Texas biennial revenue estimate: Record $188.2 billion, $32.7 billion surplus

(The Center Square) – As Texas continues to lead the U.S. in job growth, energy production, population and GDP growth, the state comptroller announced another first for Texas: a record $188.2 billion in revenue for the next two years and a record $32.7 billion surplus.

Comptroller Glenn Hegar on Monday released his office’s Biennial Revenue Estimate ahead of the 88th Legislature convening Tuesday. It states that Texas is projected to have a record $188.2 billion in revenue available for general-purpose spending during the 2024-25 biennium, a 26.3% increase from the 2022-23 biennium.

He also adjusted the surplus initially forecast at $28 billion last year to $32.7 billion.

The estimate includes 2024-25 collections of $165.9 billion in general revenue-related funds after the state reported record sales tax receipts every month, “augmented by an expected 2022-23 ending general revenue related balance of $32.7 billion,” the report states.

As state lawmakers prepare to begin the 88th legislative session, Hegar urged them “to spend money wisely and prudently.”

He said the historic increase was “a direct result of vigorous economic growth since the end of COVID-19 pandemic restrictions, spikes in energy prices and, unfortunately, the highest rate of general price inflation in 40 years.”

He also recognized that every penny and dollar reported came from Texas taxpayers.

“We cannot, and we will not, lose sight of the fact that every tax dollar received by the state is coming out of Texans’ pockets,” Hegar said. “I know very well that the Legislature decides how to use all the money they have available, yet I must advise some caution as these decisions are made: Bluntly, don’t count on me announcing another big revenue jump two years from now. The revenue increases that we’ve seen have been, in many ways, unprecedented, and we cannot reasonably expect a repeat. We are unlikely to have an opportunity like this again. This budgeting session is truly a once-in-a-lifetime session.”

Hegar said the legislature could wisely invest some of the revenue in the state’s electrical grid, broadband connectivity, port and water infrastructure, make salary adjustments for state employees, teachers and nurses, and develop the state’s skilled trade workforce.

“Lawmakers also should consider meaningful tax reduction to ease the burden of Texans who are grappling with inflation, economic uncertainty and rising housing costs,” he said. “Well-thought-out spending proposals can have positive results without creating demands on general revenue that might be difficult to meet in years to come.”

Multiple groups already have called for the legislature to return the money to taxpayers in the form of property tax relief and tax cuts.

Of the total, $10.2 billion from 2024-25 oil and natural gas taxes must be reserved and transferred to the Economic Stabilization Fund (the state’s Rainy Day Fund) and the State Highway Fund. Another $155 million must also be used to cover a shortfall in the Texas Guaranteed Tuition Plan, known as the Texas Tomorrow Fund, Hegar said.

Absent any legislative appropriations, the Rainy Day Fund balance is expected to total a record $27.1 billion at the end of 2024-25 biennium, Hegar said, but would be $4.5 billion higher if a constitutional limit wasn’t imposed on it.

The projected ending balance reflects $3.8 billion in savings to the state’s general revenue carried forward from 2021 due to the use of pandemic-related federal funds, according to the report, and $4.3 billion in reduced costs to the general revenue for the Foundation School Program due to record high and higher-than-expected growth in local school property tax revenues.

The final ending balance for the 2024-25 biennium, and beginning balance for the next, will be determined by what budget actions the 88th Legislature takes and by actual revenue collections during the remainder of the fiscal year, the comptroller’s office said.

Sales tax collections are the state’s largest source of general revenue-related funds, accounting for 53% in 2024-25. The comptroller’s Biennial Revenue Estimate projects sales tax revenues will increase by 9.1% from the 2022-23 biennium, reaching $87.9 billion for the 2024-25 biennium.

The most significant source of general fund revenue was from sales taxes collected from oil production, projected to generate $13.3 billion, up 11.9% from 2022-23, which was already a record year. Although down 4.3% from the last biennium, natural gas tax collections are expected to raise $8.6 billion.

The greatest tax revenue generator is the Texas oil and natural gas industry, which has propelled Texas to lead the U.S. in energy production and job growth. The industry’s record production taxes topped $10 billion in fiscal 2022.

Todd Staples, president of the Texas Oil & Gas Association, said the historic budget was “a continued testament to the enormous benefits of oil and natural gas activity for all Texans. By providing billions in funding for public schools, roads, universities, first responders and the Rainy Day Fund, the taxes paid by this industry help make the Lone Star State the envy of the nation.”

Motor vehicle-related taxes, including sales, rental and manufactured housing taxes, are expected to generate the next highest amount of $12.7 billion, up 4.6% from 2022-23.

Franchise tax collections are projected to generate $8.8 billion, up 6.7% from 2022-23; for all funds, it’s projected to generate $12.6 billion, up 6.7% from 2022-23.

“State revenue from all sources and for all purposes is expected to reach $342.3 billion for the 2024-25 biennium, including about $108.4 billion in federal receipts, along with $68 billion in other income and revenues dedicated for specific purposes and therefore unavailable for general-purpose spending,” the estimate states.