Hegar wise to tell Texas how economy changing

The single most important responsibility of the Comptroller of Public Accounts in Texas is certifying how much revenue the state has, so the Legislature knows how much it can spend each biennium.

As constitutional duties go, this one is pretty important.

If the revenue estimate is too high, the Legislature will be forced to impose cuts. If the revenue estimate is too low, cuts that aren’t necessary could be instituted.

As the late Yogi Berra said, “It’s tough to make predictions, especially about the future.”

Setting the revenue estimate is a complicated matter, involving modeling, international market information, sales tax predictions and a sophisticated analysis of the ever-changing Texas economy.

That said, the revenue estimate is a sore subject at the Legislature.

As Bob Garrett of the Dallas Morning News recently wrote, “Revenue estimate accuracy — or lack thereof — bedeviled ... former Comptroller Susan Combs.”

As Texas Monthly reported in their “Best and Worst” list in 2013, “were it not for the poor budget forecasting of Comptroller Susan Combs,” $5.4 billion in cuts to education would never have happened.

Current Comptroller Glenn Hegar has endeavored to improve the accuracy of revenue estimates.

Drawing the greatest attention was the estimated price of oil in his initial revenue estimate in January. Hegar initially forecasted an average price of oil in the $65-$70 range for the biennium. In his recent update, he reduces that projection to $50.

It is interesting that while the price of oil matters to our state’s economy, it matters less to our revenue picture than you might think.

Garrett pointed out that Hegar’s new projection reduced the price of oil 20 percent but only reduced “related tax collections available for general spending” by about 1 percent.

It should be noted that Hegar was not alone in his original analysis of $70 oil.

Few predicted a stubbornly low price of oil for much of the past 18 months. Even energy billionaire T. Boone Pickens was rosily predicting $70 oil by year’s end as recently as a few months ago.

The net effect of his updated revenue estimate will not change much.

He initially projected that $113 billion would be available to legislators for the 2016-2017 fiscal years. He has updated that to $110.4 billion.

But the fiscally conservative Legislature passed a budget earlier this year that only spends $106 billion.

There’s a short-term effect and a long-term one.

In the short term, this means there is less unallocated money to address school finance when the court ruling comes down.

In the long term, this updated revenue estimate portends a bearish economic future for the 2017 legislative session, when spending cuts may be more necessary than tax cuts, and tapping the rainy day fund may need to be considered.

Hegar has fully committed himself to his duties as comptroller and has earned very positive reviews from legislators and the private sector.

He is operating with increased transparency — more than is required — and is answering questions and explaining how the Texas economy is changing as the oil and gas industry slowdown ripples throughout the state.

As budget expert Dale Craymer told the San Antonio Express-News: “I think it’s a real positive that people don’t have to guess at what the comptroller is thinking because the comptroller will now tell you what he is thinking. Hegar is being more open than what we’ve seen in past years.”

No one likes a surprise — and that is especially true of legislators.

In keeping our state’s leaders fully updated on the changing revenue reality, Hegar is reducing any potential blowback that might have been directed his way.

More important, he is doing the state and its residents a great service.