As required by the Texas Constitution, Comptroller Glenn Hegar issued a revenue estimate for the 87th Legislature, first called session, on July 7.
Due to the reductions in General Revenue appropriations for the 2020-2021 biennium enacted by the 87th Legislature, combined with surging revenue collections, 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 certification revenue estimate, citing the COVID-19 pandemic and volatile oil prices as the primary causes.
The $5 billion surplus carries over into the 2022-23 biennium and helps fund Senate Bill 1, the new state budget that takes effect Sept. 1. Driven by the fiscal year 2021 surplus and upwardly revised revenue estimates for the 2022-23 biennium, Hegar now projects a $7.85 billion ending balance for fiscal year 2023. This estimated surplus takes into account SB 1, including Gov. Greg Abbott’s line-item veto of Article X, and House Bill 2, the supplemental appropriations bill for the 2020-21 budget.
The majority of the estimated surplus consists of balances in general revenue-dedicated accounts. General revenue-dedicated accounts are accounts within the General Revenue fund reserved for specific purposes by the Texas Constitution or statutes. The Legislature has a long-standing practice of using these unspent balances to certify the state budget. Hegar reports that an estimated $5.8 billion in dedicated account balances was used to certify the 2020-21 biennial budget. The exact amount that dedicated account balances make up of the estimated surplus remains unknown until November 2021, when Hegar issues his biennial report on general revenue-dedicated account balances used to certify the most recent state budget.
Finally, citing higher oil and gas production tax estimates, Hegar now estimates State Highway Fund and Rainy Day Fund transfers of $3.28 billion each in the 2022-23 biennium, up from $2.93 billion estimated in May 2021. After accounting for HB 2 appropriations, and increased oil and gas tax receipts, Hegar now projects a $12 billion balance in the Rainy Day Fund at the end of fiscal year 2023.
For more information about this article, contact Zelma Smith.