Texas Has At Least $53.77 Billion In Surpluses of the Taxpayers Money it is not using.

  FY 2003 Report Home Page Flags courtesy of Robesus Inc.



The State of Texas at the State-level has approximately $53.77 billion of the taxpayer's money it is not using, i. e. surpluses equal to $2,417 for every man, woman and child in Texas or $9,670 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Texas.

The Exhibit A below shows the results of the FY 2003 review.

What are these surpluses we refer to?

Government surpluses, as used in this report, are funds that are not required or needed for the operation of all government operations, funds, accounts, agencies, etc., directly or indirectly, for the year(s) covered by the budget which is usually one year. Theoretically, at the end of every fiscal year, governments should have little or no cash/investments on hand. But what we have found is that most governments have huge amounts of cash and investments on hand at the end of the fiscal year. And somehow these cash and investments are not being recycled back through the budget process the next year, but are being held year-after-year.

A Government Can Have a Budget Deficits/Shortfalls and Financial Surpluses At The Same Time.

This is the most deceiving topic that governments, politicians, and the news media have conveyed to the public about governmental financial matters. In realty, a government can simultaneously have a budget shortfall and a financial surplus of the taxpayers' money.

The problems are focused in four areas:

1. The budget only covers a small portion of the State's financial condition. There are a group of funds not part of the budget process. The complete list of funds and budgetary requirements are found in the Comprehensive Annual Financial Report (CAFR). This report depicts the complete financial status of the State. The budget only covers a portion of the financial resources of the government.

A Little Background:

The CAFR usually has four categories.

Governmental Funds
Proprietary Funds
Fiduciary Funds
Component Units

Governmental Funds involve activities of the government including most basic services such as environmental resources, general government, transportation, education, health and human services, and protection of persons and property. Most of the cost of these activities are financed by taxes, fees , and federal grants.

Proprietary Funds are used when a government charges customers for the services it provides, whether to outside customers or to other agencies with the state. For example, Enterprise Funds, a component of proprietary funds, are for activities that provide goods and services to outside (non-government) customers, which includes the general public. Fees, charges for services or goods, assessments, fines, licenses, etc. are the major revenue sources.

Fiduciary Funds are activities in which the state acts as a trustee or fiduciary to hold resources for the benefit of others. These funds are pension trust funds, investment trusts, and agency funds (which are for assets held for distribution by the government as an agent for other governmental units, other organizations, or individuals).

Component Units reportedly are legally separated organizations for which the government is financially accountable. Usually fees, charges for services or goods, assessments, fines, penalties, licenses, etc. are the major revenue source.

The budget, as commonly known to the public, only involves the Governmental Funds and may not even include all of the governmental-type funds. The remainder of the Funds shown above are not part of the budget and are commonly called "off-budget" items.

2. Next year's budget consists only of next year's estimated revenues and next year's estimated expenditures. Previous years' revenues not used (spent) are normally not considered in the next year's budget, but should be. In other words, the previous years' revenues (as shown in the CAFR) are not recycled back to the budget process.

Historically, a budget consists of three parts: 1) Funds brought forward (funds not previously spent); 2) Next year's estimated revenues; and 3) Next year's estimated expenditures.

But somewhere along the way the funds brought forward category was lost. In accounting, the previous years' revenues are no longer called revenue but have been converted to Cash and Investments. Since they no longer called Revenues governments have forgotten about them to the public. They are there but not considered in the budget process, but should be.

3. The budgeted items and non-budgeted items (off budget) should be budgeted to zero (usually referred to as zero-based budgeting). In addition, the government should be on a pay-as-you-go basis, no reserves for future years. What this means is that you budget to have a zero fund balance. If you plan to spend $100 you budget for $100 with no excess or reserve allowed.

4. Budgeted expenditures should be last year's expenditures (as shown in the CAFR) with an adjustment for increase in requirements (costed out) or reductions in requirements. In most cases the CAFR expenditures are not considered in the next year's budget because the CAFR in many cases is published after next year's budget is considered and sometimes approved.

Running Surpluses is Stealing

Although taxation is legitimate, running a government surplus isn't. It represents a taking by the state, because it exceeds the government's contract with the community. It is no different than if a federal agency were to take a person's land or possessions without just compensation (an activity barred by the Fifth Amendment). Excess taxation isn't what the people bargained for.

In presuming entitlement or authority not ceded by the community, the state abrogates its moral pact with those it governs. Its power is no longer derived from the people, whose rights to liberty and property it boldly denies.

"Collecting more taxes than is absolutely necessary is legalized robbery" - Calvin Coolidge

The Governor and the Legislators

The Governor and the legislators should include in the next year's budget the previous years revenues not spent as indicated by the CAFR. These were once a revenue and should still be considered revenue for budgetary purposes.

Also, they should consider a zero-balance budget concept for all budget and non-budgetary items in the CAFR including the College and Universities and the Component Units.

Budgeted expenditures (for the budget) should be last year's expenditures (from the CAFR) adjusted for demonstrated requirement changes in project, program or services. An increase in requirements should include the costs of these additional requirements. Conversely, a decrease in requirements should result in a decrease in costs associated with the decreased requirements.

The Governor and legislators should take into consideration the entire financial condition/status of the State in the budgetary process by including all of the funds in the CAFR as being a part of the budget.

This system is covered in the CAFR Budget System. This system needs to be implemented in all governments.

If the State holds the excesses/surplus, it will earn 4% to 5% on that money. If the State returns the money to the people it will receive 20% in revenue because of the increased economic activity. This is elementary economics.

Laws need to be changed.

Every thing done by governments is by law. There are laws that state this or that regarding the use of some of the funds. Man made the laws, man can change the laws. How much effort would it be to include at the end of every law "...or if considered excess or not needed for the current operation that the funds will be refunded to the taxpayers?" See how easy it is.

At one time every law had its place, but things change. The laws need to be reviewed for change to meet the current needs of the government and the people to release these funds for use/refunded.

If this were accomplished, the State would have a huge surplus to refund (rebate or tax reductions) to the taxpayers. Such a refund would create considerable wealth and jobs, increase wages, increase State and local government revenues, dramatically increase the economy, and create the greatest economic expansion in the history of the State. Everyone wins.

If you want to know the financial condition of your government(s), do not look at the budget. Get the CAFR.

The Synergistic Magic of Economics.

What happens when the government holds the $53.77 billion.

  (In Thousands) Investment Income   Per   Capita Family of 4    
  The government holds and investments the surpluses at 4.5%. 2,419,611 109 435  

Here is what happens when the $53.77 billion is returned to the taxpayers (the private economy).

  (In Thousands) Surplus
Per   Capita Family of 4    
  The surplus is returned to the taxpayers. 53769,136 2,417 9,670  
  Wages are increased. 26,884,568 1,209 4,835  
  State government revenues increase. 10,753,827 483 1,934  
Local government revenues increase. 8,603,062 387 1,547  
  Federal government revenues increase. 21,507,654 967 3,868  
  Total Benefits...   5,463 21,854  

In addition, 1,075,383 jobs are created. This is why it is disastrous for governments to hold excesses/reserves of the taxpayers money.

Note: The economic impact analysis is further explained at Economic Impact Analysis.

The business community suffers the most.

Before the 9-11 tragedy, President Bush and Congress provided tax rebates which averaged $427 for every American. This was to create an additional $60 billion in consumer (economic) spending, turn the economy around and create jobs for the unemployed. However, 9-11 change that.

As the above economic impact chart shows, if the State returned the $53.77 billion in surpluses to the people the State economy would grow by $4,835 per capita. That is 11 times the amount the Federal government used to stimulate the U.S. economy. Businesses net incomes could double or triple. This is elementary economics.


Let us look at the Enterprise Funds, not considered part of the budget.

Texas Water Development Board Funds made a profit of $120 million. It also had cash/investments(reserve/surplus) of $888 million.

Veterans Land Board Loan Programs Funds made a profit of $45 million and reserves of $893 million.

Texas Department of Transportation Turnpike Authority made a profit of $8 million and had reserves of $2.2 billion.

Texas Department of Housing and Community Affairs had net expenses of $11 million. It had reserves of $1.3 billion. That is 118 years of reserves.

Water Development Funds, a Special Revenue Fund and part of the budget, had net expenditures of $7 million and reserves of $80 million. That is 11 years of reserves.

These only represent five of the 61 funds shown below that had cash and investment reserves not being used.

What to do?

Unless the budget flaws are corrected and the entire State finances are used in the budget process, the problems that created the surpluses will continue to exist. The budget deficits reported by the Governor and legislatures will be used year after year for the excuses for tax increases and/or to reduce needed services.

Just stopping a tax increase or a reduction in services will not solve the problems. The problems will come back the next year.

I have provided the details of the surpluses and explained the ways the surpluses are accumulated. The data is accurate because it comes directly from the government's own financial statement, the CAFR. You must provide the where-with-all to convince the Governor and legislatures that the surpluses exist and what should be done about it. I live in Arizona. It is not my money that is at stake.

Exhibit A

The 2003 CAFR is located at:


Items not Included

The following items are not included in the amount of surplus shown:

-Buildings, roads, bridges, land (not for sale), and equipment.

-Deferred compensation plans for employees. These are plans in which the employee contributes to his/her retirement over and above the normal employee retirement contribution.

-Any fund that is 100% supported by donations, bequests, gifts, endowments, etc. These are not taxpayers money.

-For Colleges and Universities. All endowment and similar-type funds should not be included as surpluses. Sometimes these funds are combined with other college/university funds. We are interested in surpluses, so in these cases the total amount should not be included.

-Funds in which the revenues/contributions are 100% held for other individuals, organizations or another government.

-Funds that are required by law in which a bank, financial institution, insurance companies, etc. are required to deposit with the government a certain amount for insurance against the entity going bankrupt. These are not taxpayers' money.

-Retirement/Pension Funds - only included are 1/2 of the actuarially determined excesses, the taxpayers portion. The other 1/2 is the government employees portion.

  Review of The State of Texas CAFR- FY 2003

CAFR Page List of Investments By Fund (In thousands) Surpluses Notes
  Governmental Funds:    
43    General 297,781  
43    State Highway Fund 958,077  
43    Permanent School Fund 20,582,624  
     Special Revenue Funds:    
128       Economic Stabilization Fund 560,487  
128       Student Loan Funds 199,302  
128       Available School Fund 33,998  
128       Water Development Funds 80,455  
128       State Text Book Fund 7,833  
128       Other Nonmajor Special Revenue Funds 169,228  
     Debt Service Funds:    
136       Texas College Student Loan Bonds Interest and Sinking Fund 156,607  
136       Texas Public Finance Authority Revenue Bond Fund 87,655  
136       Student Loan Revenue Bond Fund 3,563  
136       Texas Military Facilities Commission Refund and Improvement       Bond Fund 1,202  
136       Texas Public Finance Authority G.O. Bond Funds 1,203  
137       Texas Public Finance Authority Commercial Paper Funds 1,150  
137       Texas Water Development Board Bond Funds    
137       Texas Park Development Bond Interest and Sinking Fund    
     Capital Projects Funds:    
142       Texas Public Finance Authority Administration 145,253  
142       Texas Department of Criminal Justice Prison Project Fund    
142       Texas Parks and Wildlife Department Project Funds 10,712  
142        Texas Building and Procurement Commission Office Building       Project Funds 160  
 142       Texas Youth Commission Facilities Project Funds    
143       Texas Military Facilities Commission Project Funds 1,749  
143       Texas Mental Health and Mental Retardation Facilities Project       Funds    
143        Texas State Preservation Board Project Funds    
143       Texas School for the Deaf Project Funds    
143       School For Blind and Visually Impaired Project Fund    
143       Texas Department of Transportation Project Fund    
143       Adjutant General's Department Project Fund    
143       Texas Department of Health Project Fund    
143       Texas State Preservation Board Project Funds    
     Permanent Funds:    
148       Permanent Health Fund For Higher Education 484,598  
148       Permanent Higher Education Fund 411,770  
148       Texas Commission on the Arts Trust Funds    
148       Other Nonmajor Permanent Funds 3,297  
  Proprietary Funds:    
        Colleges and Universities:    
154          University of Texas System 15,001,725 1
154          Texas A & M University System 1,308,112 1
154          Texas Tech University System 457,715 1
154          University of Houston System 266,479 1
154          Texas State University System 507,273 1
154          University of North Texas System 243,504 1
155          Texas Women's University 71,195 1
155          Stephen F. Austin State University 55,814 1
155          Texas Southern University 92,115 1
155          Midwestern State University 41,814 1
155          Texas State Technical College 31,801 1
48          Texas Water Development Board Funds 888,399  
48          Veterans Land Board Loan Program Funds 892,549  
48          Texas Department of Transportation Turnpike Authority 2,198,244  
        Nonmajor Enterprise Funds:    
168          Texas Workforce Commission Unemployment Trust Fund          Accounts (58,653)  
168          Texas Department of Housing & Community Affairs 1,332,923  
168          Texas Lottery Commission 1,650,337  
168          Texas Department of Criminal Justice Institutional Division    
169          Texas Treasury Safekeeping Trust Company Fund 4,041  
169          Texas Prepaid Higher Education Tuition Board 1,248,905  
169          Other Nonmajor Enterprise Funds 225,889  
48    Internal Services: 355,517  
  Fiduciary Funds    
181    Pension: (1/2 actuarial excesses)    
187    External Investment Trust Funds    
     Private Purpose:    
192       Tobacco Settlement Permanent Trust 1,802,350  
192       Retired School Employees Group Insurance Trust    
192       Texas Insurance Companies Assets Account-Reserve and       Custodial Fund    
192       Catastrophe Reserve Trust Fund    
192       Other Private-Purpose Trust Funds 88,052  
     Agency Funds    
195       Texas Public Finance Authority Bond Escrow Account    
195       Life, Health, Accident, and Casualty Insurance Companies Trust       Account    
195       Texas Workers' Compensation Self Insurance Fund    
195       City, County, Metropolitan Transit Authority (MTA) and Special       Purpose District (SPD) Sales Tax Trust Account    
195       Other Agency Funds    
  Component Units:    
204    State Bar of Texas 24,619  
204    Texas Agricultural Finance Authority 10,749  
204    Texas On-Site Wastewater Treatment Research Council    
204    Texas Prepaid Higher Education Tuition Scholarship Foundation,     Inc. 3  
204    Texas Appraiser Licensing and Certification Board    
204    Texas Guaranteed Student Loan Corporation 343,046  
206    Texas Water Resources Finance Authority 50,632  
206    Texas Small Business Industrial Development Corporation 99,492  
206    Texas Boll Weevil Eradication Foundation, Inc. 69,766  
206    Texas Water Resources Finance Authority 50,632  
206    Texas Small Business Industrial Development Corporation 99,492  
206    Texas Economic Development Corporation 60  
206    M.D. Anderson Cancer Center Corporation 6,578  
206    U.T. Southwestern Moncrief Cancer Center 40,542  
208    Texas Universities Health Plan, Inc. 2,179  
208    Surplus Lines Stamping Office of Texas 5,033  
208    Texas Health Reinsurance System 643  
208    Texas Health Insurance Risk Pool 31,820  
208    Texas State Affordable Housing Corporation 29,046  
  Related Organizations:    
     The Life, Accident, Health, and Hospital Service Insurance    Guaranty Association    
     The Texas Title Insurance Guaranty Association    
     Texas Mutual Insurance Company   2
     River Authorities    
  Total Potential Surpluses… 53,769,136  
  Per Capita… 2,417  
  Family of 4… 9,670  

These amounts may contain Endowment and Similar Funds which should not be considered potential surpluses, but we do not know the extent of these funds.


In the CAFR 2001 CAFR the Texas Mutual Insurance Company was called the Texas Workers' Compensation Insurance Fund and was a Component Unit with $1.28 billion in potential surpluses. Now, it is considered a related organization and financial data is not provided in the CAFR. I think it should still be considered a Component Unit; however, the State of Texas thinks otherwise.


Note: For those familiar with governmental accounting, for surpluses we basically used GFOA Balance Sheet Account Classification Codes 101, 102, 103, 151, 153, and 170.

USAF Image

This report was prepared by:
Gerald R. Klatt
Lieutenant Colonel, USAF, Retired



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