DALLAS — Tax revenues that have rebounded to pre-recession levels will bring Texas’ rainy-day fund to $7 billion by the time lawmakers begin development of the next two-year state budget.
John Heleman, chief revenue estimator in the Texas Comptroller’s Office, told the House Ways and Means Committee on Wednesday that increasing revenue collections show that the Texas economy has recovered from the recession.
The rainy-day fund, which is officially known as the economic stabilization fund, currently totals $5 billion, Heleman said. That is how much remains after the Legislature put $3.2 billion from it into the general fund earlier this year to help balance the fiscal 2011 budget.
“In November, we’ll transfer about $1.1 billion into the rainy-day fund from fiscal 2011 collections,” Heleman said. “If energy prices stay at their current level, in November 2012 we should see a transfer of $900 million into it.”
The two-year state budget does not fund some programs past January 2013, when the next Legislature will meet, in anticipation that higher tax revenues would help refill state coffers.
The surest indicator that the Texas economy has recovered from the latest recession is a continuing increase in sales tax collections, according to Heleman.
After 14 consecutive months of sales tax revenue declines that began in summer 2008, he said, collections have been up for the past 17 months. The sales tax generates 54% of general fund revenue.
“The sales tax collection in 2008 was our all-time high, and then it went down in 2009,” Heleman said during his quarterly report to the committee. “It’s back up in 2011, and we’re essentially back to where we were in 2008 in terms of sales tax collections.”
Sales taxes from the retail sector were especially hard hit as the economy fell into recession, Heleman said, along with home construction and furnishings.
“Retail, which is the backbone of our sales tax collections, was the first sector to show the stress of the oncoming recession,” he said.
“The only things that held up well were the restaurants and drinking establishments,” Heleman added. “No levity intended.”
Higher oil prices will account for most of the growth in the rainy-day fund, he said. The main revenue sourcefor the fund are oil and gas production taxes, plus some interest income from those taxes.
Oil production has been steady over the past 20 years, Heleman said, but the state collects more revenue when prices are high.
The first $530 million of annual oil taxes goes into the general fund, which was the amount collected in fiscal 1987.
Once that level is reached, 75% of the additional revenue goes into the rainy-day fund and 25% is deposited into the general fund.
The threshold for the natural gas severance tax is $600 million a year. The current low prices for natural gas limit revenue growth from that source, Heleman said.
Texas voters approved the creation of the rainy-day fund in November 1988.
Since deposits began in fiscal 1990, the state has put $11.1 billion into the fund. It was at its peak at the end of fiscal 2010 with $8.2 billion.
Deposits into the rainy-day fund hit a high in fiscal 2008 at $2.98 billion. Annual deposits fell to $870 million in fiscal 2010 and $451.5 million in fiscal 2011.