Comptroller

Transcription

[music] Well, thank you everybody for coming this morning. Today I’m delivering our estimate of state revenues available to policymakers during the 2016-2017 session. This is one of the many duties of the comptroller’s office and is required under Article 3, Section 49a of the Texas Constitution. Our projections are based on the expectation of moderate expansion in the Texas economy and reflect uncertainties in oil prices and the possibility of a slowing global economy. For general purpose spending in 2016-2017, we estimate the available general revenue-related funds will be $113 billion as detailed on the chart to my far right. Our Texas state government comes into this legislative session with a projected surplus at the end of the 2014-15 biennium of $7.5 billion, as the state’s economy recorded even stronger growth than projected over the last two years. Sales tax revenues have been higher than anticipated, thanks in part to a robust oil and natural gas sector during the last 15 months. Other revenue sources, such as motor vehicle sales taxes, have exceeded forecast as well. We estimate that general revenue-related collections will be $110.4 billion over the course of the 2016-17 biennium. Together with the surplus from 2014-15 biennium, that brings the projected total net revenue available to nearly $118 billion. After $5 billion is set aside to be transferred to the Rainy Day Fund, as well as the State Highway Fund, as approved during the previous session and by Texas voters last fall, there will be $113 billion available to the legislature for general purpose spending in the 2016-17 biennium. Texas has recovered well from the recession of 2008-2009, and we return to strong growth well ahead of the rest of the country. During the next two years, we believe the state economy will continue to expand, though at a much slower pace than we’ve seen in recent years. Job growth has been strong in Texas, outpacing job creation in other large states. Job growth has been strong in Texas, outpacing job creation in other large states. Our impressive job growth picture of gaining over 1.1 million jobs, as illustrated in Chart 2 to my immediate right, was a tribute to all sectors of our diverse economy. This growth was stimulated by the shale oil boom, which was fortunate timing for Texas. The increased oil and gas production helped the state offset both weak growth in other sectors of our state economy as well as the drag from a sluggish national recovery. We’re all well aware that oil prices have dropped significantly in recent months. These lower prices will likely to lead to significant slowing in oil exploration and production, and this has dampened our overall economic forecast for the coming biennium. We are fortunate, however, that the Texas of 2014 has a much more diverse economy than in prior decades. Some sectors ¬¬– such as construction and manufacturing – will stand to benefit from lower energy prices. Further, lower energy costs also put more disposable income in wallets and pocketbooks, which is always good news for consumers and retailers alike. This decline in oil prices and its implications for the Texas economy comes at a time when the national economy appears to be picking up steam as evidenced by stronger jobs and economic growth numbers nationally. Strength in the broader economy – such as in construction and professional and business services – should help counterbalance a marked slowdown in the Texas energy sector. Overall, we project moderate growth in the state’s economy and in state revenues. That said, we must recognize that volatility has increased significantly in recent years. So we will continue to monitor closely the economy and state revenues. And now I will call your attention to the chart to my immediate left illustrating the volatility of sales tax revenue in recent years. From 1991 – 2001, sales tax revenues increased every year, ranging from a high of nearly 10 percent to just under 4 percent during the last decade of the last century. However, chart 3 to my left shows that the 21st century has brought greater volatility to the Texas state sales tax revenue picture. In particular, you can see that we had four occasions between 2002 and 2014 when sales tax revenue declined from one year to the next, with the steepest decline in 2010. That precipitous drop came on the heels of negative sales tax growth in 2009. The other two-year period of negative sales tax growth occurred during 2002 and 2003, in the wake of 9/11. On the other end of the volatility spectrum, there were three occasions when sales tax revenues grew by more than ten percent. Texas saw dramatic increases in 2006 and 2007 and 2012. Now, I want to call your attention to chart 4 to my far left which shows that fluctuating oil prices also have been a fact of economic life in Texas in recent years. We can see the volatility from this chart, which tracks average monthly oil prices between the years of 1991 and 2014. The chart can be viewed as two distinct periods. The monthly average price per barrel ranged from $11 to $34 during the entire decade of 1991-2001, a period of low prices, yet one of relative stability. Now compare that with the spikes and dips between 2002 and 2014, when prices swung from an average monthly high of $134 to a low of $20. In conclusion, this volatility in sales tax collections and oil prices, as illustrated in charts 3 and 4, means that my office will keep a very close watch on the state’s economy and its revenues in the coming months and over the next biennium. It places a premium on thoughtful analysis and diligent monitoring of our state’s economic health. We will update our projections as necessary to ensure the Legislature and the Governor have the absolute best information available to them as they make budget decisions. Thank you. I’m glad to take any questions.