Ain’t gonna be great. How bad, we don’t yet know.
Comptroller Glenn Hegar briefed Texas House members on the state’s economy and budget Sunday night, saying that while it was too soon for specific forecasts, both are expected to take potentially massive hits in the wake of the new coronavirus pandemic, according to multiple people who were on the conference call.
The members-only call, led by House Speaker Dennis Bonnen, R-Angleton, was one of state lawmakers’ first glimpses of the impact the virus is expected to have on multiple industries, state finances and Texas’ largely oil-fed savings account, known as the Economic Stabilization Fund or the rainy day fund.
Hegar, who referred to the state of the economy as “the current recession,” according to multiple people on the roughly hourlong call, predicted both the general revenue for the state budget and the savings account balance will be drastically lower — possibly by billions of dollars — when he makes a revised fiscal forecast. He said that update could happen in July.
Later Sunday, the comptroller’s office said that unless the Legislature spent money out of the savings account before July, the balance for the fund would be revised down, but not by more than $1 billion.
In October 2019, Hegar estimated that the state budget would have a nearly $3 billion balance for the fiscal 2020-21 biennium. The balance of the Economic Stabilization Fund, Hegar announced at the time, would be around $9.3 billion by the end of the 2021 fiscal year in August of that year.
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Abbott, for his part, noted last week that he and the Legislature can tap into the state’s disaster relief fund immediately to help respond to the virus. He also said that the Economic Stabilization Fund could be used “at the appropriate time,” which he said would happen when state leaders “know the full extent of the challenge we’re dealing with.”
Before the stabilization fund could be used, Abbott would need to summon state lawmakers back to Austin for a special session before the Legislature reconvenes in January 2021. When asked at a town hall about the possibility for calling such a session, Abbott said “every option remains on the table,” while noting that there would not be any need for such an action if every Texan followed guidance to help curb the virus.
Obviously, the crash in oil prices doesn’t help the state’s financial picture, either. It’s sales tax collection that will really suffer, and that pain will be spread to the cities and counties as well. As always, the big picture here is “how long will this take” and “how many businesses and jobs will be lost in the interim”, and right now we don’t know.
I will say, situations like this are among the reasons why balanced budget requirements are such a bad idea. Let the state – and the cities – run a deficit for a year or two, rather than cut a bunch of programs and lay off a bunch of employees, both of which will exacerbate the effect of the overall downturn. I assure you, society will not crumble around us if we do that. We will see plenty of shenanigans pulled by legislators to worm their way around the balanced budget requirement, as we have always done. So why not be honest about it and just admit that the whole thing is a sham and we should just not worry about it, at least for this cycle? We can always get back to it next time. Much easier said than done of course – constitutions and charters can’t be so easily cast aside, which again goes to my point about why these things are stupid – but in a world where everything has been thrown into chaos, this just makes sense. Same for revenue caps as well – if the revenue for the state, or the city of Houston, falls ten percent this year, it will take three years under the existing 3.5% revenue cap just to get revenue back to existing levels, while forcing needless cuts in the meantime. It’s all a sham, we should seize the moment to recognize it for the sham that it is, and free ourselves once and for all from its ridiculous shackles. Won’t happen happen, but I’ll never stop pointing it out.
States, like Texas, can’t just print money out of thin air like Uncle Sam can. So hey, everybody remember bitching about the “rainy day fund,” and being upset that it wasn’t tapped into for [insert your favorite cause here]?
Well…..it’s raining, and I’m sure glad Texas believes in living below its means and has a little something set aside for a rainy day.
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