DALLAS – The Texas Legislature will see a 2.7% decrease in state revenue available for the general fund budget in the 2017 session, state Comptroller Glenn Hegar said Monday.
"Ongoing weakness in activity related to oil and natural gas has been a drag on state economic growth and led to lagging revenue collections in 2016," Hegar said. "Still, the diversity of the Texas economy has allowed for slow but continued economic expansion and steady growth in employment, which we expect to continue over the coming biennium."
The state Comptroller's report came a day before the 85th Session of the Texas Legislature opens Tuesday.
Lawmakers will have about $104.9 billion for the next two-year budget that begins Sept. 1.
While Hegar is projecting overall revenue growth from the current biennium to the next, the state is beginning the period with a lower balance of $1.5 billion.
Under a voter-approved amendment in 2015, the state is also diverting up to $5 billion of state sales tax revenue to transportation projects.
Sales tax collections make up the state's single largest source of General Revenue-related revenues. Revenue estimators project revenues from sales taxes to be nearly $62 billion in the next biennium.
Subtracting about $4.7 billion dedicated to the State Highway Fund as a result of the passage of Proposition 7 in 2015 leaves nearly $57.3 billion.
The state will shift $3.1 billion of revenue to the rainy day fund.
After a 5.9% increase in real gross state product in fiscal 2015, the Texas economy is estimated to have grown by only 0.2% in fiscal 2016, Hegar said.
In fiscal 2017, the Texas economy is projected to grow by 2.5%.
"That growth rate should increase slightly to 3% in fiscal 2018 and 3.1% in fiscal 2019," he said. "Employment growth is expected to be 1.9% in fiscal 2018 and 1.7% in fiscal 2019, while the state's unemployment rate is expected to remain relatively unchanged at 4.5% in both fiscal 2018 and 2019."
Another source of revenues, motor vehicle-related taxes, including sales, rental and manufactured housing taxes, are expected to reach $9.87 billion, up 6.7% from 2016-17, Hegar said.
Oil production tax collections are projected to generate $4.7 billion in the 2018-19 biennium, a 32.3% increase from $3.6 billion generated in the current biennium.
Natural gas tax collections in the 2018-19 biennium are expected to be $1.7 billion, 27% more than the $1.3 billion collected in 2016-17.
The state's franchise tax revenue for all funds is estimated to be $7.8 billion for 2018-19, a 2.4% increase.
The state's Rainy Day Fund balance currently stands at approximately $10.2 billion. Absent any additional appropriations that might be made by the Legislature, the balance is expected to be $11.9 billion at the end of the 2018-19 biennium, Hegar said.
"While our state revenues were down in 2016 and we face some difficult decisions in the coming months, Texas remains fiscally healthy," Hegar said. "Despite energy-related headwinds, Texas has gained 210,000 jobs in the last year, and while our gains have not been at the same rapid rate as a few years ago, it is important to note that we have added jobs in 19 of the last 20 months."
Hegar said the state's energy economy is also showing signs of improvement, with the rig count increasing. Revenue from oil and gas production fell 52% in fiscal year 2016, he noted. Texas accounts for 49% of all drilling and production rigs in the nation.
