Texas is projected to generate $188.2 billion in total revenue to fund the state’s businesses over the 2024-2025 biennium — an unprecedented 26 percent increase from what lawmakers had during the last budget cycle, the Texas Comptroller said Monday. Glenn Hegar in his biennial earnings report. assessment to legislators and state leaders.
That’s far more money than lawmakers have ever had at their disposal, Hegar said, with an increase in available funds that dwarfs any previous jumps between cycles, thanks in large part to the unexpected tax collection that kept the state afloat.
This is also more than the Texas Constitution and state law allow them to spend legally, barring any special legislative action to circumvent these spending limits.
The assessment comes a day before the Texas Legislature meets on Tuesday. It includes an expected $165.9 billion in new revenue, the vast majority of which comes from government sales and energy taxes and can only be spent in the next cycle.
It also includes the historic $32.7 billion in state dollars expected to remain in the Texas treasury from the 2022-2023 biennium due to “strong economic growth, gas prices, inflation and other factors over the past 18 months,” said he.
All but the $10 billion that is set aside for highway funds and the state’s rainy day fund are available for general spending, Hegar said.
This pot of money can be spent through August to supplement whatever lawmakers need for the current budget. Hegar said Monday that the balance will reach $27.1 billion by the end of the 2024-25 biennium.
The rainy day fund is separate from the $32.7 billion remaining in government treasury from the last cycle and is not included in Monday’s total estimate of available funds.
Government revenue from all sources is expected to reach $342.3 billion in the 2024-2025 biennium, including $108 billion in federal revenue and about $68 billion in other revenue, such as fees, that are earmarked for specific purposes and therefore not available for general purposes. -Targeted spending on things like law enforcement or property tax exemptions.
The current two-year budget period, which ends in August, has totaled $265 billion in state and federal funds, including an initial $119 billion in total revenue—a figure expected to top $150 billion before the cycle ends.
Monday’s budget estimate reflects a robust economic recovery as the state worked to recover from the COVID-19 pandemic, but explains a mild recession expected this year – albeit a “relatively shallow and short one” for Texas – and an associated slowdown in consumer spending. employment and personal income levels, said Hegar, a Republican entering his third term as Comptroller.
All of this could be affected by the Federal Reserve’s efforts to lower inflation, which Hegar said could exacerbate the recession, and whether conditions in other parts of the world, such as Russia and China, could cause oil and gas prices to become more volatile. than usual, among other factors.
But despite the economic situation, which Lt. Gov. Dan Patrick recently called “a sky full of rainbows,” Hegar on Monday urged forward thinking and frugality.
“The outlook remains subject to significant uncertainty,” he warned.
Government revenues are heavily dependent on sales taxes – about 53% of the total is expected to come from sales taxes in the next budget cycle. But it also includes significant income from oil and gas MET, as well as automotive fuel and sales taxes, as well as franchise taxes levied on alcohol.
Estimating revenue is the primary responsibility of the state comptroller and forecasting for legislative budgeters how much money Texas will collect from its residents and businesses over the next two years.
The comptroller is the state’s chief tax collector, revenue assessor, and check writer. Hegar’s most high-profile time is in the legislature, when he briefs lawmakers on how much money they have while they decide how to fund the state’s activities in the new biennium. Because the Texas Legislature meets every two years, legislators make a two-year budget.
The adoption of a balanced budget, in which spending does not exceed what is expected to be available, is the only thing the Texas Legislature is constitutionally required to do during its regular 140-day session.
Lawmakers are expected to pass the budget before the session closes at the end of May. Monday’s estimate for the next budget cycle could be updated later in the session as lawmakers move closer to wrapping up budget talks and the comptroller’s team of economic forecasters and researchers compiles reports. The latest economic information.
The forecast figure is also subject to change during the biennium as economic conditions change, as has happened over the past two years.
When the revenue actually collected is higher than budgeted, the government may receive more money than it planned to spend, as is the case now.
When actual revenue falls, it can lead to a deficit that will have to be dealt with in the next cycle.
Hegar compared the income assessment process to the task of predicting what your own bank account might look like more than two years into the future: you can’t predict with certainty.
Part of the state’s comfortable economic position ahead of the session is due to the balance that will remain in the state treasury at the end of the current budget cycle, which Hegar estimated on Monday at $32.7 billion.
That number won’t be finalized until all proceeds are received later this year, and lawmakers decide in session whether to spend the remainder of the carry-over before the end of August.
In addition to the “strong economic growth” that boosted the state’s revenues after the lifting of COVID-19 restrictions, energy price spikes and the highest headline price inflation in 40 years have also led to government collection, Hegar said. taxes exceeded what was expected when legislators approved the last budget.
This closing balance sheet also reflects $3.8 billion in savings from pandemic federal dollars replacing state taxpayer dollars, as well as state school funding savings from skyrocketing property taxes that reduced the state’s liability to schools by about $4.3 billion, he said.