Friday, December 13, 2013

Texas Revenue Projection 2014-15 Certified

Texas's Comptroller Susan Combs and her office certified the state revenue projections for 2014 & 2015. Governor Rick Perry reacted to what is considered good news.

With Texas seeming to hand out on a regular basis Texas Emerging Technology Fund and other government loans and grants meant to stimulate capital growth in the private sector, some segments of the population have raised concerns over budgetary deficits and increased tax burdens.

The advent of Proposition 6 being amended to the state Constitution furthered these concerns. The new amendment created two new state controlled funds directed at water and irrigation management. To add more concern, the 83rd Legislature was recalled into a second special session this past summer to consider moving funds from the Texas Economic Stability Fund (so-called "rainy day fund") into transportation funds.

Some elements within the state have talked about having Texas institute a state-level income tax to cover all of these government funds. Pro-capitalism number-crunchers have spoken out against the idea using economic models that demonstrate how doing so could hinder the state's economy.

According to State Comptroller Susan Combs, Texas is on the right track. It appears that, as things currently stand, no increased taxes or establishment of a state income tax will be necessary.

Here were Ms. Combs findings and projections:


The 2014-15 Certification Revenue Estimate

The State of Texas will have an estimated $98,885 million available for general purpose spending in the 2014-15 biennium, 8.9 percent more than the corresponding amount of funds available for 2012 - 13. This figure represents the sum of the 2012-13 ending balance, 2014 -15 tax revenue, and 2014-15 non-tax revenue, less estimated transfers to the Economic Stabilization Fund (ESF) and State Highway Fund (SHF), and adjustments to General Revenue dedicated account balances.

The state’s tax system is the main source of General Revenue-related funding. Tax collections in 2014-15 will generate $88,256 million, and non-tax revenue sources will produce an additional $11,185 million. Factoring in the estimated $5,505 million ending balance carried forward from 2012-13, these three sources will total $104,946 million. Against this amount, $5,421 million must be placed in reserve for future transfers to the ESF
and the State Highway Fund, and $640 million must be deducted for various adjustments to General Revenue dedicated account balances.

Taking all state revenue sources into account, the state is expected to collect $208,153 million in revenue for all state funds in 2014-15.

Comb's predictions come primarily from a positive economic outlooks based upon a variety of indicators. among those factors are the job growth rate, the migration of business to Texas, and economic policies that allow (and reward) for capital expansion and private sector economic stimulation.


Texas Economic Outlook

The Comptroller’s state economic forecast projects continued growth for the Texas economy—despite national Gross Domestic Product (GDP) and employment growth rates that are weaker than those of other recent economic recoveries, and the possibility of further economic disruptions resulting from international economic instability and/or national political gridlock.

The recent recession began later in Texas, was much less severe, and ended sooner than in the overall U.S. economy. In fiscal 2009, Texas’ nonfarm employment declined by 1.7 percent and real (inflation-adjusted) Gross State Product (GSP) contracted by 1.4 percent. In contrast, U.S. non-farm employment declined by 3.5 percent and U.S. GDP fell by 3.4 percent. Pre-recession Texas employment peaked in August 2008 at 10,635,700, and then fell by 422,100—or 4.0 percent—to its low point in December 2009. Texas non-farm employment surpassed its pre-recession peak in September 2011, and since the pre-recession peak has added an additional 597,000 jobs. As of October 2013, Texas non-farm employment was 11,232,700. For the nation, pre-recession employment peaked in January 2008 at 138,056,000, and declined by 8,736,000 — 6.3 percent — to its trough in February 2010. In contrast to Texas, the national economy has yet to regain all of the jobs lost during the recession, and as of October 2013 national employment was 1,502,000 below the pre-recession peak.

The Comptroller forecasts Texas nonfarm employment growth of 2.2 percent in fiscal 2014 and 2.1 percent in 2015. The growth rate for Texas real GSP is expected to be 3.7 percent in fiscal 2014, followed by 3.4 percent growth in 2015. (See Table 4.)

Texas Continues to Outpace National Job Growth. In fiscal 2013, the Texas economy continued its four-year post-recession expansion, adding 315,3001 nonfarm jobs, an increase of 2.9 percent from 2012. Private sector employment grew by 3.4 percent, while government employment (federal, state, and local) grew by 0.6 percent. In addition to adding more jobs than any state last year, Texas had the lowest unemployment rate among the 10 most populous states as of August 2013. The comparatively vibrant economic conditions during a slow national recovery has resulted in an influx of new residents into Texas, adding 215,000 net new residents (inbound arrivals less outbound residents) during the year, and has motivated previously discouraged job seekers to rejoin the labor force to search for work. Even with the growing labor force, the Texas economy produced enough jobs to allow the unemployment rate to fall from an average of 7.1 percent in fiscal 2012 to 6.5 percent in 2013. The Texas unemployment rate has remained below the national rate since January 2007 and is expected to continue to do so. In fiscal 2014 the Texas unemployment rate is projected to fall to an average of 6.1 percent, and to 6.0 percent in 2015.

Personal income in Texas grew steadily through the 2012-13 biennium, but at a tepid pace compared to previous recoveries. In fiscal 2013 personal income grew by 4.9 percent, and is projected to grow by 4.0 percent in 2014 and by 4.2 percent in 2015.

Texas’ population is expected to increase by about 896,000 over the 2014-15 biennium, an average annual growth rate of about 1.7 percent, to reach an average of 27.3 million in fiscal 2015. Half of the biennial population growth is expected to come from net new residents, and the other half from natural increase (resident births minus resident deaths).

In addition, Combs announced she is distributing $580 million in monthly sales taxes revenues to municipalities and local governments:

Combs will send cities, counties, transit systems and special purpose taxing districts their December local sales tax allocations totaling $579.6 million, up 5 percent compared to December 2012.
Local Sales Tax Allocations (December 2013)
Recipient Dec. 2013
Allocations
Change from
Dec. 2012
Year-to-date
Change
Cities $377.1M 4.5% 6.1%
Counties $38.2M 2.6% 5.4%
Transit Systems $131.3M 4.8% 6.4%
Special Purpose Taxing Districts $33.0M 13.8% 12.1%
Total $579.6M 5.0% 6.4%
The sales tax figures represent October sales reported by monthly tax filers.
Another item of good news for Texas is, unlike the federal budget, the state will not end 2013 with a deficit. On the contrary, the state will end its year with a budgetary surplus of over $5 Billion.

The 2012-13 Ending Balance

The ending certification balance for 2012-13 was $5,505 million after setting aside a required $2,515 million transfer to the Economic Stabilization Fund related to 2013 tax collections and transferred in fiscal 2014.

Like states such as Indiana under the leadership of Governor Mitch Daniels, Texas demonstrates fiscal and economic policies that are working. States such as Texas set an example for struggling states and our federal government to consider when making policy decisions and passing their legislation.

In response to Comb's report and certification of the revenue projections, Gov. Rick Perry issued these remarks:

"Texas government budgets like Texas families, limiting spending and saving hard-earned dollars. As a result, Comptroller Susan Combs estimates our current 2014-2015 budget will end with a positive balance of nearly $2.6 billion. What's most remarkable is we've done this while passing $1.4 billion in tax cuts, and we've made historic investments in water and, if voters approve, roads. It's a shame Washington still hasn't learned, you can't tax and spend your way to prosperity."