Comptroller Glenn Hegar’s projection on Monday that the Legislature will have as much as $113 billion for general-purpose spending in a new two-year budget gave plenty of ammunition to top Texas officials and others who say tax cuts must be part of the plan.
The figure is about $18 billion more than the $95 billion in comparable spending in the current budget. Including federal grants and other state spending, the budget totals around $200 billion.
Incoming Lt. Gov. Dan Patrick, a proponent of tax cuts, said Hegar’s numbers mean “there’s no reason not to have significant tax reform.”
He may be right — providing that lawmakers consider the healthy dose of caution that Hegar also put in his Biennial Revenue Estimate for the 2016-17 budget.
Hegar noted the volatility of sales tax revenue, the state’s largest source of income, and the recent precipitous drop in oil prices. Together, he said, those two factors account for about 60 percent of general state revenue and require “a very close watch … in the coming months.”
Even as he spoke, oil prices dropped again, to their lowest point since 2009. Prices slipped again on Tuesday, at one point trading around $45 per barrel, well below the $64.35 average for the year Hegar used in his projections.
Still, $18 billion in extra money leaves a lot of room for corrections.
There’s also a hefty balance in the rainy-day fund savings account. Hegar said the fund is expected to reach $11.1 billion by the end of the 2016-17 biennium.
A joint legislative committee recently determined that $7 billion is an adequate minimum balance for the rainy-day fund.
There are also clear spending needs that even tax-cut proponents like Patrick and incoming Gov. Greg Abbott have advocated. Highway funding, for example, is somewhere around $3 billion short.
About $1 billion will have to go toward Medicaid funding shortfalls in the current budget.
Abbott and Patrick also count themselves as proponents of adequate education spending.
The two leaders haven’t been specific about how exactly they would cut taxes or how much that would cost, other than to say they favor cuts both for businesses and for residents.
Some tax cut advocates want to abolish the franchise tax, the state’s primary business tax. But Hegar’s figures count on $5.6 billion from the franchise tax in 2016-17, a pretty big chunk of change.
The franchise tax helps annually in financing the property tax cuts approved by the Legislature in 2006.
Some tax cut proponents advocate funneling money back to Texans by increasing the mandatory $15,000 homestead exemption on school property taxes.
There’s a a ring of fairness to that, since increased property values have shifted more of the burden of school finance onto local taxpayers, away from the state. Increased exemptions would reverse that.
Tuesday was the first day of the legislative session, with 139 to go. It looks like tax cuts are on the agenda for debate.