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Hegar projects nearly $4.6 billion revenue shortfall

Tuesday, July 21, 2020 by Jo Clifton

Texas can expect to finish Fiscal Year 2021 with a shortfall of $4.58 billion, according to Texas Comptroller Glenn Hegar. (FY 2021 started on July 1.) Hegar announced the figure Monday, attributing the decrease to the Covid-19 pandemic and volatility in oil prices. The new figure compares to a previous positive ending balance of $2.89 billion, which Hegar projected last October. According to a news release from the Comptroller’s Office, the estimate assumes the state will effectively manage the pandemic and also assumes that “restrictions on businesses and individuals will be lifted before the end of this calendar year and that economic activity will strengthen but not return to pre-pandemic levels by the end of this biennium.” Because of strong sales tax collections in the first half of the fiscal year, FY 2020’s sales tax revenues are expected to finish at only 1 percent lower than FY 2019 totals, but Hegar is expecting a drop of more than 4 percent in 2021. The state’s Rainy Day Fund, formally known as the Economic Stabilization Fund, and the State Highway Fund receive funding from severance taxes on oil and natural gas. Each is expected to receive $1.1 billion in transfers from the General Revenue Fund for severance taxes collected in FY 2020, but those transfers are expected to drop significantly in the future. Stephanie Rubin, CEO of Texans Care for Children, called on Gov. Greg Abbott and the Legislature “to make sure Texas families keep getting the services they need as they deal with high unemployment and a public health crisis.” She added, “State leaders should use the Rainy Day Fund and push Congress to boost funding to states during this crisis.” There has been a suggestion that the state may cut its funding for health services because of lower revenues. But Rubin said, “This would be about the worst time imaginable for state budget-writers to make things harder on Texas kids and families.”

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