Kristopher Rivera

El Paso Times

State agencies will have to trim budgets more than expected after Texas revenue is $1 billion short from the state comptroller’s revenue projection.

“A revenue estimate I can tell you is not easy, there’s hundreds and even thousands of variables that go into a revenue estimate,” State Comptroller Glenn Hegar said in an interview Thursday with the El Paso Times. “Economics is about assumptions so we make a lot of assumptions to get one assumption.”

The state comptroller releases revenue projections before each legislative session to help lawmakers set the state budget. The next legislative session begins January 10, 2017. Lawmakers will set up the next two-year cycle that begins Sept. 1, 2017.

The drop in revenue is primarily caused by a weakness in the oil and gas sector in addition to a drop in sales taxes.

The drop in revenue affects the funds available for transportation, which under a constitutional amendment, received a share of the oil-and-gas tax revenue. The state’s transportation agency will lose $155 million. The state’s rainy day fund will lose $155 million as well. A total of $651 million will be reduced in general spending.

According to a news release from the Texas Comptroller’s office, the net revenue available for general purpose spending after severance tax revenues are set aside for transfer to the Economic Stabilization Fund — or the rainy day fund — and the State Highway Fund was $49.9 billion. That is 1.3 percent lower than the Certification Revenue Estimate (CRE) projection of $50.6 billion.

Sales tax revenue for the year was $28.2 billion, short of the CRE projection of $29.3 billion. Oil production and regulation tax revenue was $1.7 billion, which was below the projected $1.8 billion. Natural gas revenue was $579 million, below the projected $871 million.

“If you look at Texas right now, we’re still growing but extremely modestly compared to what we have been growing,” Hegar said. “El Paso is doing better than other parts of the state, same as the Austin area, metroplex and San Antonio. Those are our four metropolitan areas that are outperforming the others. Houston obviously is down slightly.”

El Paso’s economy is stable considering it is not dependent on oil and gas, its trade economy is healthy and Fort Bliss continues to pump money into the local economy.

“The whole impact hasn’t been extremely deep in Texas, obviously it depends on the economic region,” Hegar said. “In Midland and Odessa it’s much deeper.”

As a result in the drop of revenue in the state’s energy sector, Lt. Gov. Dan Patrick asked state agencies to cut 4 percent from their baseline budgets. However, a number of agencies will be exempt which includes the Department of Public Safety’s border security efforts.

“Border security in my mind should not be exempt,” state Sen. José Rodríguez said. “Not only are they (DPS) exempt from those cuts, but their executive director has requested an additional $350 million from the prior amounts that had been allocated in the last session of the legislature.”

The legislature approved more than $800 million for border security in the previous session, Rodríguez said.

“I don’t think it’s prudent for the state to be doing that at a time when we are having cuts in different programs and agencies like higher education,” Rodriguez said.

Aside from DPS, other agencies that are exempt include Medicaid, foster care, Child Protective Services and others, Rodriguez said.

Although the state budget will be tight, the state is expected to be stable.

“Unless things decline further I don’t think there will be any need to pass a supplemental bill to cover any shortages in fiscal year 2017,” Moody said. “However, when we get the budget revenue estimate at the beginning of the session, that’s the one that really sets the tone for certain types of appropriations.”

In addition, the previous “budget that the legislature passed left quite a bit of money on the table. It’s eased up some of the pressures that these declining revenues may have created,” Moody said.

The challenge has been the longer-than-anticipated decline in oil and gas revenue.

There’s a question as to whether the state’s rainy day fund, which will hit a record $10 billion, may be used to fund some of the agencies that face budget cuts.

“What concerns me is we have the DFPF (Department of Family and Protective Services) and CPS (Child Protective Services) crises,” Moody said. “We have a court case that’s mandating we do some pretty heavy lifting in that arena which includes the funding. We have a public school system that the court said is constitutionally acceptable but needs a lot of work. That requires funding. DPS is requesting even more money than they requested last session for border security. There are a lot of institutional pressures on the budget even before we start the session.”

Rodríguez said public education financing needs to be addressed. He said the state ranks in the lower third of the 50 states in mental health funding, teacher pay, highest numbers of poor kids in the country among other needs.

“It’s a picture that does not represent a healthy state,” Rodríguez said.

These issues trickle down to the local level.

“Our schools are getting on the average a thousand dollars less than other kids in North Texas or East Texas,” Rodriguez said. “We are a community where the average wage is lower than rest of the state and nation, where the unemployment is higher than the rest of the state and the nation. It’s going to continue to adversely impact the growth of this community and we have to do everything we can—it seems to me as stewards of public dollars—to ensure we are efficient with those expenditure of dollars and that we spend them where they are needed the most.”

Kristopher Rivera may be reached at 546-6121; krivera@elpasotimes.com; @kgrivera on Twitter.