Hegar: State’s budget looking ‘very difficult’
Despite signs of economic strength in oil prices, job numbers and sales tax collections, state lawmakers still face multibillion-dollar budget challenges thanks to Mother Nature and their own financial decisions.
Lawmakers will have to fill a hole as big as $3 billion to $4 billion in the current budget before they start looking at future needs, Texas Comptroller Glenn Hegar told the Senate Finance Committee on Tuesday, reiterating previous projections in areas including Medicaid.
“The numbers are pretty clear. You’re going to have a very difficult budget and appropriation process next session,” Hegar said.
Besides the issues lawmakers knew about when they completed the current budget last year, they still are working to get their arms around the cost of addressing the damage left by Hurricane Harvey.
“It’s going to be very expensive
for us to pay the costs. And we’re going to have to deal with it next session,” said Senate Finance Committee Chair Jane Nelson, R-Flower Mound. “The expenses that we’re facing next time, and you can put Harvey right at the top of those expenses, are very real.”
Hurricane Harvey has had an effect on both sides of the state ledger.
There is an economic boost reflected in areas including sales tax collections due to the economic activity spurred by rebuilding damaged homes and replacing destroyed cars, Hegar said. He emphasized this is seen on the state level, not in ravaged communities or at the individual level.
But there is also the need for state dollars to address issues such as schools’ loss of property value. When local school districts’ local property tax revenues decrease, the state has to pick up a bigger share of funding.
The federal government is expected to pick up the biggest share of government aid for Harvey, but the state will be responsible for an amount that isn’t yet defined, which is causing frustration for some officials.
“I can’t get a number,” said state Sen. Lois Kolkhorst, R-Brenham, who said people in her area are hurting and need help as they await aid.
Nelson said that “we just aren’t there yet” with a hard number for the state’s costs related to Harvey.
“We don’t know. I can tell you, it’s going to be big,” she said, adding that senators should use what influence they have on decision-makers in Washington.
“Keep reminding our federal government how many people we have in this state who have been significantly impacted, are suffering, and not to forget us. Remind your friends up there,” she said.
Hegar also presented positive economic news to budget writers, pointing out that the state snapped back from a flat 2016 to exceed the nation’s growth in 2017.
Texas had solid job growth, its lowest unemployment rate in four decades, double-digit increases in sales taxes when comparing monthly totals with the same month the previous year and higher-than-expected revenues from oil and natural gas production taxes.
Lawmakers’ only real cushion appears to be the rainy day fund that requires a supermajority of the Legislature to agree to spend.
The rainy day fund is expected to have $11.2 billion at the end of this budget period, and perhaps more if severance taxes keep coming in at a higher-than-expected pace.
Gov. Greg Abbott and Lt. Gov. Dan Patrick have been reluctant to dip into the fund for ongoing costs, but have said it makes sense to use it for Harvey costs.
But Harvey costs aren’t the only big expenses lawmakers will be facing.
In the current budget, the Medicaid shortfall alone could be as much as $2.5 billion, Hegar said.
Looking ahead to the next budget, lawmakers are constrained by a requirement that they set aside up to $2.5 billion annually for transportation that otherwise could be used for general purposes.
They also face a $1.6 billion transportation payment put off from the current budget to make ends meet.
An additional $140 million is expected to be transferred to the highway fund from the motor vehicle sales tax; the state will forgo $440 million in sales taxes on internet services due to a new federal law; and the constitutionally guaranteed prepaid tuition program needs $240 million.
But Hegar offered some potentially bright news for lawmakers who are watching the positive economic signs, saying he would look this summer at whether conditions warrant a new revenue estimate.
Despite the tough budget picture, he said, “We are going to be able to get through it.”
The Medicaid gap alone could hit $2.5B, Comptroller Glenn Hegar told senators.
Texas Comptroller Glenn Hegar, seen early last year giving the biennal revenue estimate, told state senators Tuesday the Legislature will need to plug a budget hole of $3 billion to $4 billion.