DeVore: What Real Budget Transparency Looks Like

This commentary originally appeared on TribTalk on June 2, 2014.

In January, Texas legislators will begin the 2015 legislative session. Their sole mandatory constitutional obligation will be to pass a budget.

To many Texans, the budget is a mere compilation of numbers — a dry exercise in math. To others, it’s a profoundly values-based document.

But to nearly every Texan, the budget is opaque, concealing secrets with byzantine complexity, preventing both citizens and their elected representatives from truly understanding its size and contents.

The Legislative Budget Board, known as the LBB, and the Texas comptroller of public accounts are the official gatekeepers of the Texas state budget. The comptroller tracks the money coming in; the LBB tracks the money going out. According to the LBB, the budget passed last year will spend 5.1 percent more than the prior budget. But is this accurate?

In a word: no.

The Texas Public Policy Foundation has spent time deciphering Texas’ arcane budget, creating a decade’s worth of apples-to-apples budget comparisons to produce “The Real Texas Budget,” a publication that details Texas’ true budget history since 2004.

For instance, how many Texans — or legislators, for that matter — knew that $6.1 billion of income and its corresponding expenditure vanished off books in the last legislative session? The income in question is significant, making up a full 3 percent of the two-year state budget. Its source? Mostly income from patients served by Texas’ teaching hospitals. This change in accounting artificially held the increase in spending from the previous budget to 5.1 percent rather than about 8 percent. To make the numbers match up in our own comparison, we removed the patient income for the past four budgets going back to 2004-05.

The wide use of estimates also contributes to budget confusion. Of course, estimates are an essential tool in any budgeting process. Unfortunately, budget documents containing estimates are frequently compared to historical budgets, which contain actual spending and revenue amounts. Why does this matter? One big reason is Medicaid, for which lawmakers historically underestimate costs every budget cycle. Based on recent information from the Health and Human Services Commission, the state agency that oversees Medicaid, the budget passed by the Legislature last year will likely come up $1.5 billion short of actual Medicaid expenses.

Simply accounting for these two budgetary items — the $6.1 billion shift in patient income and the $1.5 billion Medicaid underestimate — leads to the conclusion that the real Texas budget will increase by 9 percent, not 5.1 percent, over the previous two-year budget. A 9 percent spending hike is almost double the official LBB estimate — a difference between modest spending growth and nearly double-digit spending growth. 

Applying consistent budget metrics to the past 10 years through the next two years, cumulative state spending since 2004 will reach about $1 trillion by the end of the fiscal year in 2015.

So what should be done? The first step in understanding the budget and restraining its growth is finding a true baseline of actual state spending. “The Real Texas Budget” does just that. The second step is more difficult, at least politically: limiting total spending to a yardstick like population or inflation. This task paradoxically becomes progressively more challenging as Texas’ strong economy produces a surge in tax windfalls. State revenue growth is now running at double the comptroller’s estimate used by lawmakers to craft the budget.

In November 2012, on the eve of the budget-writing process, the LBB adopted a state spending limit of 10.71 percent that applied to nondedicated general revenue spending. As passed, the budget anticipates 10.4 percent growth in spending subject to the limit. But once actual Medicaid spending is accounted for, the growth in the budget subject to the spending limit will likely reach 11.2 percent, requiring the 2015 Legislature to vote to bust the spending limit as one of its first orders of business.

After lawmakers reluctantly take this vote, they should consider making the budget process more transparent for themselves and the people they represent by putting the budget online in real time and employing program-based budgeting to provide more detail. They should also consider enacting a stronger tax and expenditure limit.

True budget restraint will benefit every Texan in the long run.

The Hon. Chuck DeVore is the Vice President of Policy at the Texas Public Policy Foundation.

Chuck DeVore

Chuck DeVore is Vice President of Policy at the Texas Public Policy Foundation, one of America's premier conservative state-level public policy think tanks. From 2004 to 2010, DeVore represented almost 500,000 people in the California State Assembly in the coastal Orange County region that includes the cities of Irvine, Newport Beach, Laguna Beach, and others. He was the Vice Chairman of the Assembly Committee on Revenue and Taxation and served on the Budget Committee as well. DeVore was honored as the Legislator of the Year by seven groups while the Americanism Educational League named him with their American Spirit Award in 2010, a recognition once given to Ronald Reagan. In 2010, DeVore competed for the Republican nomination for U.S. Senate in California, earning more than 450,000 votes and raising more than $2.6 million. Chuck worked in the aerospace industry for 13 years. He was a corporate vice president at the time of his election to the Assembly in 2004. DeVore served as a Reagan White House appointee in the Pentagon from 1986 to 1988. As Special Assistant for Foreign Affairs his duties included working with Congress to advance the President's foreign and military policy. He later served on staff for a U.S. Congressman. From 1991 to 1996, he served as a City Commissioner for the City of Irvine. He was Chairman of the city's Community Services Commission. In 1983, DeVore enlisted in the United States Army Reserve. He earned an ROTC scholarship that allowed him to attend Claremont McKenna College where he graduated with honors with a degree in Strategic Studies in 1985 and was commissioned an officer. He also studied overseas at the American University in Cairo, Egypt. After more than 24 years of active reserve service, DeVore retired from the Army National Guard. He is now a Lieutenant Colonel in the U.S. Army (retired) Reserve. In 2004, The Claremont Institute named DeVore a Lincoln Fellow. He and his wife Diane have two daughters and reside in Dripping Springs. Select Publications • “The Texas Model: Prosperity in the Lone Star State and Lessons for America” • “Texas vs. California: Myth-Busting Time” • “State Tax Levels Do Impact Economic Growth” • “Cap-And-Trade Tosses an Anchor to Drowning California Economy” • “Our China Challenge” Media appearances • Fox News • Fox Business Network • Investors’ Business Daily • Wall Street Journal • CNBC • CNN • MSNBC