State Budget Practice Report Cards and Budget Resources Guide
Its rainy day fund deposits of almost $12 billion helped get Texas a top A average in reserve funds for fiscal 2017 through 2019. Yet the second-most-populous state managed only a D-minus average in legacy costs, the lowest mark possible, after appropriating less for public worker pensions and other postemployment benefits (OPEB) than actuaries recommended.
With annual contributions to the three pensions administered by the Employment Retirement System of Texas less than actuarially determined amounts, funding was 71 percent of estimated obligations in 2018. While that was 1 percentage point above the total for all states, it represents a decline from 2016, when the system was 73 percent funded. Texas also failed to follow actuarial recommendations for OPEB, which includes health care. In fiscal 2018, the state contributed only $325 million, just 16 percent of the actuarial sum.
The state’s A average in reserve funds reflects policies that track best practices cited by the Volcker Alliance in the recent working paper, Rainy Day Fund Strategies, A Call to Action. The dedication of the No. 1 crude oil–producing state to maintaining a healthy economic stabilization fund is rooted in a vigorous funding system linked to the volatility of its petroleum and natural gas revenues. This includes the deposit of a large portion of severance tax collections in years when they exceed 1987 levels. Additionally, Texas deposits half of any unencumbered general fund surplus into the stabilization fund at the end of each biennium.
Texas’s improvement in multiyear expenditure and revenue estimating processes helped it earn a C average in budget forecasting. The state did not extend revenue or expenditure projections beyond its biennial budget in 2017 but began to do so the following year, when a legislatively mandated report provided expenditure and revenue forecasts for 2018–27.
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 2017 through 2019. 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 eight 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.