This adds updated detail to the section on public policy in Texas, as well as fiscal policy.
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If it lasts, this week’s plunge in oil prices could hit the Texas economy in ways that make it much harder for state and local governments to help the state’s residents.
It’s part of a double whammy on the state economy that started with the pandemic-driven dive in hospitality and retail that, in turn, will be reflected in much lower-than-expected sales tax revenues to local and state governments.
School districts depend mostly on property taxes and state funding. If property tax revenue drops, the state is on the hook to make up the difference, if it can. The state’s public schools aren’t dependent directly on sales taxes, but the state that sends them money counts that as its largest single source of revenue.
In his latest biennial revenue estimate, the state comptroller said 54.5% of the state’s general revenue during the current two-year period would come from sales taxes.
That’s the biggest source, but taxes on oil and gas make up a significant part of the state’s general revenue. Oil production taxes would account for 6.1%, and natural gas production taxes would bring in another 2.7%. Those severance taxes were expected to bring $2.86 billion this year and next into each of two big accounts, the State Highway Fund and the Economic Stabilization Fund (which is also known as the rainy day fund).
