10chapter13

10chapter13 - 13 Introduction Government's ability to...

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Unformatted text preview: 13 Introduction Government's ability to generate needed revenues is directly tied to the economy, a fact that helps explain the boom-and-bust economy of the state and the effects of economic weakness on the budget making in 2003 and 2004. Because the poor in Texas pay a higher proportion of their incomes in taxes than do the wealthy, a major issue is raised concerning the fairness of the state revenue system. Because the budget is the best guide to policy priorities, it is a practical test of how well citizens interests are accommodated in state spending. While the population of Texas has grown thirty-three percent between 1988 and 2003, the state budget, when adjusted for population growth and inflation, has been relatively flat during this period. I I I I I I I I I I I I I I I I I 13 The Texas Economy The Past Historically, Texas had a strong economy based on natural resources and is still an important producer of oil and gas. Although the economy of the state is shifting from one based on natural resources to one based on information and technology, it is still subject to the ups and downs of resource- based components such as oil and gas. The erosion of the natural resource-based economy in the late 1980s meant high unemployment, which has been exacerbated by the collapse of financial institutions and cut- backs in the defense industry. The state responded to the problems by consolidating economic development programs, developing aggressive marketing campaigns for farm and ranch products, and selling the high-technology capability of the state through industry- university partnerships. By the fall of 1999 Texas was creating 26,000 new jobs a month, although many of them were in low-paying service industries. I I I I I I I I I I I I I I I I I 13 The Texas Economy The Present Texas has not been immune to the national and international events that have rocked the nation---a sharply dropping high-tech sector, the September 11, 2001 terrorist attacks and their aftermath, and corporate scandals. Although Texas has the eighth largest economy in the world, its unemployment was hovering around six percent through 2003 due to the failure of border cities to realize the economic hopes they had based on NAFTA, a prolonged drought in the southern part of the state, the economic woes of American Airlines, and the reeling tourism industry. Because higher unemployment rates cause a demand for more government services, the economic situation that greeted the legislature in 2003 was not encouraging. I I I I I I I I I I I I I I I I I 13 The Texas Economy Analysis: At least six factors help explain the ups and downs of the Texas economy and the growth in the state budget over the past twenty-five years....
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10chapter13 - 13 Introduction Government's ability to...

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