What are common causes of budget deficits in Texas state finance?

The correct choice identifies economic downturns, increased demand for public services, and unexpected expenditures as common causes of budget deficits in Texas state finance.

Economic downturns typically lead to a decrease in tax revenues as businesses earn less and consumers spend less. This drop in revenue can make it challenging for the state to manage its budget effectively. Simultaneously, during these downturns, there is often an increased demand for public services such as healthcare, unemployment benefits, and social services, as more individuals seek assistance. The combination of lower revenue and increased demand for services creates significant pressure on the state’s finances.

Unexpected expenditures, such as those arising from natural disasters or urgent infrastructural needs, can further exacerbate budget imbalances. These expenditures are unforeseen and can add strain to an already tight budget, leading to deficits.

In contrast, while options like increased tax revenues and higher fixed costs may impact financial planning, they don’t directly contribute to deficits in the same way that economic downturns and demand surges do. One-time funding and surpluses from previous years might be viewed as short-term solutions rather than underlying causes of budget deficits, making them less relevant in the context of chronic financial challenges.