Texas Facing Biggest Budget Shortfall in History

Yes, you can blame the pandemic. And low oil prices. But taxpayers may not need to worry yet, according to experts

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As if the pandemic weren't bad enough on its own, let's throw in a massive budget deficit for the state of Texas.

Lawmakers in Austin are contending with the biggest shortfall the state has ever faced.

State comptroller Glenn Hegar predicts the state will face a projected budget shortfall of $4.6 billion. Before the coronavirus pandemic, Texas had a multi-billion dollar surplus.

The economic devastation from the pandemic and low oil prices are to blame, driving down the projected general revenue in the state's current budget by more than $11 billion, according to Hegar.

"Comptroller Hegar has the toughest job in state government because he's trying to estimate as events are happening,” said Dale Craymer, president of the Texas Taxpayers and Research Association. “Obviously we still don't have a lot of good data on the impact of the pandemic. And certainly, we don't know what the expectations are for the next several months."

Aside from the oil and gas market, the losses in the tourism and travel industry are also hurting revenue.

"We're used to volatile swings in the oil and gas market but this one is clearly pandemic driven as well,” said Dale Craymer, president of the Austin-based Texas Taxpayers and Research Association (TTRA). "But Texas is now being hit with a double whammy. Not just the oil and gas problem but also what we're seeing with the pandemic."

Craymer has a long history with Texas finances. He is the former budget director for governors Anne Richards and George W. Bush. For the last 10 years, he has run the nonprofit TTRA working on fiscal policy.

So, is this the next worse thing to happen to the state besides the pandemic? Surprisingly, Craymer said this can be manageable.

"We've got close to $9 billion in the rainy day fund, so we can cover that,” he said.

We're also in better shape than many other states such as California, Illinois and New York.

A rainy day fund and comparisons to other states don't take away from the fact that lawmakers still have some very tough decisions to make.

“But even with that, the Governor and Lt. Governor have called on agencies to trim their spending so they're working on those plans,” said Craymer.

So far, we know that the governor has asked certain agencies and even higher education institutions to identify 5% in budget cuts for the current biennium, as the state looks pulls out the cutting board.

"But they took some things off the table,” said Craymer. “They took Medicaid off the table and public education. primarily, we're going to be looking at administrative expenses. we'll look at different programs that might not be as effective as they were. we will probably end up deferring some maintenance or suspending some capital projects in order to save money."

There’s a reason public education is safe from the chopping block.

"Last session, the legislature made a conscious decision to prioritize public education. They passed a landmark school finance bill and I think clearly, folks want to keep that in place. So for now, that's off limits,” explained Craymer.

He said he doesn't think taxpayers are going to feel the pain in their wallets yet nor does he feel that we're not in danger of a massive tax increase.

However, he clarified that the state is only one part of the equation.

"Local governments right now are facing the same challenges and have much less diverse revenue bases. So, I think people need to pay attention locally because there's going to be a lot of pressure on their property tax bills,” he said.

He said residents will really going to need to keep an eye on those budget talks within local counties and cities.

The legislature will reconvene for its next session in January to write the budget for the next cycle.

"This is something that we're going to be wrestling with for not only the remainder of this budget cycle but also into the next budget cycle,” said Craymer.

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