Hegar spoke to the Senate Committee on Finance this week with news that the robust job and economic growth, rising oil prices and production and rebuild efforts in the wake of Hurricane Harvey…
State Comptroller Glenn Hegar spoke to the Senate Committee on Finance this week with news that the robust job and economic growth, rising oil prices and production and rebuild efforts in the wake of Hurricane Harvey have contributed to strong revenue growth of 10.3 percent over the past three months.
Revenue growth is growing faster than forecasted in the Certification Revenue Estimate, which was released in October 2017.
Hegar said that unemployment has hovered below 4 percent for the last three months which is the lowest it has been in four decades.
Last week the initial estimates of the third quarter 2017 gross domestic product (GDP) growth were released and despite some lost output due to Hurricane Harvey, Texas saw real GDP growth of 5 percent behind only one state.
Purchasing vehicles damaged by Hurricane Harvey contributed to growth of motor vehicles sales tax collections of nearly 13 percent over three months. Natural gas productions have increased more than 40 and 50 percent.
This might lead one to think that the budget picture for this next Legislative session is beginning to brighten. “While there is some truth to this, I would like to offer a few words of caution for reading too much into the positive economic numbers,” Hegar said.
Beginning in fiscal 2018, Proposition 7 directs the Comptroller’s office to annually deposit to the State Highway Fund $2.5 billion of net revenue from the state sales tax, after total sales tax receipts exceed $28 billion. Last year, in order to free up some of that money for other purposes, Senate lawmakers pushed for accounting adjustments that delayed a payment to the state highway fund into the next two-year budget cycle.
That freed up about $1.6 billion for lawmakers last year, but it means funding will need to be paid in 2019. Much of the surplus also has to be set aside for transfers into the Economic Stabilization Fund, also known as the Rainy Day Fund. If oil and gas tax revenues continue to rise, the state can expect the balance of its emergency Rainy Day Fund to grow to more than $11 billion next year.
Hegar shared that there will be some supplemental costs for the current biennium when the session begins next year.
Lawmakers could face a $2.5 billion Medicaid bill shortly after they reconvene in Austin in 2019. He also projected a $240 million budget shortfall for the Texas Tomorrow Fund, a public university tuition payment program that stopped accepting enrollment in 2003. The state treasury will also soon feel the effects of an amendment to the Internet Tax Freedom Act passed by Congress, which is expected to cause a $440 million loss in sales tax revenue.
Hegar told lawmakers that his next revenue estimate would be released likely this summer.
Watch Hegar’s full presentation to the committee here.
This story was originally published by Strategic Partnerships, Inc.