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Texas’ total revenue in the 2024-2025 biennium is projected to be $188.2 billion to fund the state’s businesses, up 26% from what lawmakers had in the previous budget cycle, Texas Comptroller. Glenn Hegar said on Monday in his income estimates for the biennium 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.
“The amount of projected revenues gives the state a wonderful, truly unique opportunity for historic action in this legislative session,” Hegar said.
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.
Unless lawmakers decide to turn to the Economic Stabilization Fund (the official name for the government’s so-called rainy day fund), the fund is expected to have a record high balance sheet of $27.1 billion by the end of the 2024-2025 biennium, Hegar said. Monday said. 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.
It also marks a painful period economically for Texas taxpayers, Hegar said.
“We cannot and will not lose sight of the fact that every dollar of taxes received by the government goes out of the pockets of taxpayers,” he said.
Despite the economic situation in which the lieutenant-governor. Dan Patrick Hegar, recently dubbed “a sky full of rainbows,” called for foresight and frugality on Monday. The numbers could be affected by the Federal Reserve’s efforts to lower inflation, which could exacerbate the recession, Hegar said, and that conditions in other parts of the world, such as Russia and China, are causing oil and gas prices to become more volatile. than usual, among other factors.
“I must advise you to exercise caution in making these decisions. Honestly, don’t count on me announcing another big revenue jump in two years,” Hegar said. “It’s important to be able to maintain some kind of reserve fund.”
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.
Patrick echoed the caveat, saying on Monday that while the valuation is “further proof of the true strength of our economy,” lawmakers should continue their conservative approach as a recession could looms.
“Our state has a number of challenges ahead of us—primarily strengthening our power grid with controlled power—but I am confident that we can continue to strengthen Texas so that it remains the best place to live, work, raise a family, and create a new home.” . business,” Patrick said.
Subject to change
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.
controller 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.
Legislators are expected to adopt the budget before the end of the session 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 gathers the most recent 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.
To spend money
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.
State law and the Texas Constitution already create headwinds for legislators who might be tempted to spend all of the state’s available income in this cycle, even if it’s on pressing state issues like property tax exemptions, schools or the state, labor, or one-time investments such as water. infrastructure and broadband access.
Those spending limits were set at 12.3% more than spending in the current biennium, allowing lawmakers to increase total revenue by about $12.5 billion over the next two years, according to current budget figures. That dollar figure could rise if lawmakers pass a supplemental budget bill this session that will increase spending over the next two years, but it’s still well below the amount lawmakers are expected to receive.
Anything beyond the limits will require a politically risky vote to pass the spending ceiling, or another budgetary strategy to get around those limits.
“Spending limits are extremely important. They have served Texas very well over the years and will continue to serve,” Hegar said. “With that said, being able to take some of those dollars and maybe put them aside for use in the coming years, whether it’s infrastructure funding or property tax exemptions, would be a smart move, and I think that’s something that the Legislature will be discussed later in this session.”
Patrick is among the state’s leaders who advocate keeping some of the remaining cash in the state treasury, as well as money in the rainy day fund, while spending a significant portion of it on property tax breaks as a top priority.
Asking voters to approve other measures that would allow money to be spent on areas like mental health or the energy grid would also protect those dollars from a constitutional cap, Patrick said.
“The public is saying: manage your money wisely, don’t spend all your money and consider needs,” Patrick said in December. “I wouldn’t be in favor of breaking the spending limit, and I don’t think the participants are. But if you reach out to the people, then the people have made that decision, and it gives the voters the opportunity to say yes, I want to spend X dollars on the network. I want to spend X dollars on mental health care.”
It’s not a new strategy, but critics of the idea say the constitutional amendments will further tie dollars for a budget that is already 80% targeted.
“The budget will eventually just be on autopilot,” said Eva Deluna Castro, budget analyst at progressive think tank Every Texan. “I mean, why even have a legislative budget process at this point?”
Advocates for child and family services in Texas say the assessment represents an unprecedented opportunity to address acute shortages in areas such as student mental health and a lack of high-quality, affordable health care.
“A number of critical services … are facing understaffing and years of underfunding,” said Stephanie Rubin, CEO of Texans Care for Children. “There is no excuse in this session that the services that children and families rely on cannot be justified.”
Staff writer Brian Lopez contributed to this report.
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