DALLAS – For the second year in a row, Texas will not need to issue tax and revenue anticipation notes to smooth out its cash flow over the coming fiscal year, state Comptroller Glenn Hegar announced.
Like many other states, Texas has historically issued short-term TRANs to address periodic mismatches between revenues and expenditures during the fiscal year. The anticipated mismatches stem from the state providing nearly half of its payments to local school districts in the first three months of the fiscal year.
Last year, Hegar determined such a borrowing was unnecessary for the current fiscal year 2016. Prior to that, Texas had issued TRANs annually for nearly three decades.
Hegar said that the ability to avoid borrowing to cover cash flow demonstrates how well Texas has fared economically, despite a two-year slump in oil and gas prices.
"Texas' diverse and dynamic economy has weathered this downturn in energy prices significantly better than other energy-producing states, meaning we still have the ability to do the fiscally responsible thing and avoid unnecessary borrowing," Hegar said.
The state will combine intrafund and interfund borrowing to cover gaps in cash flow.
Intrafund borrowing taps available General Revenue Fund cash balances, while interfund borrowing taps funds outside of general revenue such as the Economic Stabilization Fund, also known as the "Rainy Day Fund."
As revenues come in, the state will repay the borrowed funds with interest as required by law, Hegar said. The agency anticipates all funds to be repaid by May 2017, coinciding with the receipt of 2017 franchise tax revenues.
Franchise tax revenues in 2016 came in ahead of estimates in the Comptroller's Certification Revenue Estimate despite the drag continued low oil prices have placed on some segments of the economy.
"With approximately $9.66 billion currently in the state's Rainy Day Fund, Texas' available large cash balances represent tremendous assets for the state and its taxpayers," Hegar said. "By tapping these resources rather than borrowing in the short term, we are continuing the sound fiscal management that has kept our state on solid economic footing."
