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A Shake Up at LBB is Long Overdue

By Tom Aldred, Executive Director. Nov. 4, 2019

A recent Texas Tribune piece accuses Lieutenant Governor Dan Patrick of letting the state's Legislative Budget Board (LBB) "fall apart," amid reports of declining staff numbers, lack of personnel in senior staff positions, and what the Tribune describes as a "nadir" for morale at the LBB. In reality, a fresh approach from the LBB is long overdue and Lt. Gov. Patrick should be applauded for his stance.

First, a little history. Per its own website, LBB was created amid concern over higher state spending in the aftermath of World War II, which prompted a need for a "continuous review of state spending." To help legislators keep tighter control over the state's coffers, each state agency would be required to submit appropriations requests to the LBB for review. LBB would then make recommendations to the legislature. That process essentially continues today.

LBB has a unique structure as a joint board led by the Lieutenant Governor and the Speaker of the House. It also has its own staff, who, in theory, provide independent and objective analysis of state appropriations. Similar to the federal Congressional Budget Office, LBB is supposed to give legislators an idea of the fiscal implications of proposed legislation. For observers of the Texas legislative process, the phrase "this bill has no fiscal note" has become commonplace, usually from the lips of a legislator or lobbyist touting the notion that their bill won't cost a dime.

However, despite what economists might tell you, projecting the future is at best fraught with difficulties and inaccuracies and at worst subject to biases and political gamesmanship. LBB's analyses have tended to fall somewhere in the middle of that spectrum, which makes it hard for legislators to discern the true costs of a particular piece of legislation.

In 2015, for example, TCCRI submitted legislative testimony pointing out that in the two previous legislative sessions, 24 bills were enacted that affected the Texas Department of Licensing and Regulation (TDLR). These bills required TDLR to implement a host of new licensing standards affecting dozens of industries, yet LBB's analyses claimed that only one of these 24 bills would have a fiscal cost to the state, noting that the 23 other bills could be implemented "within existing resources." However, in the 2016-17 state budget - afterthose 24 bills were implemented - appropriations to TDLR increased by more than $60 million and the agency's full-time employee count grew from 408 to 448 compared to the last budget before those 24 bills became law.

TDLR is just one example. Imagine that same situation extrapolated across every agency of state government. Legislators being advised by LBB that numerous bills have no fiscal impact and yet the agencies themselves receive higher and higher appropriations to implement those bills.

But it is not just the cumulative effect of bills projected to have no fiscal impact that should be of concern. LBB's analysis of major pieces of legislation has also been troubling. When the Children's Health Insurance Program (CHIP) was created, for example, LBB projected that it would cost the state $334 million in its first two years of operation. The actual cost in those first two years was $419 million, 25 percent higher than LBB's projection. Errors like this tend to compound over time. The cost of CHIP in the current budget? $2 billion.

On top of these issues, the LBB has taken on or been given numerous other responsibilities outside of its original mission. Most notable was the transfer of agency performance reviews from the Comptroller to the LBB. Branded as the "Government Effectiveness and Efficiency Report" (GEER), it became an opportunity for LBB staff to opine on policy preferences and to encourage specific legislative appropriations. For example, the 2015 report’s many suggestions included eliminating a contingency rider expressing legislative intent not to raise Teacher Retirement System premiums in the 2016-17 biennium, advocating a $386,000 appropriation to the Texas Department of Insurance to better administer and enforce the Amusement Ride Program, statutory changes to the state’s nursing studies curriculum, new policies to address truancy in public schools, and ways to expand outreach of the driver responsibility program.

Over time, the LBB has grown into a quasi-state agency with almost 150 full-time employees. Many of its newer functions – including GEER – underscore that it has gradually morphed into a powerful bureaucracy that, entirely at a staff level, wields significant influence over the state budget and related legislation. LBB acknowledges that it “provides a wide range of services and informative documents not required under general law.”

At its inception, LBB was given the narrow function of making budget recommendations to the legislature based on appropriations requests submitted by state agencies. It is clear that some level of trust needs to be restored in how the LBB arrives at some of its recommendations and projections. In TCCRI's testimony referenced above, we suggested that a good starting-point would be to audit fiscal notes for accuracy on a regular basis. We have also recommended removing some extraneous functions from the LBB, such as the Government Effectiveness and Efficiency Report, so that it can focus on its core responsibilities.

LBB was created to help the legislature keep tighter control over state spending. It should refocus on that mission. Governor Patrick’s actions vis-à-vis the LBB are not a cause for concern. They are a necessary step needed in order to get the LBB back on track.

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