The new numbers from the comptroller aren't all that bleak, to tell the truth, but if you read the report that came with them, you'll rush out and buy an umbrella and some galoshes.
Comptroller Susan Combs says the state Legislature will start with $77.1 billion available for general revenue spending in the 2010-2011 biennium. That's down more than 10 percent from what was available to the budgeteers two years ago.
And put the first asterisk here: Combs' new "biennial revenue estimate" also comes with the biggest balance ever reached in the state's Rainy Day Fund — enough to nearly cover the difference between this year's estimate and the one Combs made two years ago. At the end of the biennium, that fund is expected to have a balance of $9.1 billion. Put it another way: If they can get two-thirds of the Lege to go along, they can use that money for general spending.
The lower numbers are based on two things, mainly: Lawmakers start with a cash balance of about $2.1 billion, as against $9 billion two years ago; secondly, Combs and her forecasters appear to have adopted negative assumptions about the economy wherever they had the choice. They could well be right, but any mistakes they've made will bring relief — more money — rather than grief. It would be hard for the state to do worse than she's predicting, financially; it could do better, adding money to the pot.
The comptroller expects actual general revenue — not counting that starting cash balance — to drop by $2.2 billion, to $75 billion (general revenue is what they call non-dedicated state funds in the $167 billion budget).
And she's expecting the Texas economy to share the national economy's troubles — if later and to a lesser extent. "Our new economic forecast indicates Texas will be affected in fiscal 2009 before regaining economic momentum in 2010."
They're predicting Texas will lose 111,000 nonfarm jobs between now and mid-summer before starting to add jobs again in the fourth quarter of the year. In fiscal 2009, they're forecasting gross state product will increase by 1.8 percent, then by 1.9 percent in 2010, and 3.8 percent in 2011.
The state's biggest revenue-producer — the sales tax — is expected to rise, but more slowly. Combs expects a drop in income from several other taxes, including the natural gas tax, the insurance tax, motor vehicle sales and rentals, and oil production and regulation taxes.
The state franchise tax, she says, will be flat over the next few years. This is an example of a place where she's taking the dimmest possible view. A one-time break cut the franchise tax revenues in its first and only year of collection by hundreds of millions of dollars. But in her projection for the second and third years of that tax, Combs didn't add those numbers back in. That might turn out to be right, but it's another place where a little light could shine and the numbers would grow. That said, it's clear the tax isn't producing what the comptroller and her predecessor predicted. When that tax was revised in 2006, the comptroller said it would produce almost $6 billion a year; in fact, it's producing only about $4.4 billion annually.
That puts some pressure on budgeteers. The state is obligated to spend about $14.2 billion every two years to fulfill a promise to offset cuts in local school property taxes. That was the deal in 2006: Cut local property taxes, replace the money lost with state funds. But the property tax fund doesn't cover that nut: The $14.2 billion cost stacks up against a fund that's projected to have $8.5 billion this biennium. Lawmakers will have to make up the difference out of general revenue.
Combs expects the Texas Lottery's numbers to slide about three percent.
The whole BRE is available online, with charts and tables galore. Read the executive summary up front — you'll see what we mean about the bad weather gear.