Senator Robert "Bob" Deuell, M.D.
The Texas State Senate
District 2

For Immediate Release
April 15, 2005

***CAPITOL UPDATE***

A Guide to the Budget Process in Texas

(Austin) -Recently, the Texas House of Representatives and the Texas Senate appointed conference committee members for Senate Bill 1, which is the biennial budget for the state of Texas. The conferees will meet to work out the differences between the House and Senate versions of the bill, and will present a conference committee report to be voted on by the full House and Senate.

This article outlines a basic framework of the budget process in Texas, and how the legislature goes about forming a biennial budget during legislative session and the interim. This article is taken from a Senate Research Organization publication, "Budget 101, A Guide to the Budget Process in Texas," which can be viewed at www.senate.state.tx.us. You may also contact my office if you would like to receive a hard copy.

Overview of the Budget Process

Texas' two-year budget takes roughly twice that amount of time to prepare, produce, and administer. Agencies develop their appropriations requests in the first year, the legislature approves the General Appropriations Act in the second year, and the budget is implemented over the next two years.

The first step in preparing the budget is the development of a statewide vision for the future of Texas government. The governor, in cooperation with the Legislative Budget Board (LBB), is responsible for preparing that vision statement for Texas. This statement provides a framework for the development of strategic plans and sets forth a mission for state government, core principles to guide decision-making, and goals and benchmarks for various state agency services and programs. "Texas State government must be limited, efficient, and completely accountable. It should foster opportunity and economic prosperity, focus on critical priorities, and support the creation of strong family environments for our children. The stewards of the public trust must be men and women who administer state government in a fair, just, and responsible manner. To honor the public trust, state officials must seek new and innovative ways to meet government priorities in a fiscally responsible manner."

The next step is the development of a strategic plan by each state agency. A strategic plan is a long-term plan that sets forth where an agency is and where the agency plans to go. Strategic plans include a mission statement and identify the goals of the agency, the population served by the agency, and a description of the means by which the agency plans to achieve its goals. The Governor's Office of Budget, Planning, and Policy (GOBPP) and the LBB staff issue instructions for developing strategic plans in the spring preceding a legislative session. Included with the instructions is a copy of the governor's Planning for Progress, which is meant to provide a framework for the development of strategic plans by each agency. After developing a strategic plan, the agency submits its plan to the GOBPP and the LBB for approval.

In the spring preceding the legislative session, the LBB sends out Legislative Appropriation Request (LAR) instructions. These instructions are used by agencies to develop their budget requests. Included in each agency's LAR are the performance measures on which budgeting is based. During the summer months, the LBB and GOBPP hold hearings with each agency concerning the agency's strategic plan and LAR. During the course of these hearings, the items to be included in the agency's strategic plan and the performance measures to be contained in the LAR are determined. LARs must be submitted by the end of the summer and copies must be provided to the LBB, GOBPP, the State Auditor's Office (SAO), the Office of the Comptroller of Public Accounts (comptroller), and several other offices.2 These LARs form the basis for the appropriations bill prepared by the LBB.

During the fall prior to the legislative session, LBB staff prepares the general appropriations bill draft. This proposed appropriations bill contains performance measures, the maximum number of full-time equivalent (FTE) positions allowed, specific enumerated instructions and contingencies on some expenditures (called riders), the amount of funding recommended by the LBB, and the method of financing each agency's appropriation. The amount of funding that the LBB staff sets forth for each agency in the appropriations bill and the amount of funding requested by the agency do not always match. To help compare the amount recommended by the LBB and the amount requested by the agency, the LBB produces a document entitled Legislative Budget Estimates. That document sets forth all the information contained in the appropriations bill except riders, and includes amounts expended by the agency in past years and the amount requested by the agency for the coming biennium.

Next, the appropriations bill is filed in both houses of the legislature. This allows each house to work on the bill simultaneously. As a matter of equanimity, the final bill sent to the governor, traditionally, is a senate bill one session and a house bill the next. The comptroller is required to provide the legislature a biennial revenue estimate (BRE) at the beginning of each regular session. Because the legislature is constitutionally prohibited from appropriating more revenue than will be collected, the BRE is used by the legislature to ensure that appropriations bill not exceed the anticipated revenue. During the first part of the session, the Senate Committee on Finance and the House Committee on Appropriations independently receive testimony from state agencies, including institutions of higher education, on the budget. Each committee makes changes to the budget document. This process is referred to as "markup." After the bill passes out of committee, it will come to a vote in each chamber. The bill is then referred to a conference committee, composed of members of both houses, to resolve differences between the senate and house versions of the bill.

Like the designation of the final bill, the senate and the house of representatives traditionally alternate each session in chairing the conference committee. After the conference committee has agreed on a version of the appropriations bill, the bill is sent back to both houses for a vote on final passage. If both houses pass the appropriations bill, it is sent to the comptroller for certification. The Texas Constitution requires the comptroller to certify whether there will be sufficient revenue to cover the appropriations made by the legislature. After the appropriations bill is certified by the comptroller, it goes to the governor for signing. The Texas Constitution, Section 14, Article IV, gives the governor line item veto authority. If the legislature is still in session when that authority is exercised, it may override the governor's veto(es) by a two-thirds majority vote in each house.

After the appropriations bill is certified by the comptroller and signed by the governor, it is implemented over the next two years. The appropriations bill takes effect on September 1 of each odd-numbered year. Although the budget does not appear in Texas' statutes or codes, it is law and agencies are bound by it. The LBB and SAO are responsible for monitoring agency compliance with the budget. The governor and the LBB are empowered with budget execution authority, which is the authority to shift funds between agency programs, or even between agencies, if the need arises when the legislature is not in session.

To contact Sen. Deuell about the legislative process, contact the Capitol Office at (512) 463-0556 or mail to Sen. Bob Deuell, Texas Senate, P.O. Box 12068, Austin, TX 78711. The website for the Texas Senate is www.Senate.state.tx.us. The e-mail address for Sen. Deuell is: bob.deuell@senate.state.tx.us.

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