Chief Texas Estimator Anticipates Slow Revenue Rebound

DALLAS — Texas’ chief revenue estimator told lawmakers Wednesday that revenues probably will not climb much this fiscal year, dimming hopes of avoiding another budget shortfall in two years.

John Heleman of the comptroller’s office told the Texas House Budget Committee that though monthly sales tax collections in 2011 are up from 2010, the revenue still doesn’t match 2008’s monthly totals.

Legislators agreed on a two-year budget this summer than left some programs unfunded past January 2013, when the next Legislature meets, in anticipation of higher-than-expected sales tax revenues as the economy recovers.

Heleman said that does not look likely at this point.

“We’re just short of the 2008 monthly collections,” he said. “And we have a lot more people than we did then, and things are more expensive.”

Heleman does not expect an increase in collections in fiscal 2012 from the state’s 6.25% sales tax.

Tax collections on retail sales and dining were up 5.5% in fiscal 2011, Heleman said, but total revenue was up 9.4% from fiscal 2010, due mostly to higher activity in on oil and gas drilling.

“We’re going to go from a 9.4% growth rate to something substantially lower than that because we have a somewhat soft economy in general and we haven’t really moved into a very robust recovery yet,” he said.

Consumer confidence is low, he said, and that is bad news for sales tax collections.

“Retail trade is probably going to soften a little bit,” Heleman said. “The year of ’12 is not going to be a great recovery year. It’s still going to be flattish. It’s still going to be soft.”

The 6.25% state sales tax accounts for more than 40% of Texas’ general fund budget and is the largest revenue source. Texas does not have an income tax.

Heleman said sales tax revenues are directly linked to the state’s economic health.

“In the last 10 fiscal years, the sales tax has gone down in four and we’ve had two recessions,” he said.

Texas has recovered 90% of the jobs lost since January 2008, Heleman said, but that does not account for population growth.

“We need to be alert and aware that we are seeing a national slowdown, and Texas is a significant portion of the national economy,” he said.

Construction activity won’t pick up until the large housing inventory is brought down and demand increases, Heleman said.

“It will probably be at least a year, more probably at least two years, before we start to get to the situation where we will see a significant increase in the number of new homes under construction,” according to Heleman.

“It’s going to take a long time to get back,” he added.

The Budget Committee is planning to meet again in Austin next week to receive a report on how well actual revenue collections match with the predictions used for development of the fiscal 2012-2013 budget.

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