Deck 11: Public Finance in Texas

Question 1

Following a legislative decision in 2003 to reduce state funding to higher education, which source of university revenue began to increase most rapidly?

A) gasoline taxes
B) student tuition and fees
C) general revenues
D) state income tax
E) Texas state lottery revenues

Answer 1

B

Question 2

Compared to other states, which statement regarding revenue sources for the state of Texas is true?

A) Texas has low sales tax and low income tax.
B) Texas has no income tax and low sales tax.
C) Texas has high income tax and high sales tax.
D) Texas has no sales but high property tax.
E) Texas has no income tax but high sales tax.

Answer 2

E

Question 3

Prior to 2003, tuition for public colleges and universities in Texas was set by

A) the Board of Education.
B) the state Department of Education.
C) the governor's Department of Education.
D) the state legislature.
E) the federal government.

Answer 3

D

Question 4

What is the argument commonly used by supporters of a state income tax?

A) It will probably be quite regressive.
B) It is a fairer but a highly unreliable source of revenue.
C) It makes Texas more attractive to businesses that are considering relocating from out of state.
D) It is not influenced by special interests.
E) It is a fairer and more reliable source of revenue.

Question 5

Which is the single largest source of tax revenue for the state of Texas?

A) income
B) sales
C) property
D) gasoline
E) various taxes on the energy industry

Question 6

According to our text, what determines the amount of tax revenue generated from oil and natural gas produced in Texas?

A) the minimum wage and unemployment rate
B) market price and the amount produced
C) federal regulations and excise taxes imposed by the federal government
D) pipeline construction and environmental issues
E) refinery capacity and foreign competition

Question 7

Federal funds appropriated in Texas generally are

A) widely disbursed across numerous state agencies.
B) concentrated in one agency.
C) concentrated on a few state agencies.
D) determined at each annual legislative session.
E) earmarked almost exclusively to education.

Question 8

Prior to 2003, tuition rates for public colleges and universities in Texas tended to be

A) slightly above the national average.
B) slightly below the national average.
C) about even with the national average.
D) much higher than the national average, because Texas has no state income tax.
E) low compared to other states.

Question 9

If Texas instituted a progressive income tax

A) low-income Texans would pay a lower tax rate than wealthy Texans.
B) low-income Texans, collectively, would contribute less to the state budget than wealthy Texans would.
C) wealthy Texans would pay at a lower tax rate.
D) people with lower incomes would pay a higher tax rate.
E) poor homeowners and renters would pay taxes at higher rates.

Question 10

Next to revenue generated by state taxes, the second largest source of state revenue comes from

A) the Texas lottery.
B) gasoline taxes.
C) the federal government.
D) borrowing.
E) pollution taxes levied on the energy industry.

Question 11

Overall, the tax system in Texas is generally considered to be regressive, which means that

A) the tax burden consumes a greater percentage of income received by lower-income individuals.
B) the tax burden consumes a greater percentage of the income earned by higher-income individuals.
C) everybody pays the same percent of the their income in taxes.
D) the more income you have, the larger the percentage of it that goes to pay taxes.
E) higher-income individuals pay progressively more taxes based on their incomes.

Question 12

Given the budget structure and constitutional limitations upon spending and taxing, legislators seeking to balance the budget are left with

A) many choices as to how to balance the budget.
B) few choices as to how to balance the budget.
C) only one choice as to how to balance the budget.
D) no other option than to borrow heavily, thereby increasing state debt.
E) This issue is not discussed in the text and is therefore of no consequence.

Question 13

Who pays the greatest portion of their income in property taxes?

A) business owners
B) wealthy homeowners and renters
C) poor homeowners and renters
D) renters
E) Everybody pays the same.

Question 14

Federal money is an important part of the Texas budget, but monies that Texas receives from the federal government

A) often come with strings attached.
B) are usually categorical grants with no federal guidelines or mandates whatsoever.
C) are too insignificant to be included in the state budgetary process.
D) are usually not received in time to affect the budget process.
E) are usually earmarked for powerful Texas labor unions.

Question 15

Texas spending on a per capita basis is

A) about even with the national average.
B) much higher than the national average.
C) much lower than the national average.
D) among the highest, particularly in education.
E) second only to that of New York State.

Question 16

Federal matching funds are

A) state monies going to support the federal government in its efforts to reduce the deficit.
B) awarded to states that agree to fund a federal program on behalf of their own citizens.
C) always distributed to states without any strings attached.
D) only awarded to states that have an income tax.
E) so small that they are an inconsequential part of state budget policy.

Question 17

Which phrase best characterizes Texas's reputation in terms of taxes and services?

A) high tax, low service
B) low service, low tax
C) high tax, high service
D) no tax and all services
E) Despite its reputation, Texas's tax and service rates exceed the national averages.

Question 18

Texas will not implement a statewide income tax in the immediate future because

A) the voters would not approve the measure.
B) the federal government will veto a state constitutional amendment authorizing such a tax.
C) the Texas legislature could override the vote of the people if voters approved it.
D) there are currently other ways that Texas can generate revenue, so it may not be necessary to implement a statewide income tax.
E) the federal government must first approve it, and that is unlikely.

Question 19

Why must the Texas legislature maintain a balanced budget?

A) It is required by the U.S. Constitution.
B) It is required by the Texas Constitution.
C) Each legislative session decides to balance or not balance the state budget.
D) The Texas Office of the Comptroller writes the state budget.
E) Prior to assuming office, politicians in Texas swear an oath to balance the budget.

Question 20

Which of the following are not generally considered to be an example of regressive taxes or fees?

A) sales taxes
B) property taxes
C) auto registration and inspection fees
D) income taxes
E) excise taxes on alcohol and cigarettes

Question 21

The Economic Stabilization Fund (ESF) is commonly known as the

A) bailout for poorly managed school districts.
B) fund to take advantage of economic opportunity for investments in Texas.
C) Rainy Day Fund.
D) Too-big-to-fail Fund.
E) fund to stabilize the price of oil and gas.

Question 22

In theory, Texas has a dual-budget system, meaning the budget authority is shared by the governor and the legislature; however, in practice, the primary player(s) in the budget is/are

A) the governor.
B) the legislature.
C) the taxpayers.
D) special interests.
E) the courts.

Question 23

Which statement regarding state-federal spending in Texas is true?

A) Texas spends more on state-federal programs than most states do.
B) Texas spends less on state-federal programs than most states do.
C) Texas spends more than any state for state-federal programs because Texans favor massive public welfare programs.
D) State-federal spending in Texas has been historically high relative to that of the rest of the states.
E) Federal efforts to balance the budget have virtually eliminated all state-federal spending in Texas.

Question 24

Which of the following agencies is responsible for managing the Permanent School Fund?

A) the Texas legislature
B) the Texas Board of Education
C) the Texas comptroller
D) the Higher Education Coordinating Board
E) the Texas land commissioner

Question 25

Appropriations bills work their ways through both the House and the senate simultaneously. When there is disagreement on two versions of a bill, the bill is reconciled by

A) a state judge.
B) the governor.
C) a select committee.
D) a conference committee.
E) a vote of the House and senate.

Question 26

The Permanent University Fund (PUF) was established in 1876 with a land grant of 1 million acres. It contributes to the support of

A) all institutions of higher education in Texas.
B) virtually all community colleges in Texas.
C) only institutions designated by the state legislative body.
D) the University of Texas and Texas A & M university systems.
E) all Texas educational institutions, regardless of size or need.

Question 27

The Legislative Budget Board (LBB) is chaired by the

A) comptroller.
B) governor.
C) Speaker of the House of Texas.
D) lieutenant governor.
E) The governor appoints the chair every two years.

Question 28

Which of the following is at the heart of the budget process in Texas?

A) the lieutenant governor
B) the Texas Higher Education Coordination Board
C) the Texas comptroller
D) the Texas Education Commission
E) unions

Question 29

The National Research University Fund (NRUF) was established through a constitutional amendment to provide a source of funding for

A) community colleges in poorly performing districts.
B) community colleges in primarily minority districts.
C) independent school districts who sought to reduce the dropout rate.
D) school tuition relief based on the high rate of tuition increases colleges were experiencing.
E) universities seeking to achieve national prominence as research institutions.

Question 30

One significant component of the budget process that is relatively unique to Texas is

A) the constitutional mandate that Texas legislators write a budget every two years.
B) that, relative to other states, the rate of Texas employment and economic growth is extremely volatile.
C) a federal budget cycle that complicates the state budgeting process.
D) the unpredictability of natural disaster funding.
E) the governor's political agenda, which is influenced by election results.

Question 31

The Permanent School Fund (PSF) was created in

A)1854.
B)1932.
C)1996.
D)2001.
E)2010.

Question 32

The process of drafting a bill is referred to as

A) enrollment.
B) introduction.
C) markup.
D) referral.
E) filibustering.

Question 33

Who prepares the BRE?

A) the Legislative Budget Board
B) the comptroller
C) the secretary of state for Texas
D) the legislative committee on tax fairness
E) the lieutenant governor

Question 34

The Texas Constitution specifies that state payments for assistance to needy children and their caretakers shall not exceed ______ percent of the states' budget in any biennium.

A) 1
B) 15
C) 25
D) 40
E) There is no limit.

Question 35

The purpose of the Biennial Revenue Estimate (BRE) is to

A) provide a detailed forecast of total revenues that the state is expected to take in.
B) provide a detailed forecast of expenditures the state expects to be obligated for in the two-year budget cycle.
C) provide a detailed forecast of the estimated federal funds the state can expect to receive during the two-year budget cycle.
D) provide the governor a detailed estimate of the likelihood of a balanced budget during the two-year budget cycle.
E) provide the federal government a detailed estimate of the need for federal funds to balance the Texas budget.

Question 36

Who certifies the state budget of Texas?

A) the governor
B) the legislature
C) the chair of the LBB
D) the comptroller
E) the Speaker of the House and the lieutenant governor

Question 37

Which statement concerning matching funds in Texas is true?

A) Texas has historically enjoyed relatively high matching fund participation.
B) Texas has historically participated in matching funds at a relatively low rate.
C) Texas has participated in matching funds more aggressively than most states have.
D) Texas has never participated in matching funds funding because of statewide disapproval of big government.
E) Matching funds have not been available to Texas since Reconstruction.

Question 38

The main purpose of the Permanent School Fund (PSF) is to

A) buy textbooks for Texas children.
B) fund primary and secondary schools in the state.
C) fund universities and community colleges in the state.
D) fund the two main universities in Texas: the University of Texas and Texas A & M.
E) fund religious education in Texas.

Question 39

The funds generated by the Permanent School Fund are distributed to school districts across the state

A) based solely on financial need.
B) based on attendance rates.
C) as mandated by the Texas Constitution of 1876.
D) at the discretion of the governor.
E) based on the tax rate for school districts.

Question 40

Authorized by voters in 1991, the Texas state lottery generates a sizeable sum for the state budget. Which of the following statements regarding the Texas lottery is true?

A) The lottery is played almost entirely by poor people.
B) The lottery is played almost entirely by the wealthy.
C) The lottery is played by large numbers of people from all social classes.
D) All Texans unanimously support the lottery.
E) The lottery is the sole source of funding for education in Texas.

Question 41

To address the budget shortfall in the 2012-2013 budget, the most common tactic used by the legislature was

A) raising tax rates.
B) borrowing from the federal government.
C) spending cuts.
D) a newly implemented income tax.
E) a brand new source of revenue derived from underground fracking.

Question 42

Because of recent budget shortfalls, the state legislature will implement a state income tax effective in 2016.

Question 43

Texas maintains a balanced budget because the state Constitution requires it.

Question 44

According to the text, just as the economy began to improve and state revenues started increasing, a new threat arose to threaten the newly balanced budget. It was the

A) rising interest rates that increased the cost of borrowing.
B) increasing health care costs due to recent efforts to reform the health care system.
C) underfunded state pension system.
D) rising salaries of teachers.
E) state's public unions threatening a strike.

Question 45

From an overall standpoint, which statement is true?

A) The Texas economy is closely tied to the national economy.
B) The Texas economy is largely immune to the national economy.
C) The Texas economy is much larger than the national economy.
D) The Texas budget cycle effectively insulates the state economy from the rest of the world.
E) Oil and natural gas production within the state's borders generate over two-thirds of state tax revenue.

Question 46

Which of the following statements is true?

A) During the 2011 legislative session, it became apparent that the booming state economy had dramatically increased state revenues.
B) The effects of the Great Recession did not reach Texas, as the state enjoyed surplus revenues.
C) The legislative session was particularly difficult because the Great Recession had significantly reduced state revenue.
D) The Texas legislature did not meet in 2011.
E) Resulting from the effects of the 2011 economic recession, the state budget deficit equals GDP.

Question 47

Federal expenditures play an important role in the Texas state budget.

Question 48

The Texas legislature increased ______ to help compensate for lower property tax revenues in the 2012-2013 budget cycle.

A) gasoline taxes
B) sales tax rates
C) income tax rates
D) state corporate franchise taxes and cigarette taxes
E) both gasoline taxes and sales tax rates

Question 49

The Rainy Day Fund is more properly known as the National Research University Fund.

Question 50

What action forced the legislature to bring the 2012-2013 state budget into balance?

A) The Texas Supreme Court ordered a balanced budget.
B) The LBB passed the balanced budget, but it was vetoed by the governor.
C) A special session of the Texas legislature voted for a balanced budget.
D) The comptroller filed a lawsuit against the governor and the legislature.
E) The federal government loaned Texas enough money to balance the Texas budget.

Question 51

Texas is known as a high tax state; because of this, it is a good place to do business.

Question 52

Texas's 6.25 percent sales tax is the tenth highest in the nation.

Question 53

______ monitors state agencies to ensure that they comply with the state budget.

A) The LBB
B) The LBB, in conjunction with the State Auditor's Office,
C) The conference committee
D) The comptroller
E) The state legislature

Question 54

Nationally, what two factors caused the bubble in the real estate market?

A) high interest rates and high foreclosures
B) low interest rates and low foreclosures
C) low interest rates and loose credit standards
D) tight credit standards and low interest rates
E) adjustable rate mortgages and poorly constructed homes

Question 55

In Texas, the governor's line item veto power is

A) prohibited by the state constitution.
B) meaningless because the legislature can override it with a simple majority vote.
C) very powerful because the governor can use it to limit expenditures.
D) meaningless because before the governor can use it, he or she must obtain approval of the comptroller.
E) The line-item veto can only be used when the governor and the LBB agree upon the veto.

Question 56

When the Texas state lottery went before the voters in 1991, the vast majority of Texans voted to approve it.

Question 57

The single most important source of revenue for state government in Texas is the property tax.

Question 58

The Texas Constitution prohibits all local governments from imposing additional sales taxes within their jurisdictions.

Question 59

When compared to the rest of the nation, the real estate collapse in Texas was

A) more severe.
B) less severe.
C) remedied by low property tax rates.
D) about the same as the national trend.
E) caused primarily by increased production of oil and natural gas.

Question 60

Taking into account increasing Medicaid and school district funding, the general revenue shortfall for the 2012-2013 biennium budget was

A) between $24 and $27 million.
B) between $24 and $27 billion.
C) about $87 million.
D) well over $100 billion.
E) nearly $1 trillion.

Question 61

What happened when tuition and fees for Texas colleges were no longer controlled or mandated by the state legislature? Discuss the background conditions that led to this decision and how this impacted state funding for higher education.

Question 62

It is common for the governor to call a special session of the legislature to deal with budget issues.

Question 63

The tax revenue projections of the LBB have been uniformly accurate regardless of changes in the economy in recent years.

Question 64

Discuss three of the five budgetary categories that are part of the budget process in Texas.

Question 65

Because the budget process in Texas operates on a two-year cycle, Texas legislators have adequate time to gather information, carefully analyze it, and craft a detailed and accurate state budget.

Question 66

The Texas economy is tied to the booms and busts of the national economy.

Question 67

The LBB's draft budget, not the governor's budget, is the one voted upon by the legislature.

Question 68

In West Orange-Cove Consolidated ISD v. Neely, the Texas Supreme Court ruled that school districts had adequate discretion to set tax rates within their jurisdictions.

Question 69

Discuss the major source(s) of state revenue in Texas and the major categories of state spending.

Question 70

Explain the strengths and weaknesses of the budgetary process in Texas.

Question 71

The Legislative Budget Board (LBB) plays an important role in the budget process in Texas.

Question 72

Explain the impact of the Great Recession on the budget of Texas.

Question 73

Under Texas's budgetary system, there is no power to shift monies between agencies or programs when the legislature in not in session.

Question 74

Identify and discuss the major players in the budget process in Texas (offices or entities).