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History

Before 1949, Texas did not have an effective system of budgeting. The state's financial procedures were widely criticized as haphazard and arbitrary, and state agencies were funded by individual appropriation bills. Budgeting was assigned to the Board of Control, the state's purchasing agent and general housekeeping agency and predecessor to the General Services Commission. The Board of Control had no authority to refuse requisitions, however, or to make periodic adjustments in budgetary expenditures for state agencies.

The impetus for the creation of the Legislative Budget Board (LBB) was twofold: (1) escalating state government expenditures after the end of World War II; and (2) a recommendation from the State Auditor's Office for the creation of a legislative committee for the continuous review of state spending. The LBB was created in 1949. The legislation required all state agencies to submit their budget requests to The Board for review and recommendations.


Statutory Responsibility

The LBB's statutory responsibility remained virtually unchanged until 1973, when legislation was enacted that significantly expanded The Board's duties to include evaluation of agency programs and estimation of the probable costs of implementing legislation introduced in the legislative session.

Performance Auditing

In 1973, the Legislature directed the LBB to establish a system of state agency performance audits and evaluations. The goal of performance evaluation was to provide a comprehensive review of state agency programs and publish the results of these reviews in a performance report to each regular session of the Legislature. In 1993, the requirement that the LBB evaluate every agency each biennium was removed by the Legislature. Prior to 1994, the Program Evaluation Division of the LBB carried out this function. Since then, evaluations have been a joint effort of the LBB analyst assigned to the agency under review and the Performance Audit group.

Fiscal Note Creation

In 1973, the Legislature also directed the LBB to establish a system of fiscal notes identifying the probable costs of any bill or resolution that would authorize or require the expenditure of state funds for any purpose other than those provided for in the General Appropriations Act. Since 1977, the rules of both the House and the Senate have further required fiscal notes on bills that would have statewide impact on units of local government. In 1987, the Legislature began requiring that a criminal justice policy impact statement also be included in fiscal notes; in 1990, the Legislature added the requirement for equalized education funding impact statements. In 1993, the Legislature directed the LBB to provide tax equity notes.

“Pay-As-You-Go” Spending Limitation

The state constitution contains two major provisions that limit total state appropriations for each biennium. Article III, Section 49a (adopted in 1943), requires that the Comptroller of Public Accounts submit to the Governor and the Legislature an itemized estimate of revenue that will be available for expenditure during the forthcoming biennium. Appropriations in excess of anticipated revenue may not be made except by a four-fifths vote of each house. This provision is known as the "pay-as-you-go" spending limitation.

Limitation on Appropriation Growth

In 1978, Article VIII, Section 22 of the Texas Constitution, was amended by what was described as the "Tax-relief Amendment." Included in this amendment was a section limiting the growth of appropriations from certain revenues to the estimated rate of growth of the state's economy. In 1979, the Legislature made the LBB responsible for determining the information necessary to establish this constitutional limit on appropriations. This provision is known as the limitation on growth in appropriations.

Budget-execution Authority

Another change in LBB responsibilities came in 1985, when voters adopted a constitutional amendment, Art. XVI, Section 69, authorizing the Legislature to require prior approval for the expenditure of funds by an agency or the transfer of appropriated funds beyond current authorization. The implementing legislation for this process, referred to as budget-execution authority, was amended in 1991. Between legislative sessions, the Governor or the LBB may propose (1) to prohibit a state agency from spending all or any part of an appropriation made to the agency; (2) to transfer an appropriation to another state agency; or (3) to change the purpose for which an appropriation was made. The LBB must approve and/or amend a Governor's proposal, or the Governor must approve and/or amend an LBB proposal.


Zero-Based Budgeting

For almost 20 years (1973–1991), budgeting in Texas was based on the concept of zero-based budgeting. In 1973, the Legislature approved a House concurrent resolution calling for program budgeting, and the Senate passed a simple resolution asking the LBB "to study the concept of zero-base budgeting with a view toward possibly implementing its better features as aids in the budget-recommendation and decision-making process." In September 1973, Governor Dolph Briscoe, Speaker Price Daniel, and the LBB approved a preliminary design for the implementation of a zero-based, program budgeting system to begin in the 1976–1977 biennium.


Strategic Planning and Budgeting System

House Bill 2009 (VACS, Article 6465-31), enacted in 1991, required each executive branch state agency and each institution of higher education to develop a six-year strategic planning process. Two years later, the Legislature amended the statute to shorten the planning horizon to five years. The Legislature hoped that strategic planning could provide statewide direction in key policy areas and allow the state to move away from crisis-driven decision making.

Later in 1991, the LBB adopted a budget reform proposal to establish a performance-based budgeting system. The proposed system consisted of several elements:
  • Establish a performance and achievement based budgeting system;
  • Strengthen legislative monitoring of budgets;
  • Develop standardized unit costs;
  • Direct the State Auditor to certify performance and achievement;
  • Streamline the budget process; and
  • Base appropriation levels on outcomes.
In response to budget reform proposals and the strategic planning statutes, the LBB in cooperation with the Governor adopted a strategic planning and budgeting system (SPB) in 1992. The SPB was designed to integrate the strategic planning process with performance-based budgeting. The system was structured to recognize the relationships between funding and performance, between accountability and resource allocation, and between spending and results. The goal of SPB was to focus on the quality of services provided. In 1993, the Legislature took another step forward and included agency goals, strategies, and performance targets with each agency's appropriation in the 1994–1995 General Appropriations Act.

In 1991, the Legislature created the Medicaid Analysis and Cost Control Office (MACC) as part of the LBB. The MACC was designated to seek ways that Texas could increase federal receipts by focusing initially on the Medicaid Program. In 1993, the Legislature merged the staff of the Legislative Education Board and the staff of the Educational Economic Policy Center into the LBB. With reorganization of the LBB in 1994, these groups became the Federal Funds Analysis Team and the Public Education Team, respectively.

In 1999, responsibilities for approval of information resource strategic plans and quality assurance review of major information resource projects were transferred by interagency contract from the Department of Information Resources to the LBB. In 2001, amendments of the General Appropriations Act and the Government Code resulted in additional LBB responsibilities for state agency information resources.


Directors

Since its creation in 1949, there have been six LBB Directors. They and their terms (including acting periods) are noted below:

  • Vernon A McGee
    (January 1950 to September 1966)

  • Thomas M. Keel
    (September 1966 to September 1982)

  • James P. Oliver
    (September 1982 to April 1994)

  • John M. Keel
    (April 1994 to June 2004)

  • John S. O'Brien
    (June 2004 to March 2012)

  • Ursula M. Parks
    (March 2012 to Present)