State Rep. Phil King, R-Weatherford, recently predicted a $5 billion shortfall in the current state budget because of the COVID-19 pandemic, but added that it’s really hard to project.
“Most of the state funding comes from sales tax — the state doesn’t have a property tax, we don’t have an income tax — and quite a bit comes from oil and gas severance tax and those prices are way down,” King said. “So right now it’s really hard to project because the economy keeps bouncing up and down, but it looks like we’ll be about $5 billion short in our current budget.”
On July 20, Texas Comptroller Glenn Hegar projected a shortfall of $4.58 billion, which he attributed to the COVID-19 pandemic, according to a press release from the comptroller’s office.
“The economic contraction associated with COVID-19 had resulted in revenue collections this fiscal year that are much lower than our earlier [Certification Revenue Estimate] projections,” Hegar said in the release. “It’s important to note that this revised estimate carries unprecedented uncertainty. We’re assuming the state will effectively manage the outbreak and that infection rates won’t overwhelm our health care system. This estimate also assumes that restrictions on businesses and individuals will be lifted before the end of this calendar year and that economic activity will strengthen but not return to pre-pandemic levels by the end of this biennium.”
In May of 2019, the Texas Legislature approved a $250.7 billion two-year budget, which marked a 16% spending increase, according to The Texas Tribune. The Legislature agreed to allocate $6.5 billion for school funding and $5.1 billion to buy down property taxes.
The pandemic particularly impacted revenue from hotel, motor vehicle sales, severance and mixed beverage taxes, according to the comptroller’s office.
“We’re probably going to have to do an emergency appropriations bill as soon as we get into session and I’m very confident we’ll cut some of the things in the budget because we don’t like to raise taxes and we’re not going to do that,” King said. “We might end up dipping into our reserve fund a little bit, maybe more than a little bit, but that’s something on the table. I’ve been here three or four times when we’ve had deficits come in and we just deal with it.”
The Legislature will be in session in January 2021 to write the 2022-23 budget
According to the comptroller’s release, the end balance does not assume any further financial assistance from the federal government as both the prospect and nature of such assistance remain uncertain.
“In the coming months, some economic indicators will establish new records for rates of growth, but those records will be on the back of this year’s unprecedented declines,” Hegar said in the release. “The rebound will leave many measures of economic health below pre-pandemic levels. Consumers and businesses must be confident the virus is controlled before economic output, employment and revenues return to pre-pandemic levels.”
King said the state has already taken action to help the shortfall.
“One thing we’ve already done is ask all the state agencies to go ahead and reduce their budgets by 5%, so over the entire course of the two-year budget that is about $7 or $8 billion itself,” King said. “So we’re already addressing a lot of that.”
On May 20, Texas Gov. Greg Abbott asked state agencies to reduce their budgets by 5%, excluding the Texas Division of Emergency Management, the Texas Department of State Health Services, the Texas Workforce Commission, the Texas Military Department and the Texas Department of Public Safety.
“As Texans recover from this pandemic, it is incumbent that state government continues to maintain mission-critical services without placing a greater burden on taxpayers,” according to a letter sent to state agencies from Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen. “We are confident that Texas will get back to work and continue leading the nation in job growth, economic innovation and business creation. However, it will take months until we know the true extent of the economic ramifications of COVID-19, and how combating this virus will impact state finances. To prepare for this economic shock, we must take action today to ensure that the state can continue providing the essential government services that Texans expect.”
The Weatherford Democrat requested comment from Sen. Pat Fallon, R-Prosper, but did not receive a response by deadline.
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