Texas Comptroller Glenn Hegar announced last Thursday that his office’s previous projection of an $11.9 billion budget surplus for the 2023 legislative session was being revised to $26.9 billion, an increase of $14.95 billion taxpayer dollars.
In total, lawmakers will have $149.07 billion in general funds, Hegar said. Lawmakers entered the last regular legislative session in 2021 with $112.5 billion in available funds.
Record-high tax revenues are driving the increased projection, said Hegar. Sales taxes are Texas’ primary source of revenue, so the state’s bank account benefitted from recent inflation, pushing the price of goods upward.
“In fact, many tax revenue categories reached their highest collections on record, and this fiscal year has experienced the largest one-year increase in total tax collection, as compared with the prior fiscal year, in Texas history,” said Hegar.
Oil and gas production taxes are the other primary source of Texas’ revenue.
“Severance taxes performed extremely well due to elevated oil and gas prices caused by energy market volatility,” said Hegar. “It is important to realize that inflation is a significant contributing factor as to why we have seen record tax collections in sales tax and other revenues over the last year.”
Still, Hegar says the predicted surplus is only a projection that will still undergo at least one more revision before the 2023 legislative session. Given the state of the world economy, Hegar acknowledged it might be the last legislative session for some time where lawmakers will have a significant budget surplus.
“This estimate is subject to substantial uncertainty,” Hegar said. “While this is not a recession forecast and continued economic growth is expected, the rate of economic growth is anticipated to slow. Revenue growth in fiscal 2023 is estimated conservatively in view of the degree of uncertainty and heightened risk of a recession.”
Hegar asserted that the budget surplus should be used to increase spending on water infrastructure, road infrastructure, and broadband internet connectivity. He also mentioned a need to address rising property taxes and increase pay for state employees.
“Making sure that we have good, qualified employees and can retain them,” Hegar told the Texas Tribune. “Because you have to have a healthy state government to operate.”
Lieutenant Governor Dan Patrick said his “first priority” with the budget surplus “is to send money back to the taxpayers of Texas.” Patrick is the head of the Texas Senate and decides which bills come up for debate.
“Texas homeowners must receive tax relief before we commit to any new spending,” Lt. Gov. Patrick stated in a press release.
The lieutenant governor said he would support using $4 billion from the surplus for property tax relief next year. He also called for a permanent increase of the homestead exemption to $60,000, with the ultimate goal of increasing it to $100,000 in future years.
Patrick shared that he believes lawmakers should suspend the state gas tax for the remainder of 2022, which would save Texans $.20 per gallon on gasoline.
“I still have concerns about a national recession but the Texas economy will always lead the Nation with our conservative approach to spending and putting taxpayers first. This unprecedented windfall due to the hard work of Texas taxpayers and our growing economy will give us the funding we need to weather any future economic storm that the Nation may face,” said Patrick.
Tim Hardin, president of the group Texans for Fiscal Responsibility, called on the surplus to be used for “meaningful property tax relief,” claiming that the “historic property tax reform” passed during the 2019 legislative session “has resulted in no tax relief for anyone.”
Hardin said Texans must reject “the status quo,” claiming that the state government grows “more and more” every year.
“Our tax problems can be solved the same way that we have to solve our personal budgets: cut spending. Not slow the rate of growth of spending,” he said, but “actually cut spending and reduce the size of government.
“We are literally drowning in surplus dollars and the legislature is already looking for ways to use that to grow government,” said Hardin. “Texans must demand our money back in the form of property tax relief and a significant reduction in the size of our government.”
