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Plummeting oil prices have incited much speculation in recent weeks about how much Texas’ coffers might suffer and how much less money might be available to a Republican-dominated Legislature that wants to cut taxes significantly and also spend on things like roads.
On Monday, freshman Texas Comptroller Glenn Hegar settled the deliberation with his much-anticipated official estimate of how much the state will bring in and have to spend over the next two years. And it was higher than many expected it to be, although tempered because of low energy prices.
Hegar’s approximation – formulated, he has said, under much and diverse advisement – showed that state lawmakers, who convene at noon on Tuesday, will have $113 billion in general revenue to spend on the 2016-17 budget. That is a sizable $18 billion more than general revenue spending in the current two-year budget cycle, which ends Aug. 31.
The estimate assumes oil prices – currently at less than $50 a barrel – will be $64 per barrel on average for current fiscal year, which ends Aug. 31, and to nearly $70 per barrel by the end of 2017. The last revenue estimate, released in 2013, assumed taxable oil prices of about $80 per barrel.
Hegar estimates the state will have $221 billion to spend from all funds, including federal money. The current budget spends about $200 billion.
As Hegar has previously asserted, his estimate shows that expansion of other sectors of the economy such as construction that will benefit from low fuel prices will somewhat buoy the declining tax revenue that will come with an inevitable slow-down in drilling. His estimate assumes that oil and gas taxes will decline 14.3 percent in 2016-17, bringing in $5.7 billion over the biennium, while sales tax — the state’s largest source of tax revenue — will increase by 8.9 percent, generating $61.2 billion.
“This revenue estimate anticipates a moderated yet expanding Texas economy and revenue collections through fiscal 2017, in part due to the uncertainty around oil prices and the possibility of slow global economic growth,” Hegar said in a statement.
Budget experts at the conservative Texas Public Policy Foundation and the liberal Center for Public Policy Priorities described Hegar’s estimate as healthy.
Eva DeLuna Castro of CPPP said it was a little higher than they expected, noting there hasn’t been any wiggle room in the overly conservative estimates of the recent past and that this one appears to more closely track actual past tax collections. Susan Combs, Hegar’s predecessor, came under fire for low-balling a revenue estimate in 2011 that helped inspire billions in cuts to schools and health care.
“It’s a good, strong number,” said Talmadge Heflin, the director of the Center for Fiscal Policy at TPPF, said of Hegar’s estimate. He said the sum would be plenty for tax cuts.