Texas has $33 billion revenue surplus. The Legislature will soon decide how to spend it.
Ryan Autullo
Austin American-Statesman
After speculating for months on how much surplus tax revenue the state will have available in the 88th Legislature, Texas' top accountant finally gave a firm number: $32.7 billion.
The disclosure Monday from state Comptroller Glenn Hegar was a head-turner in that it was a significant jump from the $27 billion estimate he floated last summer. The unexpected windfall reflects record growth in sales tax revenue, largely driven by Texans spending more on services and goods due to inflation, and because the war in Ukraine has driven up fuel prices.
Including carryover funds, lawmakers will have $188.2 billion available for discretionary spending during the 2024-25 biennium, a 26.3% increase from the current biennium. That's in addition to the $13 billion the state is holding in a rainy day fund.
"This is a historical moment," said Hegar, who presented the state's finances at an event hosted by the Texas Tribune.
Hegar now will turn over the money to state lawmakers, who convened Tuesday for the start of the legislative session and, at some point, decide how much of it they'll spend and what they'll spend it on. Those deliberations are likely to be among the most challenging over the next 140 days given the state's varied needs and wants, but providing some form of tax relief seems like a safe bet as per GOP priorities.
Lt. Gov. Dan Patrick said that any conversations on how to spend the money must begin with lowering property taxes. He also said he'll prioritize strengthening the state's electric grid, providing more resources for rural law enforcement, and adding more hospital beds for mental health patients.
"Every member of the Texas Senate will have ideas on how to use this unprecedented revenue," Patrick said Monday. "We will introduce our budget in the coming days. As I stated previously in my November press conference, Texas taxpayers must first receive tax relief before we commit to any new spending."
Hegar is urging lawmakers to spend prudently because he expects the state's financial forecast two years from now to be more in line with past norms. For that reason, lawmakers are likely to give high consideration to one-time expenditures compared with programs that are stood up by recurring expenses.
The state will not spend the entire $188 billion unless lawmakers agree to bust a spending cap, which is 12.3% or about $12.5 billion over the current biennium. Patrick says he does not want to do that, preferring to stash some away for future budget cycles. The actual number they can spend is uncertain, but is probably tens of billions of dollars under that full amount, Hegar said.
Dale Craymer, president of the Texas Taxpayers and Research Association, said that his calculations suggest the money unavailable for spending could be nearly $50 billion.
"Consequently, lawmakers should make tax relief their top priority — taxpayers should not be asked to pay money to the state that it cannot use," Craymer said.
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.
Hegar is not a member of the Legislature, so he doesn't get a say in how the discretionary money is spent. But, as a former state representative and state senator, he offered some recommendations. He said he'd like to increase access to broadband internet — a move that would not only assist in educating students but in developing businesses in rural areas. About 3 million Texas homes do not have internet access.
Hegar, a three-term Republican, also gave a nod to improving roads and water accessibility as the state welcomes 1,000 new residents a day, and increasing pay for state employees.
"It's easier for a budgeting cycle when you have no money and all you have to say is no," Hegar said. "You don't say no this cycle."