AUSTIN — Texas has so far recovered from the economic downturn caused by COVID-19 that state tax receipts have set a new record, adding $14 billion to an already swollen surplus, Governor Glenn Hegar said Thursday.

Inflation is the driving force behind population growth and strong economic growth, Hegar said.

“I put it at $40 billion,” Hegar said of the prospect, shortly after advising GOP state leaders of the good news in a letter revising his “certificate estimate” of eight months ago.

In the budget biennium that ends 13 months from now, about two-thirds of the state’s $40 billion budget is money that lawmakers can use when they meet next year, Hegar said.

The rest is in a “rainy day fund” that would require a higher vote, the Republican taxman emphasized.

Sales tax is a government subsidy, and it’s gone, Hegar said in an interview. The Dallas Morning News.

“Yes, we have business tax numbers,” he said. “Even without inflation, we would still have sales tax numbers.”

In the past three months, even if you adjust for annual inflation of 8% or 9%, the state’s sales taxes are still growing by 3.7% over the same month last year, he said.

Its latest forecast shows sales tax growth of around 19% in the fiscal year that will drop at the end of next month.

Total tax revenues are growing significantly in the current financial year – by 24%, said Hegar.

And this shows the year-on-year growth in tax collection that is rising more than the sales tax – gas production (184%), oil production (81%), hotel accommodation (43%).

Last year, lawmakers passed and Gov. Greg Abbott signed a two-year “all-in-one” budget that costs $264.8 billion. Of that, $143.5 billion or 54% is federal money. The budget estimates that $125.5 billion will be spent on government spending.

But Hegar said there will be $149.07 billion of that money.

Combined with the reduction in revenue, they forecast a loss of “relevant revenue” of $26.95 billion.

In the rainy day fund, which is largely bolstered by oil and gas tax receipts, an estimated $13.66 billion will not be spent as of Aug. 31, 2023.

Add $13.66 billion and $26.95 billion, and you get $40 billion.

But Hegar is more cautious about budgeting for the fiscal year that begins Sept. 1. Sales tax will increase by only 1.5% next year; total taxes, is 2.3%, he said.

“It’s a very conservative estimate for the second year,” Hegar admitted.

He is not predicting a recession like staying in his 2023 budget, he said.

Why? Perhaps because he has another six months to look at his finances before they become a real guide to how much money lawmakers can spend.

“They’re not in the league,” he said. “They’re not sure about the budget right now. They won’t make them until January. There’s a lot of money to carry around. So, even if we’re very careful in the second year it won’t affect any decisions from now until January.”

But about $300 million a month in state sales taxes is currently “driven by inflation,” Hegar said.

The two-term governor, who is up for re-election this year, said he is trying to remember that Texas workers and consumers are feeling the brunt of higher prices.

Annually, the average family in Texas is paying $3,500 more because of inflation, he said.

When Hegar tries to find out if the money will float on the state budget, he pays more attention to the sales tax than the wild gyrations in the tax receipts of energy producers.

Primarily due to higher oil and gas prices, rather than increased production, he nearly doubled his estimate of how much natural gas tax the state will take from the sector – to $9.15 billion, from the $4.7 billion expected last November. For oil, the tax cut for the trip will be $12.8 billion, up from the $9.6 billion forecast eight months ago.

Texas has 361 oil rigs, Hegar said. The number dropped when the epidemic reached 100 in August 2020. But it is still very low at 540 in October 2018, he said.

Hegar increased its price for West Texas Intermediate crude oil. In November, he estimated that the price for the fiscal year would be about $75 a barrel; and next year, $70.

In his letter to Abbott, Lt. Gov. Dan Patrick and Speaker Dade Phelan, increased the amount to $90 a barrel in fiscal 2022 and $97 a barrel next year.

At 2:30 pm CT on Thursday, the New York Mercantile Exchange quoted the price as $96.46 a barrel.

The $300 million a month in inflation-driven taxes “is a real number, which also shows how it affects people in their ordinary families,” he said. “This is more important than the volatility of oil and gas taxes and overall prices.”

Overestimating the estimates is a lot of uncertainty, he said.

The last 2 ½ years have been difficult for the accountant, he said.

“Ah, you never know what’s going to happen next,” Hegar said. “The epidemic. It’s a cold winter. The invasion of Ukraine. I mean, the world we live in now.”

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