COMPTROLLER ADDS BILLIONS TO JANUARY REVENUE ESTIMATE
(AUSTIN) — Buoyed by the vaccine rollout and record breaking April tax collections, the Texas economy looks to add billions more in revenue than was predicted in January. Comptroller Glenn Hegar said on Monday that lower state spending, federal stimulus dollars and increased economic engagement spurred by falling COVID-19 cases mean that lawmakers will have $3.1 billion more to appropriate for the 2022-2023 biennial budget. When Hegar laid out his initial budget revenue estimate in January 2021, the pandemic was still raging across the state with cases and hospitalizations on the rise. "Those conditions warranted caution about the near-term economic outlook," he said. "Since then, case counts and hospitalizations have plummeted, many restrictions have been lifted and economic activity in the state, and across the country, has accelerated.” In January, his office forecast a $946 million shortfall in the 2020-2021 ending balance, but he revised that prediction to a $725 million positive balance, a swing to the black of nearly $1.7 billion.
Hegar gave much of the credit to the vaccine rollout that had just begun when he issued his initial biennial revenue estimate on January 11th. That Monday, the state posted 13,300 new COVID cases; on Saturday, May 1, the state saw just 2,500 new cases. Hospitalizations are down drastically as well, from a pandemic peak of 14,218 in January down to 2,558 as of Sunday, May 2nd. Hegar said that the work the state did to rein in the virus worked, and more Texans are going out to spend money and are adding to state sales tax collections. April collections broke records, he said, with the state bringing in $3.4 billion, the most ever for a single month. That's a 31 percent increase over last April when pandemic lockdowns and restrictions were coming into effect across most of the state. It's even a 19 percent increase over April 2019.
While the increase in state revenue available to state budget writers tops $3 billion, the all-funds number is up $24 billion thanks largely, said Hegar, to the $1.9 trillion federal aid package passed by Congress in March. That package also put more money in peoples’ pockets, which spurred consumer activity through April, said Hegar. "Whether you agree or disagree with the stimulus package, the fact is it's probably dragging future GDP forward as people spend those dollars today," he said.
Hegar also revised his forecast for the oil and gas sector, which has rebounded from winter lows. In January, Hegar said he was predicting that a barrel of oil would go in the low $50's; now, he says, he's expecting oil prices to rise into the low $60s by next year. The number of producing wells has also been increasing. That means more money for the state highway fund, which draws money from the state oil and gas severance tax, as well as more money going into the state's economic stabilization account. Hegar says lawmakers should come into the 2023 session with $12.12 billion in the rainy day fund.
There were a few pieces of bad news in the comptroller's presentation. Though the COVID pandemic is on the retreat here in Texas and across most of the nation, globally it's never been worse. Skyrocketing case counts in India, Brazil and other large nations mean that the world set a record for total COVID cases just last week. Hegar said that if the pandemic continues to hurt international trade, it could also be a drag on the state economy. The labor market hasn't fully recovered from the pandemic either, with the unemployment rate in Texas at 6.9 percent, still almost half-a-million jobs below where it was before the pandemic. Nevertheless, Hegar said he is cautiously optimistic about the state economy going forward. "Texas remains well positioned to fully recover from the COVID outbreak and return to its norm of economic growth in excess of the national rate," he said.
The Senate will reconvene Tuesday, May 4 at 10 a.m.