DALLAS - For the first time in nearly three decades, Texas will not need to issue tax and revenue anticipation notes to meet its short-term cash-flow needs, according to state Comptroller Glenn Hegar.
Like other states, Texas has historically issued TRANs, for cash-flow purposes, to address periodic mismatches between revenues and expenditures over the course of the fiscal year. The anticipated mismatches result primarily from the state providing nearly 50% of its payments to local school districts in the first three months of the fiscal year.
For the coming fiscal year, however, the adoption of a biennial budget with spending below revenue projections coupled with recent fund growth will allow the state to meet its cash flow needs without issuing short-term debt obligations, Hegar said.
"Even after a session that delivered significant tax relief and took positive steps toward addressing important long term funding issues such as transportation and state pensions, we can meet our cash flow needs in fiscal 2016 without adding to the state's short-term debt," Hegar said
The triple-A-rated state will bridge the gap between expenditures and revenues using available funds accessed through a combination of intrafund and interfund borrowing, he said. Intrafund borrowing taps available general revenue fund cash balances while interfund borrowing taps funds outside of general revenue such as the state's economic stabilization fund or "rainy day fund."
As revenues come in, the state will repay the borrowed funds with interest as required by law. The agency anticipates all funds to be repaid by May 2016, coinciding with the receipt of 2016 franchise tax revenues.
"With approximately $8.5 billion currently in the ESF and more than $6 billion in general revenue funds, the state's available large cash balances represent tremendous assets for Texas," Hegar said. "The responsible thing to do is to make sure that money is working for taxpayers and not send interest payments out of state when we don't have to."
Texas will repay last year's $5.4 billion TRAN borrowed on Aug. 31. The state's announcement means two large note issuers will be on the sidelines this year; California's strong cash position means it will not issue revenue anticipation notes this year for the first time since 2000.
