AUSTIN -- Texas has emerged from a devastating hurricane and a collapse in oil prices with a growth rate that exceeds forecasts, Texas Comptroller Glenn Hegar told The Bond Buyer’s Texas Public Finance Conference Wednesday.
Before the oil industry bust in 2014 and 2015, the state's economic growth was about 3.8% for 20 years, which outpaced the national average, Hegar said. During the oil bust, the state's growth was flat but not negative.
Despite the weakness in 2014 and 2015, Texas' triple-A rating from four ratings agencies was never in danger, according to analysts.
In fiscal year 2017, Texas began to show strong growth in sales tax revenue and a falling unemployment rate, Hegar said
"We are having higher growth than we had in the revenue estmate," he said. "Barring a recession -- and no one can predict when that will be -- or some international issue, Texas is poised to continue to grow at the higher rate."
With 12 economic regions across the state, some can grow while others decline. When the Permian Basin of West Texas was in decline in 2014 and 2015, the economies of the Dallas-Fort Worth area and Austin were booming, he said.
About 49% of all the oil and gas rigs operating in North America are in Texas, he said. When the thought that Texas couldn't produce any more oil crossed the industry, many oil companies sold out. Recently, oil and gas companies purchased more than $20 billion worth of land in the Permian Basin to drill again.
"The Eagle Ford Shale is (also) starting to pick back up a little bit as prices are getting back up to $60 or more (per barrel)," he said.
In the last 20 years, the state gained more than 2 million jobs, Hegar said, which is about 25% of jobs in the U.S. In the last year, Texas gained about 300,000 jobs.
With unemployment at a 40-year low, the issue for developers is a labor shortage, especially in the areas rebuilding from the hurricane.
While the state has seen a surge in sales tax revenue since Hurricane Harvey hit the Texas coast in August, the long-term impact of the storm is still being measured, Hegar said.
In a recent report, Moody's Investors Service compared the impact of Harvey on Texas and Irma on Florida last year. Coastal residential property has particular risks, Moody's noted. Nearly 38% of Florida's and 26% of Texas' coastal dwelling units are at high risk of flooding. As the result of more building in coastal areas, hurricanes will have a relatively greater impact on Florida and Texas than other states.
The economic losses from Hurricanes Irma and Harvey, while not solely affecting the two states, rival Hurricane Katrina as the most expensive U.S. natural disasters.
In his most recent monthly report, Hegar said today that state sales tax revenue continued to climb, rising 9.1% in January over the same month last year to $2.67 billion.
“Growth in sales tax revenue occurred across all major economic sectors,” Hegar said. “The strong growth in revenue was led by collections from the mining, construction and wholesale trade sectors. The manufacturing, retail trade and restaurant sectors also saw strong gains.”
Total sales tax revenue for the three months ending in January 2018 was up 10.8% compared to the same period a year ago. Sales tax revenue is the largest source of state funding for the state budget, accounting for 58% of all tax collections.
Hegar was elected to the state comptroller's job in November 2014. Hegar is Texas' chief financial officer. He is seeking re-election this year.