​

​Don’t miss episode 74 of This Week's Economy. Today, I discuss Harris copying Trump to end federal income taxes on tips, Texas energy issues, Trump and the Federal Reserve, inflation’s influence on the election, a possible recession, and school choice in Texas.

Check out my newsletter at vanceginn.substack.com for show notes and more.

​I was on NTD News on August 15, 2024, to discuss the economic agenda for the Democrats and what that could mean to you. Check it out!

​Vice President Kamala Harris is expected to call for a federal ban on price gouging in an effort to help lower grocery prices. The proposal is part of Harris’s efforts to prevent corporations in the food and grocery industries from hiking up prices. NTD speaks to Vance Ginn, founder and president of Ginn Economic Consulting, about the effectiveness of price controls regarding inflationary pressures in the food and grocery industry.

 

Originally published at Pelican Institute. ​

Environmental, Social, and Governance (ESG) investing has gained popularity for promoting environmental sustainability, social justice, and ethical governance. However, this approach often leads to lower investment returns, significantly impacting taxpayers and the economy.

In states like Louisiana, where the oil and gas industry is crucial for economic stability, mandating ESG investing could have serious consequences. Governments must focus on maximizing fiduciary responsibilities over politically driven ESG criteria to ensure the highest returns for public funds.

Louisiana’s economy heavily relies on oil and gas activities.

According to the U.S. Energy Information Administration (EIA), Louisiana is a leading crude oil and natural gas producer, contributing substantially to the state’s economic output. The state has substantial refining capacity, with some of the nation’s largest refineries located along its Gulf Coast. Imposing ESG mandates can disrupt this critical sector, potentially reducing economic growth and increasing consumer costs. Louisiana risks undermining its economic foundation by diverting investments to ESG funds, which often underperform compared to traditional indices.

Recognizing these economic threats, Louisiana has taken proactive steps to protect its financial interests.

In 2022, the Louisiana Treasurer announced a plan to divest state funds from BlackRock, citing concerns over the company’s focus on ESG criteria that conflict with the state’s economic interests. This plan included removing $794 million from BlackRock funds. This underscores Louisiana’s commitment to prioritizing financial returns and protecting the state’s vital oil and gas industry from the negative impacts of ESG-driven investment strategies. This year, Louisiana passed SB234, prohibiting state and local government entities from contracting with entities that discriminate against firearm dealers and ammunition industries.

Texas and Oklahoma have taken similar stances against ESG investing.

Texas passed Senate Bills 13 and 19 in 2021, prohibiting state investments in companies that boycott firearm and ammunition industries or fossil fuels, respectively. These laws help preserve economic interests and keep public funds from chasing poor returns. Similarly, Oklahoma passed the Energy Discrimination Elimination Act (EDEA) in 2022 to protect its vital oil and gas sector from the adverse effects of ESG investing. This Act restricts state and local governments from contracting with financial firms that boycott energy companies and ensures that investment decisions are based on financial merit rather than political considerations.

The pushback against ESG mandates is not limited to Texas, Oklahoma, and Louisiana. Across the United States, states are grappling with the implications of taxpayer funding for ESG activities. A state-by-state snapshot of the ESG policy landscape reveals a growing trend of legislative actions to curb ESG investing. States like Florida and West Virginia have also passed laws to prevent state funds from being used for ESG investments.

A study by the Committee to Unleash Prosperity reveals that ESG investing often results in lower financial returns. This finding supports the argument that ESG criteria should not drive public investment strategies. Additionally, research from the Center for Retirement Research shows that ESG investments underperform compared to traditional indices, further questioning the efficacy of ESG mandates.

Investment managers for state and local funds, such as public pensions for teachers and state employees, have a fiduciary duty to ensure the highest rate of return. ESG investing often conflicts with this duty by prioritizing non-financial criteria, leading to lower returns. The legislative actions in Louisiana, Texas, and Oklahoma exemplify how state policy can safeguard scarce taxpayer resources.

The opportunity costs of ESG investing are significant. Diverting funds from high-performing investments in traditional energy sectors to ESG projects can result in lower economic growth and higher consumer costs. In Louisiana, where the oil and gas industry is a cornerstone of the economy, such a shift can lead to job losses, reduced economic activity, and lower tax revenues, ultimately harming the communities that ESG policies aim to protect.

Policymakers in Louisiana and other states should continue prioritizing fiduciary responsibilities and avoiding ESG investments that do not serve the best interests of taxpayers. Transparent and independent audits of investment decisions can ensure that public funds are managed responsibly, promoting economic growth and stability. While ESG investing is acceptable for the private sector, given that individuals can choose what to invest in and take on whatever amount of risk makes sense for them, the government has no money, so it should use taxpayer dollars as conservatively as possible.

​Former OMB chief economist Vance Ginn discusses what positive inflation data means for Fed rate cuts on 'Varney & Co.'

​Join me for Episode 109 of the Let People Prosper Show to hear how deregulation, tax cuts, and federalism were the keys of Trumponomics but how protectionism and immigration policies got in the way of a pro-growth future with Steve Moore, an economist and author, serving as a senior fellow at the Heritage Foundation and a co-founder of The Committee to Unleash Prosperity, and author of Trumponomics: Inside the America First Plan to Revive Our Economy.

Subscribe, share, and rate the Let People Prosper Show, and visit vanceginn.com for more insights.

Interview at KTRH News Houston.

​More layoffs are coming for major businesses and corporations this year.

The layoffs are expected for a wide variety of industries too. Worldwide tech companies including Google and Microsoft will make cuts and so will retail businesses including Nike and Amazon. Even finance leaders like BlackRock and Goldman Sachs say their workforce will shrink soon.

A survey conducted in December last year by ResumeBuilder found that almost 40% of business leaders were anticipating layoffs in 2024. Half of those surveyed also believed a recession was possible.

Vance Ginn, President of Ginn Economic Consulting, said a slowing economy is largely to blame.

"You see businesses have higher costs due to inflation and at the same time consumers are cutting back so there's less demand for their product," he said.

As people start to run out of money in their savings, they're also taking on more debt. Inflation, of course, is still a major factor too.

Some companies are trying to implement 48-hour work weeks with some of the employees or offer them other opportunities. Ginn said that can put more stress on a slumping economy.

"CEOs and employers are trying to find new ways to continue to do business and keep workers on board," Ginn said.

AI is also making things more interesting. It's not wiping out the workforce completely, but some industries are fully embracing it's capabilities and that has left workers questioning their next move.

"The technologic revolution that comes with AI is improving a lot of the workforce, but there are some substitution effects," said Ginn.

Originally published at Kansas Policy Institute.

​The Kansas Legislature will consider transformative changes to the long-standing challenges in the state’s budgeting process this fall. State law mandates that the governor provide a budget report to the Legislature. However, this practice has evolved into the governor proposing an entire budget, with the Legislature making adjustments. The Legislature should instead have a more active role in proposing the budget, working with the governor to improve it, and giving the governor ways to adjust it with line-item vetoes afterward to help provide effective fiscal management.

Opportunities Moving Forward
Regardless of who proposes the budget, the state should consider a year-round approach to spending and budget review. The budget committees should meet periodically after a regular session annually to conduct performance-based analyses. State law requires performance-based budgeting, but it has yet to be faithfully implemented, and time limits during the legislative session make it difficult to police. As part of a year-round budget process, the Legislature should notify agencies that no spending increases will be approved for agencies that fall short of performance-based budgeting expectations. This proactive approach would replace the current practice where budget committees listen to agency proposals without adequate analysis. 

Another effective method for evaluating whether programs are delivering their intended goals is through independent, external efficiency audits. Unlike internal reviews, these audits objectively assess government programs’ effectiveness, which can suffer from the “fox guarding the henhouse” syndrome. While not perfect, efficiency audits can mobilize public interest from taxpayers and watchdogs to advocate for reforms or eliminate inefficient programs, thereby reducing unnecessary taxpayer expenditures.

Other ideas include improving the sunset review process and requiring the sundown of programs and agencies to enhance Kansas’ budget effectiveness. This process can help with priority-based budgeting, which combines performance-based and zero-based budgeting. Combining better review processes during the year, sunset meetings, and program sundown at fixed intervals would improve the budget process.

Add a broad spending limit with a strong, preferably constitutional, constraint. This would compel legislators to identify inefficiencies and phase out failing programs. A fiscal rule such as the Responsible Kansas Budget could serve this purpose effectively, ensuring that spending grows sustainably, aligned with population growth and inflation.

Learning from Other States
Many states have adopted best practices to improve their budget processes, drawing from performance-based budgeting, zero-based budgeting, efficiency audits, and spending limits. Here’s an overview of what other states are doing.

Colorado

• Taxpayer’s Bill of Rights (TABOR): Colorado has a constitutional spending limit known as TABOR, which restricts the revenue the state and local governments can retain and spend. Excess revenues are refunded to taxpayers, helping enforce fiscal discipline.

Florida

• Long-Term Financial Planning: Florida emphasizes long-term financial planning, requiring a three-year outlook on budgetary impacts for proposed expenditures and revenue changes. 

Louisiana

• Top-Down Budgeting: Louisiana has a top-down approach where the governor’s proposed budget is the starting point for the Legislature to tweak.
• Efficiency Audits: Louisiana conducts efficiency audits of some programs through the state auditor’s office to assess whether state programs meet their intended goals.

Texas

• Bottom-Up, Performance-Based Budgeting: Texas’ budget starts with a ceremonial budget from the governor, like the one from the president at the federal level, then is crafted by the Legislature. The governor has a line-item veto of strategies after passage. Texas periodically conducts a performance-based budgeting system. 
• Efficiency Audits: Texas conducts independent efficiency audits of some programs whereby the state auditor contracts with a private entity for more objectivity within existing funding to evaluate whether program outcomes match the program vision.
• Spending Limit: Texas has a relatively strong spending limit that was updated in 2021 to cover about half of the total budget based on the rate of population growth and inflation.

Utah

• One-Door Policy: The Utah Model includes streamlining operations and improving service delivery through efficiency audits and performance-based budgeting. It also involves putting the workforce and safety net together under one agency, which could be part of Congress extending the Workforce Innovation and Opportunity Act (WIOA) this year.
• Constitutional Spending Limit: Utah has a constitutional spending limit that ties budget growth to a formula based on population growth and inflation.

Recommendations for Kansas
Kansas can draw inspiration from these states and ALEC’s budget reform toolkit:

• Providing Annual Budget Analysis: Evaluating the budget and specific programs through the budget committees after regular sessions annually.
• Adopting Priority-Based Budgeting: Implementing a combination of performance-based and zero-based budgeting with priority-based budgeting for thorough evaluation and justification of all expenditures of taxpayer money.
• Conducting Independent Efficiency Audits: Regular, external efficiency audits can bring transparency and accountability to government programs and savings to taxpayers.
• Strengthening Spending Limit: Imposing strong constitutional or statutory spending limits, like KPI’s Responsible Kansas Budget that is similar to Texas’ limit or Colorado’s TABOR, helps enforce fiscal discipline for state and local spending with surpluses used to lower tax rates.
• Engaging in Long-Term Financial Planning: Incorporating long-term financial planning, as practiced in Florida, can ensure sustainability and preparedness for economic fluctuations.
• Reduce Dependency on Federal Funds: The federal government is running massive deficits and will need to make major budgetary changes which could influence the federal funds sent to states so states should prepare now with transparency and reduction in federal funds received.

​
By adopting these best practices, Kansas can move towards a more efficient, accountable, and fiscally responsible budget process. Incorporating these reforms will help Kansas enhance its budget process, ensuring more effective and efficient use of taxpayer dollars. The upcoming informational hearings provide an excellent opportunity to advocate for these changes and set Kansas on a path to long-term fiscal health.

​Tune in to hear my entire testimony and Q&A session from the Texas House public education hearing on August 12th, 2024.

​Hear from me and Texas House Representative Brian Harrison on the importance of school choice during the Texas House Committee hearing on public education on August 12th, 2024.

​Don't miss Dr. Vance Ginn's testimony before the Texas House Committee on Public Ed on August 12, 2024. Taxpayers are already spending too much on a failing monopoly government school system, and universal school choice is needed now!

Read my research for more information on this here. This is the notice of the public hearing.

Chairman Buckley and Members of the Texas House Committee on Public Education:

My name is Dr. Vance Ginn, president of Ginn Economic Consulting. I'm a proud Texan, an economist, a husband, and a father of three. I grew up in a low-income, single-mother household in South Houston. I attended private, public, and home schools before becoming the first in my family to graduate from college, where I earned my doctorate in economics at Texas Tech University. I've dedicated my career to the calling to let people prosper, including more than a decade of working to understand and improve education, school finance, and other policies in Texas and nationwide. Today, I urge you to please consider Texas's critical need for universal Education Savings Accounts (ESAs). 

Despite historic increases in public education funding recently and over time, student performance in Texas is flat or declining. Our state needs to catch up, as many states have educational opportunities that are not available here. Economist Milton Friedman once said about improving education, "The only solution is to break the monopoly, introduce competition and give the customers alternatives." The time is now for Texas to follow this vision with a “Texas approach” for improved education, more pay for quality teachers, and a better economy.

Here are questions to consider during your deliberations:

1. Why are Students and Texas Falling Behind in Education?

• Standardized test outcomes, such as STAAR and NAEP (though flawed as the ultimate accountability factor is parents), indicate that performance remains stagnant or worse over time. For example, only 24% of Texas 8th graders are proficient in math and 23% in reading—the lowest in decades.
• Texas is trailing behind 12 states with universal or near-universal ESAs. If Texas does not act swiftly, we risk falling further behind as other states empower parents, students, and teachers. 

2. Why are Taxpayers Spending So Much on Public Education?

• Texas Legislature increased the total budget from 2022-23 initial appropriations to 2024-25 initial appropriations (for a consistent comparison) by record amounts of $53.2 billion, or 32%, to $219.4 billion in state funds and $56.9 billion, or 21.5%, to $321.7 billion in all funds, includes state and federal funds. 
• The Legislature increased funding to public education by historic amounts of $20.3 billion, or 33.3%, to $80.6 billion in state funds and by $20.7 billion, or 28.6%, to $93.1 billion in all funds. 
  • Despite these historic increases in public education, which brought state funding up to about 50%, the monopoly government school system lacks efficiency. For example, less than 20% of classroom expenditures directly fund teachers; the rest is for administrative and other costs. Moreover, there is no positive correlation between increased funding and improved outcomes, so funding is excessive with exaggerated arguments for more.

3. What is the Path Forward to Meet Texans’ Support for School Choice?

• Multiple surveys show strong public support for school choice, reflecting the widespread desire for educational reform. The path forward should include the Texas Legislature passing a universal ESA bill in the next session and establishing universal ESAs for all Texas families for any schooling parents choose for their kids. 
• This program should use what has worked well in other states to streamline and ensure quick implementation for every student. Public schools would receive less funding under ESAs only if they failed to compete and parents chose better alternatives for their kids. 
  • Ultimately, Texas should shift from spending about $93 billion for $17,000 per student on public education for 5.5 million kids today to a fully-funded ESA model of about $75 billion with $12,000 per student for 6.3 million school-age kids. This reform could save Texans about $18 billion annually, with savings returned to taxpayers by reducing school district M&O property tax rates, putting us on a faster path to elimination.

4. What Does the Research Show on the Benefits of School Choice?

• Studies consistently find that outcomes improve when parents can choose the best educational environment for their children. For example, out of 18 academic studies on school choice, 12 found positive outcomes, including improvements in public schools due to the competitive pressure of school choice. 
• Additionally, universal ESAs could significantly increase teacher pay. Some teachers could see salary increases of up to $28,000 per year. 
• Moreover, increasing school choice has been shown to improve labor market outcomes, support higher property values, and spur job creation.

Conclusion

Texas must lead in the race for educational excellence. The evidence shows that universal education savings accounts will help provide this. Texas should pass a universal ESA bill to ensure every child in Texas has access to a high-quality education tailored to their unique needs. Thank you for your time and consideration. I am glad to be a resource on these issues throughout your deliberation and am happy to answer your questions.

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, affiliate at more than 15 think tanks across the country, and host of the Let People Prosper Show. Dr. Ginn was previously a lecturer at multiple institutions of higher education, chief economist at the Texas Public Policy Foundation, and chief economist at the White House's Office of Management and Budget. He earned his doctorate in economics at Texas Tech University. Follow him on X.com at @VanceGinn and get more of his research at vanceginn.com. 

This research provides support for my testimony on August 12, 2024 before the Texas House Committee on Public Education on advancing educational opportunities in Texas.

Overview

Despite increases in public education expenditures with taxpayer money in Texas, student performance is flat or declining. Texas is falling behind thriving states that offer educational choice as part of the school choice revolution, in which more than ten states have or nearly have universal ESAs. 
​
Economist Milton Friedman, who championed school choice well before it became popular, famously said, "The only solution is to break the monopoly, introduce competition, and give the customers alternatives." Texas can follow this optimistic vision to improve student learning and outcomes, increase teacher pay, and advance parent empowerment from universal ESAs by passing the “Texas approach,” as said by Public Education Chairman Brad Buckley, in the next session. This approach should build on what has worked well in other states rather than starting from scratch to make it universal for every child now. 

Why Universal ESAs?

1. Students and Texas are Falling Behind

• While Texas has historically been a leader in many areas, we are now trailing behind 12 other states that have complete or near-universal school choice with ESAs. These states, including Arizona, Arkansas, Florida, Louisiana, West Virginia, and more, have recognized the power of school choice in driving educational improvement. If Texas does not act swiftly, we risk falling further behind as other states benefit from a competitive education system that empowers parents, students, and teachers. 
• The outcomes of standardized tests (STAAR and NAEP), though flawed in many ways, indicate that performance over time either stays the same or worsens.
  • Despite large increases in funding (see below), student performance is flat or declining, according to the Texas Education Agency’s (TEA) STAAR scores in Texas (see Table 1).
  • The National Assessment of Educational Progress (NAEP) scores show that only 24% of Texas 8th graders are at or above proficient for grade level in mathematics (the lowest since 2000) and 23% in reading (the lowest since at least 1999).
  • The current system is failing our students and placing an unnecessary financial burden on taxpayers. However, the ultimate accountability factor is parents, who should be in charge instead of politicians and unelected bureaucrats.

2. Excessive and Inefficient Funding of Public Education

• Regarding the total budget, Texas increased appropriations from major funding sources by a record amount in the last session. Unlike the LBB’s reporting in the Fiscal Size-Up, this results from my consistent two-year budget comparison of 2022-23 initial appropriations to 2024-25 initial appropriations. 
  • Comparing estimated/budgeted in 2022-23 to appropriated in 2024-25, as the LBB does, is informative but incomplete. The 2022-23 total amounts include initial appropriations in the General Appropriations Act in 2021, supplemental appropriations in 2023, and other expenditures, whereas the latter two amounts are yet to be available for 2024-25 and will likely increase. 
  • Table 2 shows general revenue funds increased by 21.2%, state funds by 32%, and all funds (including state and federal funds that are all taxpayer money) by 21.5% from the previous budget cycle, which are all historic increases. 
• Regarding public education, the Legislature increased taxpayer funding by $20.3 billion or 33.3% in state funds and by $20.7 billion or 28.6% in all funds (see Table 3). While $12.7 billion in state funds was used to provide new tax relief from school district property taxes, the state provided about $7 billion more to public education. 
  • Despite this historic budget increase for public education, the monopoly government school system remains riddled with inefficiencies, and the return on these expenditures is highly questionable. For example, less than 20% of classroom expenditures directly fund teachers. 
  • Specifically, the average of roughly $17,000 per student going into a classroom of 20 students is $340,000, but teachers receive less than 20% of it for a 10-month $60,000 salary, on average. The rest goes to the non-teaching administrative staff surge primarily to deal with federal, state, and local requirements, including taking standardized tests with questionable results because the ultimate accountability factor of a child’s education is parents. 

3. Public Support for School Choice and Fiscal Responsibility

• Public support for school choice is robust across multiple surveys. Also, consider the results of the Republican primary elections. The time to act is now. 
• The path forward should include the Texas Legislature passing a universal ESA bill next session, establishing universal ESAs for all Texas families. 
  • The approach should use what works well in other states to streamline and start the program quickly for every student. 
  • More taxpayer money should not be spent on public education unless outcomes improve, school district debt should be reduced, more money should go to teachers over administrators, and superintendent pay and other excesses should be changed.
  • Public schools would not get less funding unless they are not competitive and parents choose to send their kids elsewhere. Why would some assume public schools cannot compete and thus get less funding?
• The path forward should include a simplified school finance system based on ESAs funding public, private, home, co-op, charter, and other schooling options. 
  • Texas could move from spending about $17,000 for each of the 5.5 million students, or $93 billion per year, on public education today to a fully funded ESA model with $12,000 for each of the 6.3 million school-age kids, or $75 billion per year.
  • This improved school finance system could save Texans $18 billion annually. The excessive taxpayer money collected should be returned to taxpayers by reducing school district M&O property tax rates for a path to elimination. 

4. Overwhelming Evidence of Success

• The evidence favoring universal school choice is compelling. Studies consistently find outcomes improve when parents can choose the best educational environment for their children. Table 3 from the University of Arkansas shows how this includes improvements at public schools from competitive pressure. 

• Better Outcomes: Out of 18 academic publications then, 12 (67%) found all or some students had improved outcomes, four found no effects, and two found negative effects (based on a limited choice program in Louisiana–but the Louisiana Legislature passed universal school choice this year so should have improvements soon). 
• Better Teacher Pay: While public school districts employ about 90% of Texas teachers, teachers have little bargaining power under the current monopsony system. The introduction of ESAs would create a more competitive labor market, allowing teachers to negotiate better salaries and working conditions. ESAs could lead to an average salary increase of $14,000 per year more for teachers, with some seeing as much as $28,000 per year more.
• Better Economy: Research indicates that increasing school choice improves educational quality, reduces dropout rates, and improves labor market outcomes. School choice supports higher property values, spurs job creation, and provides better matches between students and their educational needs, leading to a more robust and adaptable workforce.

Conclusion

Texas must lead in the race for educational excellence. The evidence is clear: universal Education Savings Accounts will improve educational outcomes, increase economic opportunity, and provide the competitive edge that our state needs. Texas should pass a universal ESA bill so kids in Texas can access a high-quality education tailored to their unique needs. This is an educational reform and a commitment to Texas's future. We can fully fund students with ESAs, who can use them to attend public or other types of schooling, spend less money and pay lower taxes, and improve outcomes and teacher pay through universal school choice.

​
Vance Ginn, Ph.D., is a leading economist and advocate for free-market principles and fiscal conservatism, shaping policies across the U.S. through his work with 15 think tanks. As the founder and president of Ginn Economic Consulting and host of the Let People Prosper Show podcast, Dr. Ginn provides high-impact economic consulting and dives deep into pressing issues with top influencers. With experience as the associate director for economic policy at the White House’s Office of Management and Budget and chief economist at the Texas Public Policy Foundation, his insights are frequently featured in major media outlets. Residing with his family in Round Rock, Texas, Dr. Ginn champions policies promoting economic freedom and prosperity. Find out more about Dr. Ginn at vanceginn.com, subscribe to his newsletter at vanceginn.substack.com, and follow him on X.com at @vanceginn.

​Don’t miss episode 73 of This Week's Economy. Today, I discuss the possibility of a recession, KOSA, Chevron moving to Texas, Trump not taxing Social Security income, Harris’ connection with Big Tech donations, and more.

Listen, like, share, and subscribe here and to my newsletter with show notes at vanceginn.substack.com.