We begin this chapter with a quick look at a recent public policy debate in Texas over the creation of the Texas Enterprise Fund, which was designed to attract new businesses to the state and promote the expansion of existing businesses. This fund is particularly interesting because it was approved at a time when budgets for state programs were being cut drastically in responses to a rather sharp economic recession. How the push and pull over this fund unfolded provides a unique glimpse of the forces at work in the state's political economy.
This short case study is followed by an overview of the evolution of the modern Texas economy. The economy of the state is much more diverse, urban, industrial, technological and international than it was even just a decade ago. Becoming familiar with the nature, shape, and overall dimensions of our modern state economy gives us a broad perspective of the issues and actors involved in our political economy.
We then examine how state government in Texas is financed. Government finance on all levels involves revenues and expenditures, also known as fiscal policy. Revenues come from a variety of sources, including taxes, federal grants and other transfers, user fees, interest income, and other sources. For most governments - certainly most governments whose jurisdiction is comparable to Texas - the primary source of revenues is taxes. We will review different tax schemes (sales taxes, income taxes, excise taxes, other payroll taxes, and more) to understand who wins and who loses. Additionally, we will compare Texas to other states to put into context the tax burden borne by Texans.
Finally, we briefly examine a set of prominent public policy issues to survey some of the economic and social policies that have emerged from the evolving structure of the state's political economy.