Forecast brighter for Texas’ budget
Texas lawmakers will reconvene today with a less-dire budget outlook than first expected, buoyed by federal relief dollars and rebounding sales tax revenue amid the coronavirus pandemic, state Comptroller Glenn Hegar announced Monday.
The state is currently projected to end the 20202021 biennium in August with a $950 million deficit, down from the $4.6 billion hole forecast this summer. Revenue for the next two fiscal years is expected to essentially keep pace with the current biennium, though that projection could shift as the economic recovery from the pandemic and declines in the oil and gas industry last year continue, he said.
The announcement was a major improvement from what Hegar had forecast just months ago, as the state’s economy appeared to be in a free fall.
“This revenue estimate highlights the resiliency of our Texas economy,” Sen. Jane Nelson, R-flower Mound, and the chair of the Senate Finance Committee, said in a state
ment. “Tough decisions remain, but I am confident we can pass a budget that meets our essential needs, maintains our commitment to education and follows the principles of fiscal responsibility that put us in a stronger position than other states to withstand this unprecedented pandemic.”
Hegar attributed the boost to consumer spending on home improvement projects and other retail purchases and to a jump in tax revenue from online sales. Tax collections on other goods and services, including alcohol and hotel occupancy, have remained low, he said.
Additionally, the state expects to be able to use at least some of the unspent federal relief money it received during the pandemic to fill general revenue gaps.
Lawmakers still face a daunting task as they return to Austin today to open the next legislative session. Setting the next two-year budget is expected to be all-consuming, with Republicans expected to weigh additional cuts to those they imposed last year amid the health crisis.
Hegar said the Legislature will likely be able to fill the current $950 million budget gap with those savings they implemented last year, which included cuts at the Health and Human Services Commission and thousands of state jobs left vacant.
Lawmakers will also have several billion dollars to pull from the state’s Economic Stabilization Fund, also called the rainy day fund; Hegar projected it will grow to $11.6 billion by the end of 2023. Democrats have been calling on the Republican-controlled Legislature to use the fund in order to avoid further cuts, though it’s unclear how much appetite there is for that.
“The money is there to use, and we need it now,” said Dick Lavine, a budget expert at Every Texan, a liberal think tank. “We should use it now.”
The Legislature is expected to have about $112.5 billion in usable revenue over the next biennium, which is a $440 million drop from the 2020-2021 cycle.
One of the biggest priorities will be funding an increase adopted two years ago that gave pay raises to teachers and other school employees while also slowing property tax increases for schools. That is expected to cost upward of $13 billion over two years.
Republican Lt. Gov. Dan Patrick, who heads the Senate, committed Monday to maintaining the education boost and meeting the growing cost of health care. He called Hegar’s forecast “welcome news.”
“We believe that with a continuing healthy economy, a growing Economic Stabilization Fund and federal COVID-19 relief, we will be able to move forward on our budget priorities this session and balance the budget by session’s end,” Patrick said in a statement.
Stephanie Rubin, CEO of Texans Care for Children, said the improved forecast and tools including the rainy day fund, expanded Medicaid dollars from the federal government and future aid packages that the incoming Biden administration is looking to pass should give lawmakers every reason to fully fund services, especially those for kids and families.
“Given the way that the pandemic has disrupted student learning, knocked families off of health insurance, traumatized kids and more, legislators need to make kids and families a priority this session,” she said in a statement.