The Texas economy was hit hard by the double whammy of the coronavirus pandemic and low oil prices, driving down tax revenues. As a result, in July 2020, Comptroller Glenn Hegar projected a $4.6 billion deficit for the state’s current two-year budget that ends in August 2021. In his January Biennial Revenue Estimate for the 2022-23 Biennium, Comptroller Hegar reduced this estimated deficit to $946 million, citing underestimated gains in tax receipts from online sales.
Out-of-state online sellers and marketplace providers were not required to collect Texas’ sales and use tax until late in 2019, following the U.S. Supreme Court’s Wayfair decision and subsequent state legislation. Although monthly sales collections were down in eight of the last nine months compared to the previous year, the drop would have been greater, but for tax collections from online sellers.
In May 2021, Comptroller Hegar updated his 2022-23 revenue estimate, projecting a surplus of $725 million for the two-year budget ending August 31, 2021. At the time, Comptroller cited upwardly revised revenue projections, including increased estimates of oil and natural gas production tax collections, and reduced estimates of the state obligation for Foundation School Program funding.
Due to reductions in General Revenue appropriations for the current two-year budget that ends on August 31, 2021, combined with surging revenue collections, Comptroller Hegar estimates a surplus of $5 billion at the end of fiscal year 2021. The reductions reflect the 5% percent cuts to state agencies’ budgets required by state leadership in May 2020 and the replacement of eligible General Revenue appropriations by federal fiscal relief funds.
This estimate represents a remarkable turnabout from the $4.6 billion deficit Hegar projected for the end of fiscal year 2021, in July 2020. At that time, Hegar prudently reduced his 2020-21 revenue estimate, citing the COVID-19 pandemic and volatile oil prices as the primary causes. See chart for estimates of the budget surplus (deficit) during the past two-year period.
The following articles provide information on the deficit and how the deficit affects state funding for counties.
GR-Dedicated Accounts & the State Budget
The Legislature's long-standing practice of balancing and certifying the state budget by diverting dedicated funds intended for certain purposes has impacted many county programs and local budgets.
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Texas Tribune, Jan. 11, 2021
Texas lawmakers will enter the legislative session this week with an estimated $112.5 billion available to allocate for general-purpose spending in the next two-year state budget, a number that's down slightly from the current budget but is significantly higher than what was estimated this summer when the coronavirus began to devastate the economy.
Texas Tribune, Dec. 28, 2020
One of the largest tasks Texas lawmakers will tackle during the 2021 legislative session that begins in January is writing the state budget, which outlines state spending for the next two years. While the tome-like General Appropriations Act can seem overwhelming and often abstract, the spending and cuts detailed within it can have immediate and highly consequential effects on Texans' lives…
Governing.com, Sept. 25, 2020
The pandemic caused by the novel coronavirus is setting the stage for one of the most unusual and high-stakes sessions of the Texas Legislature — ever. The COVID-19 outbreak crippled the state’s high-flying economy, making for severe budget woes ahead...
Valley Central, Sept. 22, 2020
Texas Chairman of the Committee of House Transportation, Terry Canales recently held a virtual townhall on Facebook, with state leaders to discuss COVID-19’s impact on transportation...
The Statesman, Sept. 1, 2020
In the first comprehensive glimpse of how the ravages of the COVID-19 pandemic will affect key state services, an August state budget document obtained by the American-Statesman lays out how agencies proposed meeting 5% cuts demanded by the state’s Republican leadership in May...
Weatherford Democrat, Aug. 7, 2020
State Rep. Phil King, R-Weatherford, recently predicted a $5 billion shortfall in the current state budget because of the COVID-19 pandemic, but added that it’s really hard to project...