Volume I
ContentsDevelop a Better-Educated Workforce
Bring Common Sense to Regulations
Introduce Competition into Texas Government
Make Government More Responsive to the Taxpayer
Improve Government Performance and Accountability
Return Control to Communities and Individuals
Make Texas Schools and Communities Safer
Reduce the Size of Government
Use Technology to Cut Costs and Increase Quality
Conclusion
Fiscal Impact
By all accounts, Texas, on the cusp of the 21st century, is driven by a powerful, well-tuned economic engine.
The Lone Star economy, more diverse than ever before, is generating jobs at a near-record pace. Inflation remains tame. Times have been rough for drought-stricken agriculture and a slumping oil patch, but most Texans are seeing better days than they have for nearly two decades.
Key economic indicators are strong and vigorous. Housing starts surged a whopping 30 percent in 1998, rising to their highest level since the unprecedented housing boom of 1984. Personal income, after inflation, is climbing by 5 percent a year. Annual exports, an indicator of Texas' growing muscle in the international economy, have quadrupled to $84 billion over the past decade.
Companies in Texas are doing better, overall, than businesses in the rest of the United States. The state's annual rate of growth in nonagricultural wage and salary employment has exceeded that of the nation as a whole for the last 39 quarters--since mid-1989. Meanwhile, growth in the state's domestic product is expected to outpace the nation's by 1.4 percent a year for the next two years.
It's no surprise, therefore, that Texans feel good about their economy. The state's consumer confidence last year reached its highest level since regional readings began in 1981.
With the exception of agriculture and oil, times are good--so good the 1999 Legislature has $5.6 billion in additional funds available over the amount appropriated last session.
Controlling Government Growth
Although they may be tempted to savor the moment and open the state's coffers for their favorite causes, state lawmakers still face unusual pressures. No one wants to spend lavishly on scores of
new government programs and then, when the economy slows, be forced to make painful choices between program cuts and tax hikes. The days of roller-coaster growth and spending are over--or should be, at any rate.
"Texas is a big, extended family. Like any good family, we need to spend wisely, invest wisely, and save some for a rainy day." Carole Keeton Rylander
Most Texans believe that our policymakers should keep state spending on a tight leash, even with a record budget surplus. The best way to prevent government from growing without bounds in good economic times is through a judicious combination of tax cuts and spending restraints. These two measures, taken together, can force state government to become lean and stay trim during good times and bad.
Still More to be Done
Texas government today is more efficient, effective, and accountable to its customers, the citizens of Texas. The state has become a national model in a number of areas including performance budgeting and educational accountability.
The basic challenge facing Texas policymakers remains: to reduce the size and cost of state government while making government accountable to the taxpayers.
But we cannot rest on our laurels. We can, and must, continue to do better.
For example:
The basic challenge facing Texas policymakers remains: to reduce the size and cost of state government while making government accountable to the taxpayers.
- Government spending has slowed, but its rate of growth remains too high. The Legislature appropriated $87.1 billion for Texas' 1998-99 biennium, of which $48.9 billion represented undedicated general revenue; these levels represented increases of 22.7 and 23 percent, respectively, over the appropriations of just two biennia ago.
- Many duplicative functions and overlapping responsibilities have been pared from state agencies, but others remain untouched.
- Texas has eliminated some burdensome regulations, but hundreds of outdated rules remain on the books and new regulations continue to multiply, many unnecessarily.
- Texas has made some attempts to introduce competition into state government, but the efforts have been piecemeal and have proceeded in fits and starts. A comprehensive approach is needed to truly open state government to the benefits of the competitive market.
- Texas has taken a national lead in education reform, but too many of our children continue to graduate from high school without the skills needed to succeed in a technology-driven economy.
Fiscal Impact of the Performance Review Recommendations, Fiscal 2000 and 2001
(Amounts in Millions)Issue Area General Revenue Impact Other State Funds Impact Federal Funds Impact Total, Including Federal Funds Education $65.40 $-1.00 $-1.07 $63.38 Regulatory Reform 0.07 0.00 3.84 3.90 Cross Government 20.00 14.30 0.00 34.34 General Government 71.40 671.90 -0.13 743.17 State Employees 188.00 -7.40 0.00 180.60 Health and Human Services 79.70 0.00 122.78 202.48 Public Safety -0.09 -18.00 26.45 8.36 Housing 5.00 0.00 8.60 13.60 Total $429.60 $659.81 $160.48 $1,249.88 Note: Totals presented may not add due to rounding.
A Vision for Our Future
Comptroller Rylander's vision for the 21st century is paychecks and jobs for Texans; limited government, unlimited opportunity. Her commitment to free markets, smaller government, lower taxes, and increased educational excellence for Texas children is unwavering.
Nothing is more important than education. The Comptroller will be "the education watchdog" for the people of Texas. She will see to it that more of every education dollar goes directly into the classroom where it belongs.
Limited government and lower
taxes spur economic growth. Research has demonstrated repeatedly that states with low tax burdens outperform their high-tax counterparts in economic growth and in job creation.[1] Allowing individuals and businesses to keep more of the money they earn provides more capital for savings, investment, and consumer spending, and thus encourages the creation of new jobs.
Comptroller Rylander's vision for the 21st century is paychecks and jobs for Texans; limited government, unlimited opportunity. Similarly, a lighter regulatory burden frees businesses from bureaucratic chores and allows them to focus on increasing value for their shareholders and customers. Government should not be in the business of micromanaging business--when it does, the taxpayer ultimately pays the price.
Smaller government has become a fashionable topic, but it continues to garner more lip service than action. Trimming government requires a focus on core functions, the introduction of competition into government services, the abolition of unnecessary work, streamlined work processes, and the reduction or elimination of low-priority programs. Most of all, achieving smaller government requires policymakers to ask hard questions about each and every program, the most fundamental being: "Should government even be doing this at all?"
Real, fundamental change cannot be achieved within any institution--whether in government or the private sector--without a vision of where you want to go and how to get there. Comptroller Rylander's vision for Texas government as we approach the 21st Century is based on a simple set of principles. These principles, highlighted in the box below, will guide the Comptroller's future efforts to scrutinize government, and include the work of a Texas citizens' waste-fighting commission soon to be formed.
10 Principles for Texas in the New Century
- Develop a better-educated workforce
- Direct more of every education dollar into the classroom
- Raise the bar on student performance
- Cut taxes in Texas
- Introduce competition into Texas government
- Improve government performance and accountability
- Reduce the size of government
- Bring common sense to regulations
- Use technology to cut costs and increase quality
- Return control to communities and individuals
A New Direction for the Texas Performance Review
Past Texas Performance reviews focused largely on identifying short-term cost-cutting opportunities in specific programs at individual agencies. The exercise was useful, particularly in its early days, in helping lawmakers and agencies identify ways to save money. However, as the 1990s come to a close, the easiest savings opportunities--the "low-hanging fruit" have already been plucked. To move forward, Texas needs a new approach.
To ensure that cuts and savings are permanent and won't become undone in future budget cycles, Texas needs systemic, structural reforms that cut across state agencies. Texas has had some success in improving its systems--a notable example is the introduction of performance budgeting--but for the most part, public employees remain trapped in systems that fail to adequately reward excellence, discourage competition, and ultimately fail to serve the best interests of taxpayers.
Government often fails to deliver services in a cost-effective manner because state employees work in an environment that does not reward excellence. The pay of front-line workers generally is linked to longevity, not performance. Public-sector managers have even fewer incentives. Their compensation typically is tied to the size of their staff and budget.
Comptroller Rylander proposes a series of structural changes, ranging from rewards for performance to customer service standards for each agency, with objectives that go further than the elimination or improvement of specific programs.
The 86 proposals in this report are
intended to achieve continuous improvement in state government's operations, reduce costs both in the short and long terms, and change incentives within government. If adopted by the 1999 Legislature, these recommendations would free up nearly $937 million in all funds through fiscal 2001 and even greater rewards in future years. When combined with the revenue available in the budget surplus, these savings should allow the state to enact record tax cuts while simultaneously making a very substantial investment in public education. This effort will further the Comptroller's ultimate goal: a leaner, less costly, more efficient, and more accountable state government.
"Many times government strives to do better what it shouldn't be doing at all." Carole Keeton Rylander
About this Document Many recommendations in this report were prepared by the Texas Performance Review staff under John Sharp, the previous Comptroller of Public Accounts, and published in a "staff draft" in December 1998. Comptroller Carole Keeton Rylander has substantially modified many of these proposals. She and her staff also have introduced many new ideas and specific recommendations that underscore her commitment to thoroughly reshaping Texas government.
The proposals referenced in this volume are described in detail in Volume II of this report. Issues in Volume II are divided into eight sections that generally correspond to major program areas of state government, and identified according to the following abbreviations:
ED Education RR Regulatory Reform CG Cross-Government GG General Government SE State Employment HHS Health and Human Services PS Public Safety HOU Housing For Instance, ED 1 is the first issue within the Education section of Volume II.
Endnotes
1 Joint Economic Committee of Congress, "State and Local Taxation and Economic Growth: Lessons for Federal Tax Reform," by Richard K. Vedder (Washington, D.C., December 1995). This is true whether growth is measured by income, jobs, movement of capital, or population movement.