Despite setbacks due to Hurricane Harvey and rock-bottom oil prices clearly in the rear-view mirror, the state’s biennial budget looks to be on solid footing, according to the state’s top accountant.

Last week, Texas Comptroller Glenn Hegar announced the release of the Certification Revenue Estimate.

The Comptroller’s Biennial Revenue Estimate (BRE), required by the Texas Constitution since 1942 and produced before each regular legislative session, tells the Legislature the amount of funds that should be available for spending in the next two-year budget period.

The Texas Government Code also requires the Comptroller to prepare another estimate, generally called the Certification Revenue Estimate (CRE), after each regular legislative session. The CRE uses the BRE as its starting point and incorporates the fiscal impact of that year’s legislation.

In a press release, Hegar highlights an expectation that the Texas economy is back on track after the collapse in oil prices that hit the state especially hard.

“The diversity of the Texas economy, coupled with conservative fiscal management and strengthening in the oil and gas sector, allowed the state economy to return to its normal pattern of growth, which exceeds that of the national economy,” Hegar said.

After inflation, Texas’ gross state product – a measure of economic output – grew by 3.9 percent in the first quarter of 2017, by the most recent figures available. After a collapse in oil prices, the state economy was basically flat throughout 2016 – a departure from two decades of nearly 3.8 percent growth.

The economic devastation and disruption that Hurricane Harvey recently wrought on the Texas coast is expected to impair growth in the short term. But Hegar sees at least some of these costs offset by sales tax and other revenues brought in by ongoing construction and rebuilding efforts.

“On the expenditure side, this hurricane event is going to cost more than anything we’ve had before,” Hegar said in an interview. His estimate of Harvey’s budgetary impact rests at around $2 billion for the current two-year budget cycle.

Hegar also noted that while he’s lowered projections for oil and natural gas prices, an increase in production, mostly based around Midland’s Permian Basin, should lead to an increase in revenues over his original estimates.

The Comptroller’s office now expects revenue available for general spending to total about $107.3 billion, versus an earlier BRE estimate of $104.9 billion.

Still, the fact remains that budget writers next session will have their work cut out for them. In addition to the hit to the state’s finances from Harvey, lawmakers will have to contend with a $1.6 billion deferral of sales taxes to the State Highway Fund, as well as a big Medicaid IOU.

At this point during the previous budget cycle, the state’s general fund balance stood at $8.3 billion, but currently stands at $883 million, and by September 2019 will have shrunk to $94 million.

Meanwhile, the state’s Economic Stabilization Fund is expected to grow to $11.2 billion according to Hegar. Lt. Gov. Dan Patrick noted the wisdom of refraining from using the fund for various funding gaps.

“The Senate was correct in protecting the rainy day fund this session and limiting spending to less than a one-percent increase in a tight budget cycle,” he said in a written statement. “We did not spend money we didn’t have.”



Salvador Ayala

Sal is the Budget & Policy Analyst for Empower Texans. He has been a committed proponent of American founding principles since 2007, shortly after receiving his J.D. from Chicago-Kent College of Law. Before joining Empower Texans, he served as legislative director for Rep. Matt Rinaldi in the Texas house and was a delegate to the 2012 RNC. In his leisure, Sal enjoys live music, digital photography, guitar, bicycling, trivia, and documentary films.