Hegar: Available revenue has decreased by 2.7 percent
AUSTIN — Texas Comptroller Glenn Hegar released the state’s Biennial Revenue Estimate Monday, showing the state is projected to have approximately $104.9 billion in revenue available for general-purpose spending during the 2018-19 biennium.
This represents a 2.7 percent decrease from the amounts available for the 2016-17 biennium. It’s important to note that this decline is not due to a projected drop in total revenue collections from the 2016-17 biennium to the 2018-19 biennium. The Comptroller is projecting overall revenue growth from the current biennium to the next.
Such growth, however, is offset by a significantly lower beginning balance of $1.5 billion. In addition, a 2015 voter-approved constitutional provision (Proposition 7) dedicates up to $5 billion in biennial sales tax revenue to the State Highway Fund (SHF) starting in the 2018-19 biennium to address important transportation infrastructure needs.
“Ongoing weakness in activity related to oil and natural gas has been a drag on state economic growth and led to lagging revenue collections in 2016,” Hegar said. “Still, the diversity of the Texas economy has allowed for slow but continued economic expansion and steady growth in employment, which we expect to continue over the coming biennium. Texas stands in contrast to other states with large energy industries, many of which have suffered declines in employment and economic output.”
Sales tax collections make up the state’s single largest source of General Revenue-Related (GR-R) revenues. The BRE projects GR-R revenues from sales taxes to be nearly $62.0 billion in the next biennium. Subtracting about $4.7 billion dedicated to the SHF as a result of the passage of Proposition 7 leaves nearly $57.3 billion. Added to this are other GR-R revenues of $49.2 billion and a beginning balance of approximately $1.5 billion, bringing the subtotal to $108.0 billion. From this subtotal, $3.1 billion will be set aside for transfers to the Economic Stabilization Fund (ESF) and the SHF, leaving $104.9 billion available to the Legislature for general-purpose spending in the next biennium.
Following a strong 5.9 percent increase in real gross state product in fiscal 2015, the Texas economy is estimated to have grown by only 0.2 percent in fiscal 2016. In fiscal 2017, the Texas economy is projected to grow by 2.5 percent. That growth rate should increase slightly to 3.0 percent in fiscal 2018 and 3.1 percent in fiscal 2019. Employment growth is expected to be 1.9 percent in fiscal 2018 and 1.7 percent in fiscal 2019, while the state’s unemployment rate is expected to remain relatively unchanged at 4.5 percent in both fiscal 2018 and 2019.
Among other large tax revenue sources:
motor vehicle-related taxes, including sales, rental and manufactured housing taxes, are expected to reach $9.87 billion, up 6.7 percent from 2016-17.
oil production tax collections are projected to generate $4.7 billion in the 2018-19 biennium, a 32.3 percent increase from $3.6 billion generated in the current biennium; natural gas tax collections in the 2018-19 biennium are expected to be $1.7 billion, 27 percent more than the $1.3 billion collected in 2016-17.
the state’s franchise tax revenue for all funds is estimated to be $7.8 billion for 2018-19, a 2.4 percent increase.
The state’s Rainy Day Fund balance currently stands at approximately $10.2 billion. Absent any additional appropriations that might be made by the Legislature, the balance is expected to be $11.9 billion at the end of the 2018-19 biennium.
“While our state revenues were down in 2016 and we face some difficult decisions in the coming months, Texas remains fiscally healthy,” Hegar said. “Despite energy-related headwinds, Texas has gained 210,000 jobs in the last year, and while our gains have not been at the same rapid rate as a few years ago, it is important to note that we have added jobs in 19 of the last 20 months. We have also seen signs of possible improvement in recent months, with some modest acceleration in job growth and oil prices and rig counts rising. And December brought the best monthly sales tax revenue collections since May 2015.”
State revenue from all sources and for all purposes is expected to reach $224.8 billion for the 2018-19 biennium, including approximately $74.9 billion in federal receipts, along with other income and revenues dedicated for specific purposes and therefore unavailable for general-purpose spending.