The Texas Tribune held an interview with Texas Comptroller Glenn Hegar which was conducted by Tribune Executive Editor Ross Ramsey. During the interview, Ramsey and Hegar discussed the January 11 Biennial Revenue Estimate, the effects of the pandemic on the economy, when the economy will possibly recover, and the 87th legislative session. A video of the interview can be found here.
This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.
Q: Give us a rundown of the changes in the economy since the pandemic started
- Hegar – Before the pandemic, the state treasury looked great and had a $3 billion surplus
- Hegar – Initially saw a $4.5 billion deficit, but has recovered to only a $1 billion deficit
- Hegar – This current estimate could possibly be better since it does not take to account the reduction in state agency budgets or federal pandemic dollars
- Hegar – After the recognition of the reduction of state agency budgets by the legislature, estimate it will be around 0/breaking even
- Hegar – Currently estimate we have $112.5 billion in General Revenue Funds
Q: Will be at a flat number. Does not look like the dire fiscal condition that we were at in the beginning of the pandemic. What changed?
- Hegar – In the beginning, the economic downturn was unlike any in history and had to look at non-traditional economic indicators in order to get an estimate
- Hegar – A surprise is that sales tax held up better than anticipated; is still negative, but is half of what we anticipated
- Hegar – Last session’s Wayfair decision ensured online sales taxes are collected; pandemic accelerated online sales and $800 million more was collected than anticipated
- Hegar – Other revenue streams have been disproportionally impacted by the pandemic, and are still “double digit”
Q: You noted this is uncertain; is this harder to estimate than other years?
- Hegar – Correct, and every Revenue Estimate has been uncertain to a certain degree
- Hegar – Estimate provided is as accurate as possible given the data we have
Q: Are there particular sectors you have your eye on that could change this estimate?
- Hegar – Effectiveness of vaccine, how many are taking it, consumer confidence
- Hegar – Consumer confidence extremely important; also important what happens in the global/national economy
- Hegar – Federal package of next administration would also prop up the economy in the short term
- Hegar – If something changes, then will make that known; would want to give info to the legislature at the end of April or beginning of May
Q: Do you feel like this is more likely to go up in terms of state revenue?
- Hegar – Will stick with the estimate we have now; want to see what is happening in the world/state as time goes on
Q: Will the legislature have the money they need to keep providing current services or programs?
- Hegar – They are in relatively good shape; could possibly be supplemental appropriations, the Rainy-Day Fund, and federal COVID-19 dollars
- Hegar – Have until December 31, 2021 to spent federal COVID-19 dollars
Ramsey and Hegar discuss supplemental appropriations
Q: Rainy Day Fund has a lot in savings?
- Hegar – Is a substantial amount in that fund; if they need it for one time expenses, a portion of it is there for them to use
- Hegar – Need to ensure some balance is in there for future events
Q: Wayfair decision, are there some tweaks the legislature need to make to the revenue system?
- Hegar – Are always things there to tweak; none will be as big as the Wayfair decision
- Hegar – Are small items relating to technology that need to be fixed to ensure fairness
Q: What needs to happen with Pensions?
- Hegar – Pensions is a long-term issue that needs to be addressed; legislature has not invested in this group
- Hegar – Suggested last session some of the Economic Stabilization Funds should be used to create a Legacy Fund to pay off some unfunded liabilities
- Hegar – Need to change the funding structure to ensure future generations do not have a large tax bill and need to keep the promises to those in the pensions system
Q: Is that an expensive proposition?
- Hegar – If it continues to be ignored, the bill will get larger
Q: You were one of the first to say that we were in a recession. Still in it? In recovery?
- Hegar – Initial downturn was a recession, but we are in a recovery
- Hegar – Now what happens in the next 3-4 months determines the slope of recovery
Q: How do we get our way out?
- Hegar – Reiterates consumer confidence, vaccine rollout, etc. are important
- Hegar – Are variations within these sectors
- Hegar – Those who can work from home, and have those flexibilities; are recovering
- Hegar – Those in the service industry and have lower economic means, are hit harder
- Will take a longer time for those areas to recover
Q: Notes Hegar was in the legislature during some “nasty” budget years; how does this compare?
- Hegar – Early on, it looked like a 2003 and was looking to be a 2011
- Hegar – Now are better off than both those years, but will depend on the next 6 months
Q: Was early talk of legalization of marijuana/sports betting; are there economic benefits to the legalization of these?
- Hegar – [discussing the legalization of marijuana] Have looked in part, reality is any dollars that are used in that business in other states are not in the federal banking system
- Hegar – Implementation will not replicate what happens in other states; enforcement mechanisms could be extremely costly, difficult to put in place, and difficult to enforce
Q: Have you looked at the numbers for either of those? Could they be a revenue stream that could “save” us?
- Hegar – Depends on the legislation is filed in terms of what their cost/potential output would be; some legislation will put the cost on the next biennium
Q: So they would not be the thing to save the next budget?
- Hegar – Not really, for example, state lotto’s money to public education is diminutive compared to state investment
Q: Oil and gas revenue looks a lot better than in March, what is happening with their recovery?
- Hegar – Noted the causes of oil prices in March and April; will take a while for the industry to recover
- Hegar – Oil prices will slowly recover, 12-month certainty is currently low $20s and mid $80s a barrel; is high volatility in this sector
- Hegar – Important what is going to happen on the federal level; is concerned on the “dampening effect” possible federal action could have on the state
Q: Lay out how things are going to go over this session; what do we expect to hear from your office?
- Hegar – Will talk about any possible adjustments once a month and will get new estimates to the legislature at the end of April beginning of May