Texas Comptroller Glenn Hegar released the Biennial Revenue Estimate (BRE) Monday, showing the state is projected to have approximately $119.1 billion in revenue available for general-purpose spending during the 2020-21 biennium.
The revenue estimate represents an 8.1 percent increase from the amounts available for the 2018-19 biennium. Hegar warned, however, that substantial supplemental appropriations could affect revenue available for the 2020-21 biennium.
“Despite this projected revenue growth, the Legislature will again face some difficult choices in balancing the budget,” Hegar said. “The most pressing and costly budget drivers for the upcoming session include a potentially large boost in education spending to reduce the property tax burden and reform school finance.”
The $119.1 billion available for general-purpose spending includes 2020-21 collections of $121.5 billion in General Revenue-Related (GR-R) funds as well as $4.2 billion in balances from the 2018-19 biennium. The total reflects $6.3 billion reserved from oil and natural gas taxes for 2020-21 transfers to the Economic Stabilization Fund (ESF) and the State Highway Fund (SHF) and $211 million set aside to cover a shortfall in the state’s original prepaid tuition plan, the Texas Tomorrow Fund.
Sales tax collections make up the state’s largest source (55 percent) of GR-R revenues in 2020-21. The BRE projects sales tax revenues will increase 9.5 percent from the 2018-19 biennium to nearly $66.3 billion for the 2020-21 biennium. That is after $5 billion is allocated to the SHF.
Other significant sources of revenue in 2020-21 include:
- motor vehicle-related taxes, including sales, rental and manufactured housing taxes, which are expected to reach $9.8 billion, up 0.4 percent from 2018-19;
- oil production tax collections, which are projected to generate $7.4 billion, up 11.1 percent from 2018-19;
- natural gas tax collections, which are expected to raise $3.3 billion, up 9.6 percent from 2018-19; and
- state franchise tax revenue for all funds, estimated at $8.2 billion, up 8.0 percent from 2018-19.
The ESF (the state’s “rainy day fund”) currently contains about $12.5 billion, not counting currently outstanding spending authority. Absent any legislative appropriations, the ESF balance is expected to be $15.4 billion at the end of the 2020-21 biennium.
“For the 2020-21 biennium, we remain cautiously optimistic but recognize we’re unlikely to see continued revenue growth at the unusually strong rates we’ve seen in recent months,” Hegar said. “Oil prices have dropped sharply since October, financial markets have demonstrated increased volatility, interest rates have been rising and U.S. trade policy remains uncertain. And as the nation’s leading export state, the Texas economy in particular is exposed to potential reductions in international trade.
“Because of this heightened uncertainty, this revenue estimate is based on a projection of continued but slowing expansion of the Texas economy,” Hegar said.
State revenue from all sources and for all purposes is expected to reach $265.6 billion for the 2020-21 biennium, including approximately $88.7 billion in federal receipts, along with other income and revenues dedicated for specific purposes and therefore unavailable for general-purpose spending.
“Today’s revenue estimate reflects the continued strength of the Texas economy,” noted Gov. Greg Abbott. “Even with this strong economic growth, Texans expect their government to live within its means, while funding its priorities. This session I look forward to working with the legislature to fulfill these expectations by addressing many key issues, including school finance reform and limiting the growth of property taxes.”