Shale oil helped pull Texas out of the 2008-2009 national recession more quickly than other parts of the country, but during the 2016-2017 biennium, revenue from oil and gas taxes will be making a smaller contribution to state coffers than during the current biennium, according to the comptroller's latest estimates.
Texas Comptroller Glenn Hegar Monday released the state's biennial revenue estimate, showing that Texas is projected to have about $113 billion in revenue available for general-purpose spending during the 2016-2017 biennium.
"Texas recovered well from the recession of 2008-2009 and witnessed strong economic growth well ahead of the rest of the country," Hegar said. "This recovery is perhaps most obviously illustrated in our tremendous job growth figures of 1.1 million since the recession, which far outpaced those of other large states. This was partly attributable to the recent shale oil boom in Texas, which helped counterbalance a sluggish national recovery and weakness in other sectors of the economy."
The state will begin the new biennium with a projected $7.5 billion ending balance from the current period. This amount is added to the estimated $110.4 billion in projected General Revenue-related collections from taxes, fees and other income over the course of the 2016-2017 biennium. From this amount about $5 billion will be set aside for transfers to the Rainy Day Fund and State Highway Fund. The resulting $113 billion represents the estimated revenue available to the Legislature for general purpose spending in the next biennium.
Oil production and regulation taxes are projected to generate $5.7 billion, a 14.3% decrease from the current biennium; natural gas production tax revenue is expected to be $3.2 billion, an 8% decrease from the current biennium.
"The significant drop in oil prices in recent months will likely lead to a marked slowdown in oil exploration and production. This slowdown will dampen overall economic growth in Texas," Hegar said. "However, in addition to the economic boost felt by Texas motorists as a result of lower gasoline prices, there are industries in Texas' diverse economy such as transportation and some manufacturing that will benefit from lower energy prices. This, coupled with continued strength in construction, professional services and other sectors of the broader economy, should somewhat counterbalance a slowdown in the energy sector."
The state's largest tax revenue source is the sales tax, which accounts for more than half of general revenue. It is expected to generate $61.2 billion in the 2016-2017 biennium, an 8.9% increase over 2014-2015 collections. Motor vehicle-related taxes, including sales, rental and manufactured housing taxes, are expected to reach $10 billion, up 14.6% from 2014-2015. The state's franchise tax revenue for all funds is estimated at $9.6 billion for 2016-2017, a 3.7% increase.
State revenue from all sources is estimated at $220.9 billion for the 2016-2017 biennium, including $110.5 billion in federal receipts and other income.
In fiscal years 2013 and 2014 the Texas economy saw inflation-adjusted growth rates of 4.3 and 3.7%, respectively. In fiscal 2015 the Texas economy is projected to grow by 3%. That growth rate increases slightly to 3.2% in fiscal 2016 and increases further to an estimated 4.1% in fiscal 2017. The state's unemployment rate, which has fallen significantly since the recession peak of 8.3%, is expected to remain around 5% over the coming biennium.
At the end of the current biennium, the state's Rainy Day Fund will have a balance of $8.5 billion, absent any additional appropriations that might be made by the Legislature. At the end of the 2016-2017 biennium, the balance is projected to be $11.1 billion, absent any legislative appropriations.