Falling Oil Prices Hitting State’s Bottom Line

State tax revenue over the next two years will fall short of expectations by $2.6 billion, largely because of sluggish oil prices, Texas Comptroller Glenn Hegar said Tuesday.

The Texas comptroller downgraded the state’s projected fortunes Tuesday, saying he expects the state to have about $5.8 billion less in certain sources of revenue than he previously estimated because of dampened oil and gas prices.

Abbott signed a $209 billion two-year budget in June that included tax cuts, more border security spending and billions of dollars left unspent.

Texas State Comptroller Glenn Hegar announces his estimate that the…

The comptroller is now predicting the taxable value of a barrel of oil will average $44.53 in the first year of the biennium and $50.87 in the second year. The CRE predicts fiscal 2016 transfers of $1.1 billion each to ESF and SHF, in line with the BRE estimate, but fiscal 2017 estimates have been revised downward to approximately $594 million for each fund.

“The Legislature wrote a conservative budget this year so that Texas would be prepared for changing economic conditions and forecasts”, Straus said.

Lower oil prices “definitely” have persisted long enough to require him to lower his biennial revenue estimate, issued in January, “so let’s go ahead and update”, he said.

Hegar said in an interview Tuesday morning that he believes his office made the best estimate given the data available in January.

In his first term, Hegar is taking a few flak over oil and gas projections.

But Hegar stressed that by August 2017, the state should have about $4.2 billion more in general-purpose revenue than needed to pay for the budget that lawmakers passed this year.

It looks as though a weakened oil market is finally being felt in Austin. “Stronger growth in collections from the retail trade, restaurant, services and construction sectors offset declines from oil and gas-related industries”. The rainy day fund stashes away money the state can use to stave off an economic crisis or a natural disaster.

Next month, voters will decide on Proposition 7, a constitutional amendment that would use part of the state’s general sales and use tax and motor vehicle sales tax for the State Highway Fund. But it wouldn’t have an effect on Tuesday’s projections.

Hegar is on a 27-city, two-month Good for Texas tour, meeting with local officials and citizens to talk about the future of the Texas economy.