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.
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 found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2017. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eleven US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.