Texas

State Budget Practice Report Cards and Budget Resources Guide

The Volcker Alliance’s budgetary grades for Texas—the second most-populous state, after California—showed leadership in some areas and deficiencies in others from fiscal 2015 through 2017.  While deep fiscal reserves helped Texas win best-possible average grades of A in the budget maneuvers and reserve funds categories, the state received low assessments for its handling of legacy costs and budget forecasting.

In the category of legacy costs, which includes public worker pensions and postretirement health care, Texas received an overall D-minus—the lowest grade possible—for the three years studied. Though its pension fund had 76 percent of the assets needed to pay obligations—4 percentage points above the average for all states—its low marks reflect Texas’s failure to make the full contribution to pensions and other postemployment benefits, principally retiree health care, as recommended by fund actuaries over the period studied.

Texas’s D average in budget forecasting was influenced by an absence of long-term revenue and expenditure forecasts as part of the budgetary package. In contrast, its straight A’s in for reserve funds were driven by the high balance in the Economic Stabilization Fund, the state’s rainy day account. It totaled $9.7 billion as of June 30, 2016, the largest such reserve in any state, according to the Texas Comptroller of Public Accounts. Texas also ties its reserve balances to revenue volatility, a best practice. The state’s savings policy may pay dividends in the wake of Hurricane Harvey, which caused billions of dollars in damage in East Texas in 2017.

Download Printable State Report Card

To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2017 Volcker Alliance report, Truth and Integrity in State Budgeting: What Is the Reality? which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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