Texas’ robust COVID-19 economic rebound will lead to $25B budget cushion in 2023, comptroller says

AUSTIN – Texas’ economic recovery from the coronavirus pandemic has been so robust and leaders so wary of spending that the Treasury Department should have parked nearly $ 25 billion on the sidelines in 22 months, auditor Glenn Hegar said Thursday.

Hegar expects a buffer of $ 12.62 billion for August 2023.

In the past, Hegar has extolled the virtues of spending one time spending excess cash to repair aging infrastructure, renovate rundown government buildings, and prop up pension funds

But with the Republican headed for a third term with two terms next year – he’s just over five weeks away from getting through an application phase without a major major objection – Hegar shied away from pushing for such “investments” as uncertainties and the need for fiscal Caution.

“It’s not like we just ended the legislature with $ 24 billion in the bank,” he told The Dallas Morning News when he certified his January revenue estimate is still enough to meet government spending.

“This is an expectation,” he said of his certification, “not a guarantee of what might be in the treasury. It is important to always leave a little money in the bank because you never know what the economy is doing. “

Hegar cited uncertainties regarding inflation, energy prices, labor availability and bottlenecks in the global supply chain as reasons for caution.

Texas has the highest percentage – and number – of people without health insurance. Urban breadwinners have emerged from COVID-19 lockdowns to return to work – and crowded highways. Experts warn of wastewater and power grid requirements. Community colleges have seen a dramatic 11% drop in enrollments since the pandemic began.

But Hegar, who was asked if he would use his megaphone as the state’s chief tax collector and treasurer to recommend selective spending increases, said it was “very prudent” to wait until 2022 to see if his revenue projections hit targets correspond. 2023 lawmakers can then “make some decisions about how to use those dollars prudently – if the numbers are right”.

In the two-year cycle that began September 1, Lawmaker and Governor Greg Abbott approved spending measures that would consume $ 123.3 billion in government multipurpose revenue.

In January, Hegar predicted that discretionary revenue would be $ 112.5 billion. He now reckons at $ 135.32 billion, an increase of 15.1 percent over the previous cycle.

By far the biggest reason for its $ 22.8 billion increase from its original estimate is the surprising rebound in the Texan economy after last year’s heavy job losses and business closings caused by COVID-19.

Prior to the pandemic, Texas had just four months in which sales tax collections, its workhorse for revenue, hit or exceeded $ 3 billion for the month. But from April through October of that year, the average transportation was $ 3.3 billion per month, Hegar noted. That includes a record $ 3.41 billion raised last month based on September sales.

“The sales tax revenue for the past seven months has been phenomenal,” he said.

Similar records have been set for automotive sales tax receipts in the past six months, though Hegar said he expected these to cool due to car dealerships’ inventory shortages.

Auditor Glenn Hegar, who can be seen in a 2018 file photo, said Thursday that he expects to see $ 135.32 billion in government revenue by August 2023. That’s $ 22.8 billion more than he predicted in January.(Amanda Voisard / Austin American-Statesman)

Split up its increase in total expected revenue of $ 22.8 billion for the current two-year cycle, Hegar said the 2020-2021 cycle ended August 31 with more than $ 11 billion unspent.

The exchange of federal COVID-19 aid dollars for planned state spending on salaries and benefits for public safety and health care workers contributed $ 3.8 billion. Higher property values ​​and federal COVID aid reduced the state’s obligation to public schools by just over $ 1 billion, he said. The 5% spending cuts proposed by GOP leaders in spring 2020 for some programs resulted in savings of $ 800 million, he said. Another $ 1.7 billion in expected expenses, such as the expiration of additional federal funding for the Medicaid program, did not materialize, Hegar said.

“The treasury is obviously in a significant, better position,” he told The News.

Hegar expects oil prices to stay above the levels of recent years – $ 75 a barrel this fiscal year and $ 70 in fiscal 2023.

“We haven’t generated a significant increase in production,” but a higher price drives up severance tax collections, he noted.

Since Texas responded to the US Supreme Court’s Wayfair ruling two years ago and began levying sales tax more aggressively on online distance sales, an additional $ 3 billion has been collected for the state and an additional $ 800 million for local governments he said.

When deciding last month on how to spend about $ 16 billion in federal funds from President Joe Biden’s American Recovery Plan Act, state lawmakers casually parked $ 3 billion and said they wanted to investigate how they could be used for future property tax breaks could be used.

That money, plus the reimbursements expected by the Federal Emergency Management Agency for Texas’s COVID-19 response costs, are not reflected in Hegar’s estimate that the state will have $ 24.61 billion in unspent all-purpose revenue, he said.

“I doubt we’ll be taking out any loans next summer,” said the auditor. He referred to a state practice of issuing advance receipts every August on Wall Street. The borrowed money alleviates a cash flow problem that occurs because the Texas back-to-school payments to school districts are huge.

Hegar said lawmakers had passed bills in the last two sessions that allocate more funding to the teacher pension system and the employee pension system. The moves “take that off the table” as a concern of Wall Street credit rating agencies, he said.

“While we remain optimistic, this is a conservative estimate,” wrote Hegar Abbott, Lt. Gov. Dan Patrick and Speaker Dade Phelan, R-Beaumont.

“Risks that affect this estimate include persistent global supply chain disruptions and bottlenecks affecting a number of products. Labor shortages and inflationary pressures could affect both corporate and consumer demand. The volatile energy prices and the potential spread of coronavirus variants also remain uncertainties for the economic outlook for Texas. “

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