Estimator: Good News for Texas’s Economic Outlook

“The Texas ECONOMY continues to expand. We’re through recovery and into expansion.”

That was the good news brought by John Heleman, chief revenue estimator for the office of the Comptroller of Public Accounts, to the members of the state’s Legislative Budget Board (LBB) this week. Heleman offered a report on the state’s economy and an overview of Texas state revenue.

In fact, he said, if Texas were a nation, the State would have the 12th largest economy in the world, slightly behind Canada, but larger than Australia.

It was good news all around from Heleman, who reported that the state’s economy “CONTINUES to outperform” the United States’ economy. Texas is “continuing its trend of growing faster than our nation as a whole.” Heleman added that the Comptroller expects to see a little more money than anticipated in the rainy day fund, with an anticipated ending balance of about $8.4 billion for FY 2015. And, that figure assumes passage by Texas voters of Prop. 1 in November, which would transfer $1.7 billion out of the rainy day fund for highway expenditures.

And how is the state’s revenue system performing? Heleman offered this analysis:

Sales tax – The state’s largest tax has grown quickly. Figures released just this week show fiscal year-to-date state sales tax collections are up more than 5 percent.

Motor vehicle tax – Described as “particularly robust.” In 2009, there was an “unprecedented” 22 percent decline in one year during the early part of the recession. There were few NEW CAR PURCHASES. Sales tax receipts are up 6.25 percent this fiscal year.

FRANCHISE TAX – The state is nearing the estimated $4.7 billion in receipts. A rate reduction in effect this year could very well be extended – and doubled – next year.
Oil production and natural gas tax – Tax receipts in this category are “outproducing what was expected,” largely due to Eagle Ford Shale.

In spite of these positive numbers, LBB member Lt. Gov. David Dewhurst warned that the state continues to grow in population by 1.7 percent per year, and that growth will have an impact on the money needed to fund public education and the state’s “SAFETY net programs.”

In his overview of the state ECONOMY, Heleman said Texas entered the recent recession later than the nation as a whole, exited at the same time, but lost fewer non-farm payroll workers than the United States as a whole.

He said Texas’ current payroll worker number are up 3.3 percent over the last 12 months – growing “twice as fast” as employment growth of the nation. And, the state’s unemployment rate of 5.1 percent is a full percentage point better than the nation’s.

“We still have 31 states that have yet to recover all their jobs they lost in the recession,” said Heleman. “Many states are struggling. We’re not seeing that in Texas.”

The Comptroller’s Office representative said by November 2011, Texas had recovered all of the jobs it lost as a result of the recession. The United States, however, is just now at the same level of employment as it was six and one-half years ago.

Regarding housing, Heleman said the United States market is “struggling to recover,” while Texas is doing “somewhat better” and the inventory on the market is growing smaller. Regarding COMMERCIAL office space, Heleman said the Dallas, Houston and Austin Class A office space vacancy rate is below 10 percent, even with new construction and higher rental fees.

THE PRICE OF OIL has “settled down,” according to Heleman, and is “relatively stable.” The focus in Texas now is on crude oil. He explained that there are currently about 900 rigs in the state and only 74 of them are drilling for natural gas. The other 800-plus are drilling for crude oil, evidenced by the increase in activity in both the Eagle Ford Shale area and the Permian Basin.

Later this week, State Comptroller Susan Combs said she anticipates there will be at least $232 million more in revenue than her official estimate last year. That excess will likely allow the State Legislature to extend the current FRANCHISE TAX cut for most businesses and increase it to 5 percent.

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