- Click here for the full report.
Here's their specific analysis of Texas. It suggests that recent efforts to diversify the Texas economy - especially following the oil bust in the 1980s - have worked, Texas is more likely to weather the storm than other places.
Which isn't to say that a city like Houston might be more exposed to fallout. I'll look for some analysis along those lines soon.
Texas's limited direct reliance on oil production and natural gas production taxes on general operations and the state's strong reserve levels have positioned the state well through this downturn in oil prices. Oil production taxes comprise only 4% of general revenues in the fiscal 2016-2017 biennial revenue estimate, with natural gas production taxes comprising another 2%. In our view, declines in oil and gas revenues will limit the increases in the economic stabilization fund (ESF)--also known as the rainy-day fund--and state highway fund (SHF), but have a more limited impact on general revenue spending, given the funding formula for the state's ESF and SHF. Under the formulas, 75% of the oil and natural gas tax collections that exceed 1987 collection levels are transferred into those funds, therefore reducing the amount available for general revenue spending. However, there has been a softening of other tax revenues due to the oil price declines, in particular in the state's sales tax revenues, which account for 56% of total net general revenues. As well, there may be a link with expenditure pressures as public assistance has grown by 6.3% in the first four months of the fiscal year compared to the prior year. That said, in our view, the state's reserve position will allow it to manage through these budget pressures during the current biennium. Despite the projected declines in oil and gas collections, the rainy-day fund is projected to increase to $10.4 billion (or approximately 20% of fiscal 2017 general fund expenditures) by the end of the biennium. Furthermore, if we assumed no growth in the ESF, the state still has liquidity in the rainy day fund commensurate with a 'AAA' rating. The state should be releasing an updated revenue forecast for the current biennium later this month.
