Unified Development Budgets

As Greg LeRoy (GoodJobsFirst) points out, "As states grapple with their worst deficits in more than half a century, policymakers seek better data to help with budgeting decisions. But most states spend the bulk of their economic development budgets almost invisibly, in uncollected taxes, a.k.a. 'tax expenditures.'"

He continues, "That makes it hard to see -- much less evaluate -- where most of the money is going. Most states publish a "tax expenditure budget," but they are inconsistent and often incomplete. Even if they are complete, they don't stem deficits. That's because income tax breaks are corporate entitlements, so they deny states budget control. That is, even if a state's budget is in crisis and appropriations for public services are being slashed, there is no debate about the tax spending; a company just claims the credit if it is entitled to it."

One promising innovation: Unified Development Budgets -- an annual statement to the legislature with all forms of spending itemized in one place. All tax credits (such as those for investment, job creation, enterprise zones or research and development), all tax exemptions (such as sales and utility tax breaks) and all appropriated spending (such as training, manufacturing extension services, loans and loan guarantees). With this system, policymakers can see the state's true spending priorities and trends.

The State of Texas has enacted such an innovation.

§ 403.030[0]. INFORMATION ON ECONOMIC DEVELOPMENT ACTIVITIES.

(a) For purposes of evaluating the effect on economic development in this state, the comptroller, before each regular session of the legislature, shall collect and make available information that:

(1) lists the strategies in the General Appropriations Act identified as meeting the statewide priority goal or service category of economic development, if any, of each state agency and institution of higher education, as defined by Section 61.003, Education Code, including:

(A) legislative appropriations or actual expenditures, as applicable, for each strategy;

(B) the method of financing of each strategy; and

(C) outcome measures associated with each appropriate strategy that are listed in the General Appropriations Act or the Automated Budget and Evaluation System of Texas (ABEST);

(2) lists all investments financed with money from the Texas growth fund created by Section 70, Article XVI, Texas Constitution;

(3) contains a summary of the information reported under Section 4C, Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes), by each corporation created under Section 4A or 4B of that Act and a copy of the report submitted by each of the 10 corporations with the largest total revenue in the most recent fiscal year ending before the date the information compiled under this section is made available;

(4) contains a summary of the report required by Section 403.014 and information on the effect on revenues of allocation or apportionment under Sections 171.106 and 171.1061, Tax Code;

(5) contains a summary of reports the comptroller is required to submit by other law to evaluate the effectiveness of Tax Code provisions, including reports required by Sections 171.707, 171.727, 171.759, and 171.809, Tax Code; and

(6) to the extent practicable, contains information on employment, capital investment, and personal income relating to:

(A) at least two tax provisions described by Section 403.014; and

(B) changes in school district property tax law or Tax Code provisions enacted by the most recent legislature.

(b) The information compiled by the comptroller under this section must cover the five-year period ending on the last day of the most recent fiscal year ending before the date the information is made available.

(c) The comptroller may request from any appropriate entity or agency information necessary to compile the information described by this section. Each entity or agency shall cooperate with the comptroller in providing information under this section. The Legislative Budget Board shall provide to the comptroller the information required by Subsection (a)(1).

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