Biennial Revenue Estimate 2006-2007

Transmittal Letter

January 10, 2005

The Honorable Rick Perry, Governor
The Honorable David Dewhurst, Lieutenant Governor
The Honorable Thomas R. Craddick, Speaker of the House
Members of the 79th Legislature

Fellow Texans:

In accordance with Article III, Section 49a of the Texas Constitution, I present herewith my revenue estimate for the remainder of fiscal 2005 and the upcoming 2006-07 biennium.

For 2006-07, the state can expect $6.4 billion more than the amount appropriated for 2004-05. All totaled, the state should have $64.7 billion in funds available for general-purpose spending.

General revenue-related tax and fee collections in 2006-07 are expected to reach $63.3 billion, with tax revenues accounting for 86 percent of the total. Approximately 62 percent of this tax revenue will come from the sales tax. Other significant sources of general revenue include motor vehicle sales taxes, the franchise tax, insurance premium taxes, the natural gas tax, and lottery proceeds.

In addition to the general revenue-related funds, the state stands to collect $67.3 billion in federal receipts and other revenues dedicated for specific purposes and therefore unavailable for general-purpose spending. State revenue collections from all sources and for all purposes should total $130.5 billion.

This estimate is based on my current economic forecast, which indicates that, consistent with the national trend, growth in state economic output should moderate slightly in the next biennium, dropping from an average annual growth rate of 4.1 percent in 2004-05 to 3.2 percent in 2006-07. In contrast, the state experienced a 5.5 percent average annual economic growth rate during the boom years 1995-2000. Unlike previous years, when the Texas economy typically led national growth, the gap has become narrower, and the state economy is expected to outpace national growth only slightly during the upcoming biennium.

I must emphasize, as I have in the past, that this estimate remains subject to revision as the state economy responds to national and international events over the next two years. I shall continue to monitor the fiscal situation and report to you as necessary.


Carole Keeton Strayhorn
Texas Comptroller

c: John O'Brien, Deputy Director, Legislative Budget Board