By The Honorable Talmadge Heflin and Dr. Vance Ginn
Texas Comptroller Glenn Hegar recently released The 2016-17 Certification Revenue Estimate (CRE) that determines whether there will be enough estimated revenue with new laws and updated economic information during the 2016-17 fiscal years to cover the budget passed by the 84th Texas Legislature.
Though the estimated general revenue-related funds declined by $2.6 billion compared with the earlier Biennial Revenue Estimate (BRE), the Comptroller certified that there should be sufficient revenue. This is why it was important last session to pass a conservative Texas budget leaving plenty of money on the table for a drop in revenue while passing historic tax relief.
The report, along with the infographic below, shows that compared with previous estimates, the 2016-17 budget had a higher beginning balance, lower tax collections from slower economic growth, less available for transfers from lower oil and natural gas prices, and $6.9 billion less in all state funds of $214 billion and $2.6 billion less in general-related funds of $110.4 billion. This amount of general revenue-related funds still provides a buffer of $4.2 billion above expected spending of $106.2 billion.
Table 1 compares major economic and fiscal measures from the BRE and CRE.
Table 1: Drop in expected economic growth and oil prices lowers revenue projections
In general, the Comptroller expects slower economic growth and job creation compared with the projections in January from lower oil prices and global economic weakness. Figure 1 shows that these lower oil price projections are comparable with the Energy Information Administration’s (EIA) estimates for most of the budget period. These lower estimated oil prices decrease the potential oil production tax revenue by 42.1 percent compared with the 2014-15 budget period.
Figure 1: Texas Comptroller’s oil price projections are near the EIA’s projections
Despite these economic concerns and the difficulty of estimating economic and fiscal measures for two years in the future, the Comptroller’s certification provides evidence that the Legislature can fund essential government functions within population growth plus inflation and provide substantial tax relief.
This must be continued in future sessions, particularly by reforming the state’s current weak spending limit, so the state can withstand fluctuating tax revenues and leave more money in the pockets of taxpayers. Doing so, will allow legislators to phase out and ultimately eliminate the onerous margins tax and reduce the burdens of other taxes.