AUSTIN, Texas – Tax cuts are likely off the table this legislative session following Comptroller Glenn Hegar’s announcement that the state is projected to have approximately $104.9 billion in revenue available for general-purpose spending during the 2018-19 biennium.
This is the view of Dale Craymer, president of the Texas Taxpayers and Research Association (TTARA). Before joining TTARA, Craymer served as the director of budget and planning for the Governor’s Office, chief fiscal analyst for the House of Representatives, and as chief revenue estimator for the Texas Comptroller’s Office under Bob Bullock.
“One of the things Texans have become used to over the last couple of legislative sessions has been a lot of talk of tax cuts. This financial situation is going to make it very, very, difficult for the Legislature to cut taxes. I would imagine tax cuts are pretty much off the table,” Craymer told the Rio Grande Guardian.
State lawmakers kick off the 85th Legislature in Austin today. The one piece of legislation they have to pass by law is a state budget. That budget is based on the biennial revenue estimate put out by the Comptroller.
In a news release, Hegar said the $104.9 billion figure represents a 2.7 percent decrease from the amounts available for the 2016-17 biennium. Hegar said it is important to note that this decline is not due to a projected drop in total revenue collections from the 2016-17 biennium to the 2018-19 biennium.
Hegar said he is projecting overall revenue growth from the current biennium to the next. Such growth, however, is offset by a significantly lower beginning balance of $1.5 billion, he said. In addition, a 2015 voter-approved constitutional provision (Proposition 7) dedicates up to $5 billion in biennial sales tax revenue to the State Highway Fund (SHF) starting in the 2018-19 biennium to address important transportation infrastructure needs.
“Ongoing weakness in activity related to oil and natural gas has been a drag on state economic growth and led to lagging revenue collections in 2016,” Hegar said. “Still, the diversity of the Texas economy has allowed for slow but continued economic expansion and steady growth in employment, which we expect to continue over the coming biennium. Texas stands in contrast to other states with large energy industries, many of which have suffered declines in employment and economic output.”
In his interview with the Rio Grande Guardian, TTARA’s Craymer said he was not surprised by Hegar’s revenue estimate.
“It did not surprise me. Those of us who have been watching the state’s economy and the state’s revenue picture, we expected that the Comptroller was going to indicate we had less money to spend. Even though the underlying economy is strong, the impact of a diminished surplus and a new obligation for highways really swamps any type of revenue growth we are looking at,” Craymer said.
Craymer said that while $105 billion is a lot of money, it should be put into perspective. “It is $8 billion less than what the Legislature had to spend two years ago. So, the revenue trend is downward and that is going to put a lot of pressure on the budget this session.”
Craymer went on to say: “There is less money but there are increased demands on the budget. We’ve got growing costs in Medicaid, we’ve got growing costs in our pension system. The numbers the Comptroller has put on the table fall far short of being able to finance all of the budget pressures the state is facing.”
Asked why there will be less money to spend on state programs, Craymer said: “There are two major reasons. Two years ago, the Comptroller estimated we had an $8 billion cash surplus that we were carrying forward that was revenue we had accumulated during the oil boom. Over the last two years we have seen an oil bust and we have very little revenue that we will be able to carry forward. So, that loss of an $8 billion surplus is a huge swing to the downside. As is a new dedication of sales tax revenues that has been removed from general revenue and transferred to the highway fund. Voters and the Legislature made a commitment of additional funds for highways. That is great but it takes money off the table for schools, for Medicaid, and for all the other budget uses.”
Craymer also pointed out that the State of Texas cannot deficit-spend. “The Constitution does not allow that. So, the legislature is basically going to have to cut the budget cloth to fit a much smaller pattern,” he said. “So, this is going to be a very difficult budget session. Lawmakers are going to have to say no to a lot of priorities they agree with just because the money is not there.”
Asked if TTARA has any advice for legislators when it comes to writing the state budget, Craymer said: “In terms of money management, we would encourage the legislature to look at using our Rainy Day Fund. The Rainy Day Fund is basically a cushion of cash that the state has. It is going to have $12 billion in it. So, it is more than enough money to tide us over the next two years. We would hope the legislature would look at using the Rainy Day Fund to meet some of these needs.”
However, while many would think accessing the Rainy Day makes sense, Craymer said it is not a certainty.
“Budget cuts are going to be a more popular alternative politically than using the either Rainy Day Fund or, at the last resort, raising taxes. Politically, raising taxes is going to be a non-starter given how conservative this legislature is. I think using the Rainy Day Fund is an alternative is going to be debated substantially.”
Editor’s Note: Reporter Ron Whitlock assisted with this story from the state Capitol in Austin, Texas. The main photo accompanying this story was taken by publisher Mark Hanna.