Texas Comptroller Glenn Hegar Releases Biennial Revenue Estimate
TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
January 9, 2023
(AUSTIN) — Texas Comptroller Glenn Hegar released the Biennial Revenue Estimate (BRE) today, showing the state is projected to have a record $188.2 billion in revenue available for general-purpose spending during the 2024-25 biennium, a 26.3 percent increase from the 2022-23 biennium.
The increase is a direct result of vigorous economic growth since the end of COVID-19 pandemic restrictions, spikes in energy prices and, unfortunately, the highest rate of general price inflation in 40 years.
As state lawmakers prepare for tomorrow’s start of the Regular Session of the 88th Legislature, Hegar urged state policymakers to spend money wisely and prudently to benefit Texans now and in the future.
“We cannot, and we will not, lose sight of the fact that every tax dollar received by the state is coming out of Texans’ pockets,” Hegar said. “I know very well that the Legislature decides how to use all the money they have available, yet I must advise some caution as these decisions are made: Bluntly, don’t count on me announcing another big revenue jump two years from now. The revenue increases that we’ve seen have been, in many ways, unprecedented, and we cannot reasonably expect a repeat. We are unlikely to have an opportunity like this again. This budgeting session is truly a once-in-a-lifetime session.”
The $188.2 billion available for general-purpose spending includes 2024-25 collections of $165.9 billion in General Revenue-Related (GR-R) funds.
These collections are augmented by an expected 2022-23 ending GR-R balance of $32.7 billion. Of the total, $10.2 billion must be reserved from 2024-25 oil and natural gas tax collections for transfers to the Economic Stabilization Fund (ESF), also known as the state’s Rainy Day Fund, and the State Highway Fund (SHF). These reserves would be $4.5 billion higher but for the constitutional limit on the ESF balance, which will be met beginning in 2025. Another $155 million must be set aside to cover a shortfall in the Texas Guaranteed Tuition Plan, also known as the Texas Tomorrow Fund.
Additionally, the projected ending balance reflects $3.8 billion in savings to General Revenue (GR) carried forward from 2021 due to the use of pandemic-related federal funds and $4.3 billion in reduced costs to GR for the Foundation School Program due to higher-than-expected growth in local school property tax revenues. The projected ending balance does not anticipate any GR-R spending as may be authorized by a supplemental appropriations bill, which would reduce the ending balance and the associated $5.7 billion unencumbered GR balance (revenue not reserved for any specific purpose) transfer to the ESF in fiscal 2024. The final ending balance for this biennium, and thus the beginning balance for the next, will be determined by actions taken by the 88th Legislature and by actual revenue collections during the remainder of this fiscal year.
Sales tax collections make up the state’s largest source (53 percent) of GR-R revenues in 2024-25. The BRE projects sales tax revenues will increase by 9.1 percent from the 2022-23 biennium, reaching $87.9 billion for the 2024-25 biennium.
Other significant sources of GR-R revenues in 2024-25 include:
- oil production tax collections, which are projected to generate $13.3 billion, up 11.9 percent from 2022-23;
- motor vehicle-related taxes, including sales, rental and manufactured housing taxes, which are expected to reach $12.7 billion, up 4.6 percent from 2022-23;
- franchise tax collections, which are projected to generate $8.8 billion, up 6.7 percent from 2022-23; for all funds, franchise tax revenue is estimated to generate $12.6 billion, up 6.7 percent from 2022-23; and
- natural gas tax collections, which are expected to raise $8.6 billion, down 4.3 percent from 2022-23.
Absent any legislative appropriations, the balance of the ESF is expected to total a record $27.1 billion at the end of 2024-25 biennium.
State revenue from all sources and for all purposes is expected to reach $342.3 billion for the 2024-25 biennium, including about $108.4 billion in federal receipts, along with $68 billion in other income and revenues dedicated for specific purposes and therefore unavailable for general-purpose spending.
Hegar said the state must be careful in its spending so any expenditures can be supported when this surplus is a memory.
“Thoughtful options might include investment in our electrical grid; broadband connectivity; port and water infrastructure; salary adjustments for state employees, our teachers and nurses; and development of our skilled trade workforce,” Hegar said. “Lawmakers also should consider meaningful tax reduction to ease the burden of Texans who are grappling with inflation, economic uncertainty and rising housing costs. Well-thought-out spending proposals can have positive results without creating demands on general revenue that might be difficult to meet in years to come.
“In the event of significant changes in economic conditions or other relevant factors, this estimate will be updated to ensure that lawmakers’ deliberations are based on the most accurate and timely information available.”
The Biennial Revenue Estimate and visuals from today’s press conference are available on the Comptroller’s website.