For Immediate Release
January 8, 2007
Comptroller Susan Combs Reveals $14 Billion in New State Funds
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AUSTIN — Comptroller Susan Combs today said the Texas Legislature will have $14.3 billion in new money to spend in the 2008-2009 state budget.
Combs issued her Biennial Revenue Estimate, reporting to the 80th Legislature and the Governor that $82.5 billion in general revenue is available for appropriation.
“This is a solid, conservative estimate,” Combs said.
“I anticipate $77.5 billion in general revenue income during the next biennium,” Combs said. “Add to that a $7.0 billion ending balance for the current biennium—the largest ending balance on record. Subtract $2.0 billion in oil and gas production tax revenue that must be set aside in the Rainy Day Fund, and the bottom line is $82.5 billion that is available to spend.
“That is approximately $14.3 billion dollars more than the current $68.2 billion budget,” Combs said.
“This is a great time in Texas,” Combs said. “Our state’s strong economy is producing vigorous revenue growth to serve Texans’ needs. However, it is my duty as Comptroller to point out that I do expect a cooling of the economy in the months ahead.”
Combs said three important contributors to the Texas economy are slowing: the housing market, oil and gas prices and consumer spending.
“Nationwide, the housing boom of the last two years is rapidly slowing. In Texas, new home starts that were up 20.7 percent a year ago were down 12.4 percent last October—a dramatic shift,” Combs said.
“Oil and gas prices are expected to recede following a rapid climb in fiscal 2006 and exploration will decrease somewhat,” Combs continued. “The growth in consumer spending will decline, due in part to the slowdown in the housing market. People feel wealthier and spend more freely if their homes are increasing in value. Also, low interest rates have made refinancing attractive—often involving a ‘cash out’ of home equity to be spent by consumers. That trend, too, has changed.
Looking at some of the state’s largest revenue sources, Combs said 87 percent of the revenue will come from taxes and the remaining 13 percent will come from non-tax sources such as fees, interest earnings and lottery proceeds.
The sales tax will continue to be the states largest tax revenue source, bringing in an estimated $41.50 billion during the 2008-2009 biennium. Sales tax revenue is expected to grow approximately 4.2 percent annually—down from fiscal 2006’s 12.0 percent growth and fiscal 2007’s anticipated 7.0 percent growth.
With the overhaul of the franchise tax by the 79th Legislature, this tax is now the second largest source of tax revenue and the third largest source of general revenue. During the next biennium, the franchise tax is expected to produce $5.84 billion for the General Revenue Fund and an additional $6.09 billion for the new Property Tax Relief Fund, a dedicated fund that is not available for general-purpose spending by the Legislature.
Oil and natural gas production taxes are expected to raise $4.94 billion in revenue. Of this, $2.01 billion will be reserved for the Rainy Day Fund. Both taxes are expected to decline over the biennium, as historically high prices are expected to moderate.
“I will continue to closely monitor Texas’ economic indicators and report to the Legislature if a change in my revenue estimate is warranted,” Combs said. “There will be no surprises. My goal is seamless and constant communication with the Legislature as they go about the crucial task of allocating taxpayer dollars to best meet the needs of all Texans.”
Comptroller Susan Combs’ complete 2008-2009 Biennial Revenue Estimate can be found on her Web site www.window.state.tx.us.