The Comptroller's Duties
The Texas legislature is meeting again beginning Tuesday January 12, to set the budget for the coming biennium. As part of this budgeting process, Texas Comptroller Glenn Hegar is on the news discussing revenue forecasts for the next two years.
What is a comptroller, and what does the comptroller have to do with the budget? According to one definition, a comptroller is a person who is in charge of the financial accounts of a company or organization. In Texas, the Comptroller is responsible for overseeing the collection of taxes. The Comptroller is also responsible for providing guidance to the legislature in terms of estimating monies available for spending in the state budget.
The Texas legislature meets every two years in the spring, and sets the budget for the coming two fiscal years. The fiscal year (FY) in Texas runs from September through August, so FY 2021, for example, runs from September 2020 through August 2021. When the legislature meets this year, starting January 12 2021, FY 2021 is still not half over, but the legislature is planning the budget for FY 2022 and FY 2023.
The Comptroller for the state of Texas creates the Biennial Revenue Estimate (BRE) prior to each legislative session. This document is an estimate of how much money the state will have available in tax revenue and other revenue sources to fund state government operations and programs. Texas has a balanced budget requirement, so this estimate serves as a constraint on state spending. The BRE for the current legislative session was provided January 11 2021 and contains revenue forecasts for the remainder of the current fiscal year, FY 2020, as well as revenue forecasts for FY 2021 and FY 2022, the coming biennium.
The Comptroller also works to provide estimates of the budgetary impact of proposed legislation introduced during the legislative session, to help make sure the revenue and expenditure implications of the various bills are understood and incorporated into the balanced budget. Further, once the budget is prepared and appropriations made, the Comptroller prepares another report, the Certification of Revenue Estimate (CRE), to certify that the budgeted expenditures can be covered by the expected revenue.
When warranted, the CRE can be revised. This occurred after the outbreak of the coronavirus pandemic. The pandemic struck the Texas economy in March and April 2020, and a revised CRE was released in July 2020.
Revenue Estimates - A Brief History and the Current Situation
The table below presents estimates of general revenue related funds from taxes and other sources that are estimated to be available for spending during the indicated fiscal years, as well as the initial budget situation (estimated) and a value for the total available general revenue available to the legislature, all as estimated by the comptroller at various times. The first row has estimates in January 2019 for the Biennial Revenue Estimate prepared as the legislature began meeting in January 2019 to settle on the budget for FY 2020 and FY 2021. Of major focus is the estimated tax revenue, $107.3 billion.
In May 2019, the Comptroller presented the Certified Revenue Estimate for the budget, with the same tax estimate of $107.3 billion, with a revised upward beginning surplus of $4.7 billion, and a total available funds of $119.6 billion. Then in October 2019, another CRE indicated even more tax revenue, $108.1 billion, and greater total available funds, $121.8 billion.
When the coronavirus pandemic began, the Texas economy, and state tax revenue, took a large hit, and a revised CRE was released in July. Tax revenue estimates were slashed to $94.1 billion, and estimated total available funds declined to $110.2 billion.
In January 2021 the Comptroller released the BRE for the start of the current legislative session. This document also contains information on the estimated current situation for the FY 2020 – FY 2021 biennium. For this biennium, the comptroller forecast tax revenues of $97.4 billion, up somewhat from his July 2020 CRE, and total available general revenue of $113.0 billion. He also projects that there will be a deficit for this current biennium of $1 billion that must be covered in the budget of the coming biennium, FY 2022 and FY 2023.
That same BRE released in January 2021 presents estimates for the coming biennium, FY 2022 - FY 2023. Tax revenues are estimated to be $103.9 billion, and total available general revenue is estimated to be $112.5 billion. The estimates for tax revenue in the coming biennium is up $6.5 billion from the latest estimate of tax revenue in the current biennium, a substantial increase. However, the estimated tax revenue for the coming biennium is down substantially - $3.4 billion - from the estimate of tax revenue that was made in January 2019 for the current biennium. So this is a good news/bad news story. Tax revenue estimates for the coming two fiscal years are up from what we now think will be tax revenues for the current biennium. But tax revenue estimates for the coming two fiscal years are below what we had expected for the current biennium back in January 2019. The sequence of revenue estimates indicates the large negative impact of the pandemic on state finances, the partial recovery to date, and how far we have yet to go to return to what was considered ‘normal’ just a year ago.