Over the long term, one of the most important reforms the Legislature can enact to promote fiscal responsibility is to make the appropriations process more transparent.

Today, the Texas state budget is formatted in such a way that even people with advanced degrees have trouble tracking funds in the budget, let alone the average taxpayer— or legislator. Th e problem lies in the strategic budgeting format—or bill pattern—currently used in the appropriations bills each session. Th e format was first used in the 1993 appropriations bill. The concept behind the strategic format was to give legislators a longer-term view of programs and spending beyond the two years appropriations cycle.

To carry out this new vision, goals, objectives, strategies, and performance measures were introduced into the appropriations bill. Money was no longer appropriated by programs but by strategy, with performance measures used to measure the accomplishment of goals over time. However, the process has failed to achieve any meaningful improvements in the effi ciency or performance of the state. In fact, the primary result has been a tremendous reduction in the transparency, accountability, and efficiency of the appropriations process.

One reason for this is that the revamped appropriations bill now contains broad statements of goals and outcomes and performance measure. While broad goal statements are useful to describe outcomes, budgets allocate funds for expenditure via objects of expense (salaries, rent, capital, etc). Appropriators or the public should know which of those objects they are buying to best eff ect the outcome desired because the state does not buy outcomes; it buys units of input (the objects of expense).

Failure to work at the object or programmatic level skips an important step in the fi scal control process. With inputs the public can know what it is buying and thus those assets can be managed to produce outcomes. However, if the state doesn’t appropriate by programs/objects but instead by goals, there is little control of the cost of inputs in favor of the assumption that there is a link between outcomes and spending. Outcomes may be related to spending, but they may not. For instance, is a can of coke that costs $5 better than one that costs $5.04? With goal based budgeting no one has the information to make this determination.

Along these lines, the strategy-based bill pattern obscured where the money was actually being spent. For instance, in the 1989 appropriations bill, one could easily find that the Comptroller of Public Accounts spent $3.3 million on legal services in central administration and $20.7 million on the enforcement of the tax compliance in fi eld operations. In the 1993 bill, however, that information is impossible to determine. One can determine that the comptroller spent $177 million dollars on tax compliance and $97 million of that on “Ongoing Audit Activities,” but that is the extent of the detail available in the appropriations bill.

To fix this problem, the state should move from a strategic planning and budgeting system to a program-based budgeting system. Th e budget should be written so that each agency’s income and expense is listed by program, as is done in the agency’s own internal budget. And the source of funds should be also listed in each line item.

Making the change over to a program-based budgeting system is an eff ective way to simplify the budget process for taxpayers and get more eyes on the budget. In turn, this will multiply our chances at spotting waste, fraud and abuse.

The state budget should be changed as follows:
• Include more line items (thus more information)
• Limit the size of line items to amounts that describe discreet programs, or if a program is very large, to
discreet activities within those programs
• Line items based on programs and activities should describe what the program does and where it is authorized in law.
• Line items should have more information about the source of funds (general revenue, general revenue dedicated, federal funds, and other funds) being appropriated

Two bills have been filed in the 82nd Texas Legislature that would move the state toward program-based appropriations— HB 2804 by Cain and SB 1653 by Watson.  The directions for preparing the general appropriations bills to the Legislative Budget Board in both of these bills would drastically improve the transparency of the Texas budget process.

Filed Under : Transparency