Texas Legislature Convenes with 12.4% Rebound in Revenue

DALLAS – Texas lawmakers will have $101.4 billion available for their legislative session that begins Tuesday, a 12.4% increase over the previous two-year period, which brought painful reductions in education spending.

Comptroller Susan Combs provided the revenue estimate in Austin Monday as she is required to do before each legislative session.  Texas lawmakers budget for two-year periods, meeting in odd-numbered years.  The state’s fiscal year begins on Sept. 1.

“Texas experienced a very strong rebound from a severe recession,” Combs said. “The outlook for both the economy and state revenue is for continuing expansion as the fast-growth of the economic recovery gives way to moderate, sustained growth.”

When federal funds are included, the legislature will have $208.2 billion for the 2014-15 biennium.  Federal funding for Texas is estimated at about $112 billion.

The higher revenue will allow lawmakers to cover about $7 billion owed to state programs whose funding was deferred, including a $4.7 billion in unpaid Medicaid expenses.

With the state facing a lawsuit from school districts across the state, the legislature will also face strong demands to restore funding to match growth rates in the burgeoning local districts. The 2011 Legislature provided schools about $5 billion less than required by the state per-student spending formula.

Across the board, lawmakers cut about $15 billion in spending to balance the previous biennial budget.

For the upcoming budget, the state’s general revenue collections from taxes, fees and other income are estimated to be $96.2 billion for the 2014-15 biennium, of which about $3.6 billion would be set aside for future transfers to the Rainy Day Fund. The Rainy Day Fund is expected to grow from the current $8.1 billion to $11.4 billion at the end of fiscal year 2015.

The Texas economy, in inflation-adjusted terms, is projected to increase by 3.4% in fiscal 2013 that ends Aug. 31, another 3.4% in fiscal 2014 and 3.9% in fiscal 2015. The state’s unemployment rate, which reached 8.2% during the recession, is expected to continue slowly dropping and average 6% during 2015, Combs said.

The state’s sales tax, which accounts for more than half the state’s general revenue, is expected to produce about $54.9 billion in the 2014-15 biennium, a 9.4% increase from the current biennium.

Motor vehicle sales taxes are expected to be about $7.9 billion in 2014-15, a 9.3% increase.  The oil production tax is projected to generate about $4.6 billion, a 3.9% increase from the current biennium.  However, natural gas production tax revenue is estimated to be $2.5 billion, about 4% lower than the current biennium.

Combs attributed the change in energy revenue to the fact that most drilling in the state is now seeking oil rather than gas in a reversal of years past. Texas is now in the midst of an oil and gas production boom, particularly in the Eagle Ford Shale region of South Texas.

“While the Texas economy is doing well, we must be mindful of factors that cast a shadow over our economy,” Combs said, citing economic problems in Europe and China and ramifications of persistent budget and debt showdowns in Washington.

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