From the Austin American Statesman (January 12, 2015): Comptroller predicts better-than-expected growth in Texas economy

It didn't work out this way though.

- Click here for the article.

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.

From CNBC: Falling oil prices put the squeeze on state budgets

For 2306 prior to out look at the state budget.

No surprise that a good chink of revenue comes from taxes on oil and natural gas. And no surprise that the lower the price of a barrel of oil, the less is collected in revenue. This matters in a state - like Texas - that has to run a balanced budget. The effects of the reduction in price is beginning to be felt. This might include a reduction in the state's credit rating.

- Click here for the article.

Several states that are dependent on energy revenue are facing strained budgets due to low oil prices, and at least three — Alaska,Louisiana and New Mexico — are at risk having their credit ratings lowered, according to a report from Standard & Poor's Ratings Services.

"In short, the more aggressive a state was with regard to its assumptions and use of oil-related revenues during the oil boom, the more acute its fiscal pressures now, in the oil price bust," according to S&P. "For states with greater budgetary reliance on oil-related revenue, the unrelenting decline in prices places a larger budget on state lawmakers to identify and enact corrective fiscal measures."

The report, entitled "Collapsing Oil Prices Seep Into State Credit Profiles," suggests that as state lawmakers head into session in the next budget season, their true fiscal situation "could be more intense than what their official forecasts currently anticipate." The report surveys the situation in eight major oil-producing states: Alaska, Louisiana, Montana, New Mexico, North Dakota, Oklahoma, Texas andWyoming.

S&P pointed out that all of the states in the survey forecast a higher price for oil than what the ratings agency expects in 2016 ($40 per barrel). For example, Alaska has a fiscal 2016 price assumption of $49.58 per barrel, according to S&P, while Louisiana's is $48.02 per barrel and Texas is $49.48 per barrel. Looking ahead to fiscal 2017, just one state (North Dakota) is identified as having a forecast in line with S&P ($45 per barrel).

From boom to bust?

The Dallas Morning News thinks we're in bad shape.

- Click here for the article.

I'll look for other opinions, but think about this in terms of revenue collection for the state.

Is Texas' economic growth due to economic policies or increased oil production?

One of the books available for 2306 argues that Texas' economic policies have created recent boom in jobs, and that other states should emulate them. But here's an observation that that states that have grown the most in recent years have oil based economies.

That's tough to replicate.

Is it possible that the Great Plains simply have better zoning laws, better governors, better entrepreneurial incentives, better schools, and better [other things that you typically associate with growth]? Yes, it is possible that the entire central time zone is magically gifted at matching people and jobs. It's also really, really unlikely. More likely is that the Great Plains have some of the positive aforementioned qualities -- Houston's zoning policies are exemplary, e.g. -- but most importantly, they did well because many of them shared something in common at the trans-state level: bountiful energy resources under their feet. 

Take the five or so states with fastest-growing oil production -- ND, TX, OK, CO, NM -- and draw their post-crash job performance against the rest of the country. This is the picture you get. Except for New Mexico, the four top oil-growth states fell lower and have climbed higher than the rest of the country.