Certification Revenue Estimate 2012-13

December 12, 2011

The Honorable Rick Perry, Governor
The Honorable David Dewhurst, Lieutenant Governor
The Honorable Joe R. Straus, III, Speaker of the House
Members of the 82st Legislature

Ladies and Gentlemen:

In accordance with the Texas Government Code, Section 403.0131, I present herewith the detailed tables for the revenue estimate that I used to certify the General Appropriations Act for the 2012-13 biennium and other appropriations bills approved by the 82nd Legislature.

The estimates in this document reflect actual revenue collections through Aug. 31, 2011, the end of fiscal 2011, and the estimated fiscal impacts from all legislation passed by the 82nd Legislature. After accounting for statutory transfers, adjustments and balances on hand at the close of the 2010-11 biennium, the state will have a total of $82.7 billion in General Revenue-related funds available to finance appropriations in the 2012-13 biennium.

This estimate shows that available revenue supports current General Revenue spending of $81.1 billion for the 2012-13 biennium, yielding an expected General Revenue-related ending balance of $1.6 billion on Aug. 31, 2013.

Revenue collections in fiscal 2011 were stronger than expected, coinciding with the Texas economy moving more fully into recovery and significant job growth in the state. State sales tax collections grew by 9.4 percent over the previous year, motor vehicle sales taxes advanced strongly in response to an improving economy, and severance tax revenues increased sharply due to an increase in oil prices and accelerated activity in the Eagle Ford Shale formation and the Permian Basin. Overall, state revenues to General Revenue in fiscal 2011 — after adjusting for amounts to be transferred to the Economic Stabilization (Rainy Day) Fund — were $1.7 billion above projection, with this revenue increase partially offset by somewhat greater-than-expected state agency spending. The state closed the 2010-11 biennium with a General Revenue-related balance of $1.1 billion.

The recent national recession is over and the economy is once again expanding. However, our state and nation continue to face the effects of the economic dislocations that occurred. Through October 2011, Texas has recovered 94 percent of the jobs lost during the recession; the U.S. just 27 percent. The Texas unemployment rate — as low as 4.3 percent in early 2007 — is now at 8.4 percent and giving no indication of receding rapidly. While the threat of another recession does exist, the most likely scenario continues to be one of slow, steady recovery from the worst recession in our state since World War II.

The economic forecast underlying this revenue estimate projects Texas will continue adding jobs in fiscal years 2012 and 2013, although not at the pace of 2011. Over the 2012-13 biennium, nonfarm employment is expected to increase by an average of 1.5 percent each year. Adjusted for inflation, Texas’ gross product is expected to grow by an average of 2.2 percent annually in fiscal 2012 and 2013, slightly exceeding the nation’s expected growth rate of 1.9 percent annually. It must be noted that weak single-family housing construction activity, doing no better than “bouncing along the bottom” and at levels not seen prior to the recent recession since the early 1990s, remains a drag on economic recovery.

While Texas continues to recover, events now unfolding throughout the world are of great concern. Some observers believe a broad eurozone recession to be likely, and is expected sooner rather than later. The economies of some European countries may already be contracting and contagion from the ongoing financial crisis is possible. China, as well as India, shows signs of a slowing economy; further, the Chinese property boom is in sharp reversal. And the ongoing political gridlock in Washington is adding to the atmosphere of uncertainty, negatively affecting business and consumer confidence. Texas, as the recent downturn has illustrated, is not immune to events originating elsewhere in the country or the world. Again, the overall picture is one of slower-than-normal recovery with above-average risks of a new recession. This estimate will be revised, if necessary, as economic and fiscal conditions warrant.

I shall continue to monitor the Texas economy and revenues closely, and I shall keep you informed of any significant events as they arise.


Susan Combs


cc: Capitol Office
     John O'Brien, CPA, Director, Legislative Budget Board

The Comptroller can be reached at P.O.Box 13528 Austin, TX 78711-3528
Telephone: 512-463-4000 · toll free: 1-800-531-5441 · FAX: 512-463-4965