Texas Economy Expected to Grow Despite Oil Slump

Glenn Hegar - AP Photo
Eric Gay - AP

Texas Comptroller of Public Accounts Glenn Hegar released the Biennium Review Estimate (BRE) on Monday in Austin. He predicted Texas will have $113 billion available for general purpose spending during the 2016-17 biennium. This represents a 9.5 percent increase over the 2014-15 biennium. The new Comptroller predicted a moderate growth rate during the coming two years.

Hegar delivered his estimate during a press conference held in the LBJ State Office Building on Monday morning. The 84th Texas Legislature will use this estimate in the development of the constitutionally required balanced budget during the session.

In the BRE, attached below, Hegar said the last biennium ended with a $7.5 billion surplus balance that is carried forward and calculated into the $113 billion estimate. This ending balance “reflects better-than-expected revenue collections, including the positive effects of robust oil and natural gas activity over the past several years,” according to the BRE.

“We’re all well aware that oil prices have dropped significantly in recent months,” Hegar said in his remarks made while releasing the report. “These lower prices will likely to lead to significant slowing in oil exploration and production, and this has dampened our overall economic forecast for the coming biennium.”

Hegar wrote tax revenues will account for eighty-nine percent of the total anticipated $110.4 billion in General Revenue-related funds. Sixty-three percent is estimated to come from sales tax collections. Other sources contributing to the General Revenue funds include motor vehicle sales and rental taxes, oil and gas production taxes, franchise taxes, insurance taxes and proceeds from the State Lottery. An estimated $5 billion will be reserved from oil and gas production revenue for Economic Stabilization Fund (ESF) and the State Highway Fund.

Hegar said the State will receive an estimated $72.9 billion from the federal government and other specifically dedicated funds that are unavailable for the general-purpose spending. He estimated the total revenue from all sources to be about $220.9 billion.

Hegar predicted the State’s ESF, also known as the Rainy Day Fund, will be at $11.1 billion by the end of the biennium.

The state also saved some money from the last biennium due to increased property values causing many school districts to be less dependent on state funds used for public education purposes.

The Texas Legislature must now take these estimates and develop the State’s budget for the next two years. With the increase in revenue, it will be tempting for people to want to increase spending. Newly sworn-in Senator Lois Kolkhorst told Breitbart Texas this is when it is most difficult to control government spending. She said it is easier when revenues are predicted to be down because people understand when you have to make cuts. With increasing revenues she said everyone wants more for their departments or for their issues. Other legislators have expressed similar concerns to this writer.

Governor-elect Greg Abbott and Lt. Governor-elect Dan Patrick have both promised tax cuts which could cut into available revenues. During a speech at the Fort Bend County Republican Party’s Lincoln-Reagan Dinner, Abbott told the audience, “It is time to give some money back to the people of Texas.” Both officials also promised increased spending on infrastructure projects related to roads and water.

In the BRE, Hegar predicts the Texas Model will continue to be a job creating engine despite the downturn in oil prices. He predicts job growth numbers of 213,000 for FY 2015, 252,000 for FY 2016 and 271,000 for FY 2017. However he said the states Gross State Product will fall short of the 20-year average of 3.6 percent. He predicts a growth in the GSP of 3.0 percent in FY 2015 and an average of 3.7 percent throughout the biennium.

The report details out industry performance in many areas of the Texas economy.

Hegar said several areas must be watched during the biennium. Those include falling oil prices and international conditions that can influence the Texas economy. On the positive side, he predicts housing and automobile sales to continue to increase and that lower gasoline prices allow consumers to use their money for other forms of spending.

The Comptroller recommends a cautious interpretation of the economic indicators. He said this economic forecast is based on an expectation of moderate economic growth from 2015-17.

Bob Price is a senior political news contributor for Breitbart Texas and a member of the original Breitbart Texas team. Follow him on Twitter @BobPriceBBTX.




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