State Comptroller Glenn Hegar has had to do a lot of hand-holding around the Capitol recently, reassuring state legislators and others that despite the drop in oil and gas prices Texas is still OK.
Before this energy slump is over, he might have to resort to hugs, soft pats on the back, calming it’ll-be-alrights.
Oil prices only a little above $30 per barrel (they averaged $101.45 per barrel in 2014 and $64.94 per barrel last year) can’t be good for Texas. Nor can natural gas at $2.27 per million Btu (remember the $8 heyday in 2008?).
Still, Hegar is right. The state budget has a lot of cushion to absorb energy price shocks for a while.
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The state economy is diversified — well enough, at least, to withstand bad times in the oil patch far better than in many previous years.
Some local Texas economies are in shock.
Local governments in the Permian Basin of West Texas and the Eagle Ford Shale of South Texas flew high on oil’s latest boom. Now property values, property tax income and sales tax revenue face serious threats.
For the state, taxes on oil and gas production for the most part do not feed directly into budget revenue.
Under a state constitutional amendment approved by voters in 1988, Texas puts most of that money into the Economic Stabilization Fund — commonly called the “Rainy Day Fund.”
Legislators, with a three-fifths vote, can move money from the fund to the budget, but the idea is to save it for special purposes or hard times.
The fund is expected to reach $10.4 billion next year.
On top of that, lawmakers didn’t spend all they could have in the $106.6 billion, two-year general fund budget. There’s a surplus of about $4 billion.
Texas now faces a test of its economic diversity. It’s a question of whether troubles in the oil patch will lead to a larger slowdown.
Sales tax income accounts for 56 percent of the state’s net general revenue, almost $30 billion a year.
On Thursday, Moody’s Investor Services issued a cautionary report on Texas. It said sales tax revenue was projected to rise 1.2 percent in the current fiscal year but in fact has declined 2 percent in the four months since September.
Hegar blasted that report, restating his confidence.
So far, he seems to be on top of things, not gloomy but not careless. We’re going to need frequent updates.