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Texas economy humming, adding $14B to state surplus amid record-breaking sales taxes

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AUSTIN – Texas has fully recovered from the economic downturn caused by COVID-19 that state tax receipts set new records, adding $14 billion to an already increased surplus, Comptroller Glenn Hager said Thursday. .

Inflation is a factor, but so is rapid population growth and a thriving energy sector, Hager said.

“I reduce it to $40 billion,” Hager said of his projected surplus, formally advising GOP state leaders in a letter updating his “certification revenue estimate” eight months ago. shortly before giving.

Hager said that in the two-year budget cycle, which ends 13 months from now, discretionary state revenues account for nearly two-thirds of the state’s $40 billion cushion, which lawmakers can spend on convening next year.

The rest is in a “rainy day fund” that would require a supermajority vote to be tapped, the Republican tax collector insisted.

The sales tax is the state’s revenue worker, and it sucks, Hager said in an interview with The Dallas Morning News.

“Yes, we have record sales tax numbers,” he said. “Even without inflation, we would still have record sales tax numbers.”

He said that in the last three months, even after adjusting for annual inflation of 8% or 9%, the state’s sales tax has been rising by 3.7% compared to the same month a year ago.

Their new forecast predicts sales tax growth of around 19% in the fiscal year that ends at the end of next month.

Hager said overall tax collections are rising even more dramatically in the current fiscal – 24%.

And this reflects year-on-year growth in collections of some taxes that are growing even more spectacularly than sales tax – natural gas production (184%), oil production (81%), hotel occupancy (43%) .

Last year, lawmakers passed and Governor Greg Abbott signed off on a two-year “all funds” budget, which costs $264.8 billion. Of that $143.5 billion, or 54%, is federal funds. The budget is projected to spend about $125.5 billion in state discretionary revenue.

But Hager said such general-purpose money would amount to $149.07 billion.

With some spending cuts, he expects a “general revenue-related” fund’s final balance of $26.95 billion.

On rainy days, driven mostly by oil and gas tax receipts, he estimated that $13.66 billion would not be spent until August 31, 2023.

Add $13.66 billion and $26.95 billion, and you get about $40 billion.

conservative estimate

But Hager is very cautious in forecasting revenue for the fiscal year beginning September 1. Sales tax will increase by just 1.5% next year; Total tax collection, 2.3%, he said.

“It’s a very conservative second year estimate,” Hager admitted.

He is not predicting a recession as staying at the bottom of his fiscal 2023 revenue projections, he said.

Why? Perhaps because they have six months to look at the economy before their revenue projections become a real-world determinant of how much lawmakers can afford.

“They are not in session,” he said. “They’re not making the determinations on the budget right now. They’re not going to make them until January. There’s a significant cash carryover balance. And so, even if we’re more or less conservative in two years, any decision between now and January can’t really be made.” I’m not going to impress.”

But about $300 million a month of the state’s sales tax “is being driven because of inflation,” Hager said.

The two-term comptroller, who is seeking re-election this year, said he tries to keep in mind what Texas activists and consumers are feeling from the higher prices.

He said the average Texas family is paying $3,500 more annually because of inflation.

oil and gas

As Hager tries to track whether revenue will fall into the state budget, he focuses more on sales tax than wild change in energy production tax receipts.

With no significant jump in production, mostly due to higher oil and natural gas prices, he nearly doubled his estimate of how much natural gas the state would collect this cycle by severance tax — from his estimated $4.7 billion last November to $9.15. Billion. For oil, the severance-tax haul for the cycle would be $12.8 billion, up from what he estimated eight months ago at $9.6 billion.

There are 361 active oil rigs in Texas, Hager said. In August 2020, this number had dropped to 100 at the height of the pandemic. But it is still well below the record high of 540 in October 2018.

Hager increased his estimated value of West Texas Intermediate crude. In November, he estimated the price to average $75 a barrel in the current fiscal year; And the next year, $70.

In his letter to Abbott, Lieutenant Gov. Dan Patrick and Speaker Dade Phelan, he raised it to $90 a barrel for fiscal 2022 and $97 a barrel for the next year.

At 2:30 pm on Thursday, the New York Mercantile Exchange listed the price at $ 96.46 per barrel.

$300 million a month in inflation-driven sales tax “is a real number, which also reflects how it’s affecting the people in their average household,” he said. “This is a significant factor in comparison to oil and gas severance taxes and price volatility.”

There is great uncertainty in dismantling the projections, he said.

The last two-and-a-half years have been a wild ride for a revenue estimator, he said.

“Wow, you don’t know what’s going to happen next,” Hager said. “Pandemic. Uri winter storm. Invasion of Ukraine. I mean, what world are we living in right now.”

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