Estimated Time to Read: 3 minutes
In mid-July, Texas Comptroller Glenn Hegar (R) issued an update to Governor Greg Abbott (R), Lieutenant Governor Dan Patrick (R), the Speaker of the House Dade Phelan (R), and lawmakers of the Texas Legislature on the state’s Certification Revenue Estimate (CRE) for the 2024-25 biennium.
What follows are the key takeaways.
Overview of the Certification Revenue Estimate Update
The update, given via a letter, outlines the state’s revenue collection status and projections for the remainder of the 2024-25 biennium. Hegar highlights that net general revenue-related (GR-R) collections are tracking closely with the CRE given in October of 2023, suggesting a stable fiscal environment. However, it is important to note the variations within specific revenue sources, such as the lower-than-expected natural gas production tax revenue and higher-than-anticipated interest income. He stated, “On net with all sources considered together, the outlook for total 2024-25 GR-R revenue does not differ materially from the CRE.”
Hegar went on to compare the current situation to previous budget cycles where actual revenue collections and changes in economic outlook had substantial deviations from estimates due to things like the pandemic and subsequent inflation.
“Assuming no further legislative action ahead of the 89th Legislature, my office estimates a 2024-25 ending balance of $21.2 billion. There will likely be a need, of course, for supplemental appropriations for the 2024-25 biennium. Current projections indicate appropriations will be needed for Medicaid and the Foundation School Program. If such appropriations are made, the 2024-25 ending balance will be roughly $20 billion.”
Texas Comptroller Glenn Hegar (R) Letter, 7.17.2024
Key Figures and Adjustments
- Initial Projections:
- The original CRE forecasted an ending certification balance of $18.3 billion for 2024-25.
- Adjustments:
- Adjustments, including appropriations for border initiatives and the final fiscal 2023 General Revenue Fund ending balance, revised the expectation to $16.7 billion.
- Contingent Appropriations:
- $4.5 billion earmarked for public education and education savings accounts was not enacted, leading to a revised projection of $21.2 billion. However, anticipated supplemental appropriations for Medicaid and the Foundation School Program may reduce this to approximately $20 billion.
Implications for Texas Taxpayers & the Debate Over the Surplus
The stability in revenue collections and the projected budget surplus present both opportunities and challenges for Texas lawmakers and taxpayers. On one hand, the surplus, which ultimately represents an overcollection of taxpayer money from various sources, offers a cushion that can be utilized for government services and spending on infrastructure challenges. On the other hand, it also raises questions about the prudent use of taxpayer money.
For example, in the most recent legislative session (88th – 2023), lawmakers faced a historic budget surplus of over $32.7 billion. Among other things, the surplus represented a realistic way for lawmakers to return that money to Texas taxpayers by providing tangible property tax relief and also a path to the elimination of the tax altogether. The money could have been used to provide maximum compression of the maintenance and operations (M&O) portion of the property tax, taking a significant portion of the burden off of property taxpayers, and then required to do so in the event of future surpluses. Instead, lawmakers provided only some tax relief and passed the largest spending increase in the history of Texas. That spending increase will now be the baseline for spending going into the next biennium when lawmakers convene in January 2025.
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