Texas comptroller estimates account balance at $30 billion by next legislative session after dire forecast
In an interview with The Texan, Comptroller Glenn Hegar said current projections estimate the Treasury would have a balance of between $15 billion and $16 billion at the end of the year. The Economic Stabilization Fund (ESF), also known as the State Savings Account or “Rainy Day Fund,” is expected to have a balance of $13.5 billion by January.
“Right now the economy is really remarkable and really has been for over a year,” Hegar said. “Obviously two years ago the businesses were shut down and I had made the argument then that Texas had entered this unknown with a very strong base – really, stronger than any other state and nation.”
The pandemic – and the government-mandated shutdowns and accompanying market uncertainty – have set in motion grim economic realities and projections. The Price of West Texas Intermediate Oil Futures dropped almost minus $40 a barrel, while sales tax revenue fall noticeably month after month.
The fiscal outlook has become so bleak that in July 2020, Hegar projected a budget deficit of $4.6 billion for the 2020-2021 biennium. But over time, those conditions improved as businesses reopened and pent-up demand went wild. By January 2021, this projection has shrunk only a shortfall of $950 million – which in May of last year turned into a surplus of $725 million.
Coming full circle, in July of last year, Hegar announcement this small surplus had increased to $5 billion for the biennium 2021-2022.
In the midst of the 2022-2023 biennium, these economic projections continue to improve. Hegar’s projection for July 2021 estimated $8 billion in additional funds available for this biennium. And now the Treasury balance could double.
The ESF is funded by the original oil and gas taxes, and when the fall occurred its ability to keep up with the levels of funding required was challenged. Unsurprisingly, the state contribution to the ESF for 2021 was around 30% lower than its 2020 contribution consisting of pre-coronavirus tax deductions.
But the recovery since has been quite remarkable. Since May, sales tax collections are 21% higher than the previous year. Departure taxes on oil and gas have increased by 90% and 195% respectively compared to last year. Total tax revenue increased by 35% over the previous year.
These are all consumption taxes, which means consumers spend more money.
“The economy has rebounded quite strongly,” Hegar said of the recovery from the initial shock. “Now, that said, as we all know by now, businesses are faced with three things: inflation, [struggling] supply chains and labor shortages.
“Since February 2021 or so, Texas has really just been at a remarkable pace – stronger than we could have anticipated. But now the economy is not as strong and there are a lot of concerns about its direction.
Hegar has always maintained that Texas has as strong a foundation as any to weather economic turmoil, but added that he’s not sure where it’s headed.
Highlighting an area of concern, he added that while sales tax collections in May were 9% upper that in the same month last year, inflation was above 8%. “While revenues are higher, because of this administration and its terrible policies, many costs have also gone up,” Hegar said.
Governor Greg Abbott replied to the comptroller’s statements on Twitter, “We need to use a substantial portion of this money to reduce property taxes in Texas.”
When it meets again next year, the Texas legislature will likely have plenty of cash to spend. He already has several new items he hopes to spend money on, such as school security expenses and continued property tax reduction.
Inflation has and will continue to drive up the cost of everything she hopes to pursue. But compared to two years ago, fiscal projections are improving.
Update: A comment from Governor Greg Abbott has been added to this article.