Texas Comptroller’s Revenue Estimate for 2026-27
The commencement of the 89th legislative session marks a critical juncture for Texas as Comptroller Glenn Hegar presents a carefully considered revenue estimate for the upcoming biennium. On Monday, Hegar unveiled projections that indicate a slight decline in available funds compared to the previous cycle, which had seen lawmakers operating with record taxpayer resources. Specifically, the Legislature is expected to have approximately $195 billion for general purpose expenditures, reflecting a decrease of 1 percent from the last biennium.
Adequate Surplus Amidst Declining Revenue Forecast
Despite the anticipated dip in overall revenue, Hegar emphasized that lawmakers are beginning this session with a notable surplus. The projected surplus is estimated to be around $23.8 billion, which includes $4.5 billion earmarked for public education funding related to Governor Greg Abbott’s school vouchers initiative. This funding was never utilized because the governor withheld it as leverage against the proposal to expand school voucher programs, which ultimately did not pass in the Texas House.
The Rainy Day Fund Reaches Its Limit
For the first time in Texas history, the Economic Stabilization Fund (often referred to as the “rainy day fund”) is anticipated to hit its constitutional cap. This limit is set at 10 percent of the total revenue from the prior biennium, suggesting a significant moment for Texas financial policy. This cap means legislators will not be required to allocate any additional state revenue to the fund this session, allowing more flexibility in budget decisions.
Sales Tax Revenue as a Key Driver
Integral to the projected revenue is an expected 9 percent increase in sales tax collections, which serves as the state’s primary funding source. Sales tax revenue is expected to account for 61 percent of total revenues, overshadowing other sources such as franchise taxes and oil production taxes. The importance of sales tax in Texas revenue streams underscores the state’s reliance on consumer activity for fiscal stability.
Budgetary Guidelines and Future Projections
The revenue estimate released on the eve of the legislative session provides a framework for lawmakers as they strive to finalize the budget for the 2026-27 fiscal years. Under the Texas Constitution, legislators are mandated to pass a budget by June 2 of this year. Hegar has urged lawmakers to utilize this substantial funding for vital issues, including public education, infrastructure enhancement, and housing affordability, while cautioning them to prepare for potential fluctuations in economic performance in the years ahead.
Political Priorities in Legislative Sessions
With budget talks underway, Lieutenant Governor Dan Patrick has expressed intentions to prioritize property tax reductions, enhancements to teacher salaries, and improvements to the state’s power grid. In a statement, Patrick reaffirmed his commitment to a conservative financial strategy aimed at ensuring Texas is well-equipped to tackle any challenges that may arise. His focus aligns with the ongoing discussions about effective use of surplus funds in a way that bolsters the state’s economic resilience.
Perspectives on Revenue Allocation
On the other side of the political spectrum, Houston Representative Gene Wu emphasized the importance of utilizing the newfound financial resources to strengthen public education and infrastructure, areas he believes were underfunded in the previous session. Wu echoed the sentiment that with Texas thriving financially, there is a pressing need for political will to capitalize on these funds to support all Texans adequately.
Conclusion
The revenue estimate provided by Texas Comptroller Glenn Hegar sets the stage for a pivotal legislative session amid varying revenue expectations. While a slight decrease in overall funds is projected, the significant surplus represents an opportunity for lawmakers to address critical issues in public education, infrastructure, and economic stability. The conversations surrounding the Economic Stabilization Fund, coupled with the priority initiatives outlined by state leaders, will shape Texas’s financial landscape in the coming years.
FAQs
- What is the primary source of revenue for Texas?
- Sales tax is the largest source of revenue for Texas, expected to account for approximately 61 percent of total revenue in the upcoming biennium.
- What is the Economic Stabilization Fund?
- Commonly known as the rainy day fund, the Economic Stabilization Fund is designed to provide financial support during economic downturns and is capped at 10 percent of total revenue from the previous biennium.
- What initiatives are considered priorities by Texas lawmakers this session?
- Key priorities include cutting property taxes, increasing teacher salaries, and improving the state’s power infrastructure, as highlighted by Lieutenant Governor Dan Patrick.
- Will the Texas Legislature be required to allocate funds to the rainy day fund this session?
- No, for the first time in history, the Legislature will not be mandated to contribute to the rainy day fund due to it hitting its constitutional cap.