Facing sluggish economic forecasts amid low oil prices along with billions in tax revenue already dedicated to the state highway fund, Comptroller Glenn Hegar said Monday that lawmakers will have $104.87 billion in state funds at their disposal in crafting the next two-year budget, a significant decrease from his estimate ahead of the legislative session two years ago.
Hegar told state lawmakers he expected a "slow to moderate" expansion of the Texas economy. Still, he said, the amount of revenue they will be able to negotiate over has fallen. That's largely because lawmakers in 2015 dedicated up to $5 billion in sales tax revenue that must go to the state's ravenous highway fund, rather than being spent on other priorities such as schools, health care or reforms to the embattled Texas foster care system.
"We are projecting overall revenue growth," Hegar said. "Such growth, however, is more than offset" by the demands of the state highway fund and other dedicated funds.
The revenue estimate does not determine the scope of the entire Texas budget. Rather, it sets a limit on the state’s general fund, the portion of the budget that lawmakers have the most control over. The general fund typically makes up about half of the state’s total budget and, along with federal funding, helps pay for schools, health care, universities and other services.
Two years ago, Hegar estimated that the Legislature would have $113 billion in state funds, also known as general revenue. Adding in federal funds and other revenue sources, lawmakers would have $221 billion in total for its budget, as well as $11.1 billion in the Rainy Day Fund, he said at the time. Lawmakers ultimately passed a $209.4 billion budget, which included billions in tax cuts.
“There are obviously going to be cuts to the budget. We’re just going to have to figure out where those cuts are going to come,” said state Rep. Drew Darby, R-San Angelo, one of the House’s experts on the budget. He said that the amount of general revenue available to lawmakers is $5 billion to $6 billion less than what it would take to cover current services when inflation and the growth of the state are taken into account.
It would take about $109 billion in general revenue to cover the cost of current programs and services provided by the state, a little more than $4 billion more than Hegar estimated the state will have to spend, according to an estimate from the left-leaning Center for Public Policy Priorities.
Hegar estimated that the state's Rainy Day Fund, fed largely by taxes on oil and gas development, will have a balance of $11.9 billion at the end of the next two-year budget, assuming legislators don't tap that savings account during the session that begins Tuesday.
“Texans expect their government to live within its means, and I fully expect to sign a budget that does just that," Gov. Greg Abbott said Monday in a statement. "As fiscal conservatives, we must treat our state budget the way families do – by funding our priorities, while constraining the size and growth of government. I will work with the Legislature this session to craft a budget that funds our most vital services without growing faster than the growth of population and inflation.”
Ross Ramsey contributed reporting.
This article originally appeared in The Texas Tribune at https://www.texastribune.org/2017/01/09/hegar-gives-lawmakers-dour-revenue-estimate-2017-s/.