Tuesday, the House Appropriations Committee held its first interim hearing to consider some of their assigned interim charges involving the state budget. Among the invited testimony was that of Texas Comptroller Glenn Hegar, who came to give a general update to lawmakers on the state’s current revenue and economic outlook. For months Texans for Fiscal Responsibility (TFR) has been talking about the existing massive budget surplus that is projected to just keep getting bigger and bigger. Well, guess what? In yesterday’s hearing, Hegar revealed he would be announcing yet another revenue increase on Thursday and that everyone is going to be really surprised by the numbers.
Throughout his update, he noted quite a few interesting things about revenues in Texas. Here is some of what he said in the committee hearing:
- Texas non-farm employment is up 6.1% since May 2021 (highest among 10 most populous states)
- The Unemployment Rate is 4.2% in Texas
- He acknowledged the hardship of the historical inflation reported in May as that of 8.6% (Wednesday, the Consumer Price Index indicated it had increased in June to 9.1%)
- The average cost for a gallon of gas in Texas was $4.07
- He expects higher interest rates to slow the growth of both the U.S. and Texas economies
- Tax revenue has rebounded strongly with most major tax streams surpassing pre-pandemic levels
- Sales tax revenues have been “exceptionally strong” and the average monthly collection in the last year has been $3.5 billion (a massive increase)
- Adjusted inflation revenue for Year-over-Year (YoY) growth is 3.7%, which is more than 3 times their initial estimate of 1.1%
- Oil and gas severance tax revenues in the last 3 months have exceeded $3.1 billion (this surpasses many annual revenues historically!)
- In the last 10 months, oil tax revenue is up 87.9%
After his presentation, he went on to say, “The Texas economy has been exceptionally strong since the last revised BRE (Biennial Revenue Estimate) in November of last year ”. We will be releasing a revised BRE on Thursday… But I am going to warn you… stay seated in your seat when you read it. It is astonishing growth.” Hegar then went on to remind the committee that 58% of all tax revenue is sales tax revenue and that it is the main driver of revenue in Texas and a strong indicator of economic health. He finished his remarks by saying he has seen more revenue growth in the past year compared to the previous year than any year he has ever seen in his time in elected office.
Needless to say, this simply reinforces a fact that TFR has repeated often in the last year, that Texas does not have a revenue problem we have a spending problem! The question on Texas taxpayers’ minds should be, “What will we spend this ‘astonishing revenue’ on?”
Throughout the Comptroller’s portion of the hearing, only one member; Taxpayer Champion State Rep. Matt Schaefer (R-Tyler), suggested that Texas should, “be giving as much of it back to taxpayers as possible.” This is something TFR agrees with and has suggested many times should be done in the form of providing true property tax relief, by using the surplus money to ‘buy down’ the Maintenance and Operations (M&O) portion of the property tax.
TFR is hopeful that the idea of property tax elimination is gaining traction in the state legislature as the surplus revenue estimate continues to grow, however, some lawmakers’ questions in the committee hearing were revealing as to their motivations to spend much of that money on other pet projects. As an example, when asked by Schaefer what Hegar would suggest spending the excess revenue on, his answer was infrastructure, without giving any specifics as to what that term actually means. Many other committee members echoed Hegar’s sentiments throughout the hearing.
Stay tuned Thursday as we report on the updated BRE.
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