Texas Comptroller Glenn Hegar announced the release of the Certification Revenue Estimate (CRE) for the fiscal 2018-19 biennium.
Before each regular legislative session, the Comptroller’s office issues a Biennial Revenue Estimate (BRE) that estimates how much revenue will be available for spending in the state’s next two-year budget cycle. After the session, the agency releases the CRE to provide the detailed basis by which the Comptroller certified the budget, to revise estimates in the BRE to reflect legislative activity and current economic information and to take into account final revenue numbers for the recently ended fiscal year.
“The diversity of the Texas economy, coupled with conservative fiscal management and strengthening in the oil and gas sector, allowed the state economy to return to its normal pattern of growth, which exceeds that of the national economy,” Hegar said. “While revenues remained in line with the estimates we made in January, some uncertainty remains in our outlook for the biennium due in part to the ongoing assessment of the economic impact of Hurricane Harvey.
“Despite this uncertainty, we are continuing to project steady expansion of the Texas economy following a brief slowdown due to the storm’s impact,” Hegar added. “Factoring in recent legislative activity, this CRE presents slightly higher revenue forecasts for the 2018-19 biennium than those we released in January.”
As a result of actions taken by the Legislature and an updated economic forecast, the Comptroller’s office now expects revenue available for general spending in 2018-19 to total about $107.33 billion, versus the BRE estimate of about $104.87 billion. This revenue will support the $107.23 billion in general-purpose spending called for by the 85th Legislature, and will result in a final balance available for certification of $94 million.
The State Highway Fund (SHF) and Economic Stabilization Fund (ESF, the state’s “Rainy Day Fund”) both receive funding from oil and gas severance taxes. Fiscal 2018 transfers will total $734 million each to ESF and SHF, and the CRE projects $777 million will be transferred to each fund in fiscal 2019.
Additionally, the constitutional amendment passed in 2015, which directs up to $2.5 billion in annual state sales tax revenue in excess of $28 billion into the SHF, begins to take effect in fiscal 2018.
In 2018, the $28 billion threshold is not expected to be reached until August. As a result, a projected $2.31 billion transfer will not occur until September 2018, the first month of fiscal 2019.
In 2019, the state is projected to reach the $28 billion threshold in July, triggering a $920 million transfer to the SHF in August. The remaining estimated $1.58 billion from August collections will be transferred in September 2019 — the first month of the 2020-21 biennium — leaving that amount available for certification in 2018-19.
In addition to market turbulence, energy price fluctuations and potential changes in national economic policy, the impact of Hurricane Harvey contributes some uncertainty to this estimate.
While some agencies were able to provide preliminary estimates of the costs associated with recovery efforts as well as estimates of federal revenue expected to offset those costs, Texas remains in the very early stages of the recovery. The full impacts to the state’s economy and revenues have only begun to take shape and will likely change in the coming months.
“I will continue to monitor the Texas economy and state revenues closely, and will keep the public informed of significant events as they arise,” Hegar said. “What I can tell you is Texans are resilient, determined and up to any challenge, and as this CRE projects, so is our economy.”
The Comptroller’s office has created this useful infographic featuring highlights from the full CRE. Detailed tables and the full CRE can be found on the Comptroller’s website.