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Welcome to the official website for the
Texas Senate
January 30, 2023
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(AUSTIN) — Telling members of the Senate Finance committee that they will likely never again see a session with the state as flush with cash as it is now, state Comptroller Glenn Hegar said lawmakers must decide how to carefully shepherd the state's record-breaking income. The Finance committee began budget hearings on Monday, opening with a presentation from the state's chief financial officer, who echoed comments he made earlier in the month when he laid out his forecast for state revenue over the next biennium. "The revenue increases that we have seen have truly been historical and unprecedented," he said. "We have never seen anything like this in the past and I truly don't believe we'll see anything like this again in the future." Hegar told members not to expect to see anything like this session's numbers in 2025 or 2027.

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The Senate Finance Committee opened public hearings on the state budget Monday, where they will deliberate on how to spend a record-setting amount of projected revenue.

While the comptroller is forecasting $188 billion in tax revenue over the next two years, along with a massive projected surplus from the last biennium, Hegar reminded lawmakers that a high degree of uncertainty surrounds his projections. With inflation rates still above the Federal Reserve's policy goal, Hegar warned that more interest rate hikes are likely as we move through the year. "If inflation doesn't slow down significantly, the Fed's actions to check it may prompt a much deeper recession than we currently anticipate." Consumer spending, which feeds state coffers through sales tax collections, is also projected to decrease as people run through COVID savings and employment drops, he added.

Because Texas collects more than half of its revenue through sales and use taxes, what has left the state in an enviable position has also hurt consumers' pocket books. Texas increased sales tax revenue by 26 percent over last year, about double the previous record increase, but Hegar said much of this increase comes from high inflation, with consumers paying more than $45 billion more than they would've a year ago. "We're deriving hundreds of millions of sales tax dollars [monthly] that we wouldn't have otherwise but for the inflation," he told the committee.

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State Comptroller Glenn Hegar testified that the policy decisions made this session will determine how robust revenue looks next session and beyond. "Choose wisely," he said.

In lean years, deep cuts and reductions in services are the problem faced by budget writers, but years of plenty bring different challenges. Committee member and Georgetown Senator Charles Schwertner offered this summary of the conundrum facing lawmakers in 2023. "This session we have the unique choice and obligation of spending more money on priorities of the state, or returning it to taxpayers, or…putting more away for future endeavors and difficult times. They all have merit," he said. Some of it will likely be going back to taxpayers in the form of property tax cuts, as both the Senate and House have set aside $15 billion for property tax reduction. Spending money doesn't necessarily mean it's lost to posterity, said Finance Committee Chair Joan Huffman of Houston. "There are other ways to ensure that we invest in Texas, for example, paying off pensions, which we've done," she said. "There are ways we can invest these riches we have for future generations."

With the Legislature's long history of conservative budgeting philosophy, lawmakers will also be careful not to overspend, especially given Hegar's cautions about the uncertainty in his revenue estimate. Senators don't have to look too far into the past to see another state which saw a sudden reversal of fortune, with the state of California currently staring down an $24 billion shortfall in their state budget. "They had a $100 billion surplus a year ago - things changed for them, didn't it? " said Hegar. "Let's not repeat the mistakes they've made." Constitutional spending limits will keep spending in check, with the base budget limited to around $135 billion against $188 billion in revenue. Lawmakers can vote to bust the spending cap, but don't bet on it, said Huffman. "That's going to be a no," she said when the topic arose at Monday's hearing.

The Senate is scheduled to reconvene Tuesday, January 31st, at 11 a.m.

Session video and all other Senate webcast recordings can be accessed from the Senate website's Audio/Video Archive.