Texas is expecting a record surplus of nearly $27 billion for the 2022-23 biennium, Texas Comptroller Glenn Hegar says, mostly due to the record amount of taxes the Texas oil and natural gas industry contributed.
Texas Comptroller Glenn Hegar revised the Certification Revenue Estimate (CRE) upward, increasing his November estimate of General Revenue-related (GR-R) funds available for certification by $13.75 billion.
In a letter to state leadership, Hegar said the state will have $149.07 billion in GR-R funds available for general-purpose spending for the 2022-23 biennium, resulting in a projected fiscal 2023 ending balance of $26.95 billion, an increase of $14.95 billion from the November projected balance. The ending balance does not account for any 2022-23 supplemental appropriations the Legislature may make.
“This revised estimate includes a net decrease in projected GR-R spending of $1.5 billion yet is mostly driven by tax revenues that rebounded strongly in recent months after being suppressed by the pandemic in the previous biennium,” Hegar said. “In fact, many tax revenue categories reached their highest collections on record, and this fiscal year has experienced the largest one-year increase in total tax collection, as compared with the prior fiscal year, in Texas history. This is especially true of state sales taxes, where monthly collections for each of the last 15 months exceeded $3 billion and averaged $3.5 billion.
“Severance taxes performed extremely well due to elevated oil and gas prices caused by energy market volatility. This is due in part to a strong global economic recovery coupled with the war in Ukraine and a period of limited investment in fossil fuel production and refining capacity. It is important to realize that inflation is a significant contributing factor to why we have seen record tax collections in sales tax and other revenues over the last year.
“This estimate is subject to substantial uncertainty,” Hegar said. “High inflation, geopolitical conflicts, and renewed COVID restrictions among our global trading partners could impair economic activity. While this is not a recession forecast and continued economic growth is expected, the rate of economic growth is anticipated to slow. Revenue growth in fiscal 2023 is estimated conservatively in view of the degree of uncertainty and heightened risk of a recession.”
The Economic Stabilization Fund (ESF), otherwise known as the state’s ‘Rainy Day Fund’, and the State Highway Fund (SHF) both receive funding from oil and natural gas severance taxes. In fiscal 2023, the ESF and SHF each will receive $3.58 billion in transfers from the General Revenue Fund for severance taxes collected in fiscal 2022. After accounting for appropriations and investments and interest earnings, the CRE projects a fiscal 2023 ending ESF balance of $13.66 billion.
“I will continue to monitor the Texas economy and state revenues closely, and I will keep the public informed of significant events as they arise,” Hegar said.
“Good news for Texans”
Following Hegar’s announcement, president of the Texas Oil & Gas Association Todd Staples issued the following statement:
“Comptroller Hegar’s increased revenue forecast means good news for Texans, and the oil and natural gas industry is a big factor in producing resources that are positively impacting our state. This fiscal year the oil production tax is estimated to have grown by 91.8 percent, while the natural gas production tax is estimated to have grown by an eye-popping 266.8 percent. Further, Texas oil and natural gas activity has been a significant factor in the 23.6 percent increase in sales tax collections.
“Not only is oil and natural gas a large amount of the increased general revenue estimate, but the indicated contribution of $3.58 billion to the Economic Stabilization Fund (also known as the “Rainy Day Fund”), which is funded almost exclusively by oil and natural gas severance taxes is more than double the amount this fund normally grows. Heading into the upcoming legislative session, Texas lawmakers will have a whopping $13.6 billion in their savings accounts.
“Additionally, another $3.58 billion is estimated to be paid through oil and natural gas production taxes to the State Highway Fund in FY 2023, bringing the total increase to these two critical state funds to about $7.7 billion, funding that comes directly from severance taxes that will be paid by the Texas oil and natural gas industry. Oil and natural gas severance taxes (also referred to as production taxes) paid to the state that exceeds $1.1 billion during the biennium are equally split between each fund.
“Every single Texan should celebrate our state’s strong oil and natural gas industry for its contributions to our schools, roads, universities, and first responders. We hope all members of the legislature will work next session to ensure this vibrant, job-creating, and essential service-funding sector of our state’s economy continues to thrive and prosper because of all the important contributions it makes to our state and our local communities.
“At a time when European nations are struggling to meet basic energy needs, Texas oil and natural gas needs to grow to meet our domestic needs and those of our allies. Oil and natural gas is the only industry that pays severance taxes to the state – this industry and these funding streams are truly irreplaceable. TXOGA members are committed to continuing both economic and environmental progress as we provide the indispensable fuel that powers modern life,” Staples said.
Source: Rigzone.com
