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Texas Comptroller Glenn Hegar announced on Friday that lawmakers will have a larger budget for funding public education during their upcoming special session than they initially anticipated when they passed the state’s $321.3 billion budget earlier this year.
Hegar expressed that the surge in state revenue, primarily due to rising insurance premiums, would create fresh funding avenues for increased investment in public education. He further expressed his desire for the Legislature to prioritize allocating a portion of the newfound funds towards improving teacher salaries.
“In light of the uncertainties, we must set aside a portion for unforeseen circumstances,” Hegar stated during an interview at the Texas Tribune Festival. “Nevertheless, we should seize the opportunity and allocate resources towards enhancing public education,” Hegar emphasized. “It is crucial to invest in our teachers and prioritize those on the front lines who are nurturing the future workforce.”
In his upcoming October update, Hegar refrained from disclosing the exact amount in dollars that he plans to contribute to the state’s overall revenue increase.
He stated that the revenue for this year has exceeded our expectations once again.
Hegar also said he’s no longer forecasting even a mild recession for Texas, which he had been warning about for several months.
Hegar stated that the Texas economy is experiencing ongoing growth.
Less than a year after Hegar informed lawmakers that they could anticipate $165.9 billion in new revenues for the next two years, the rosy economic outlook further solidifies this figure, which is expected to increase with the October update.
They also had a historic $32.7 billion cash surplus when they began their budget process in January, a number driven by record-breaking sales tax and gas tax collections.
Several programs, such as property tax relief, water infrastructure, research institutions, and other significant items, will be up for a vote in November. The decision lies in the hands of voters, who will determine whether to allocate $27 billion from state taxes towards these initiatives.
Lawmakers granted $4.5 billion in additional funds for schools during the recent regular session. This allocation was intended for various programs, including teacher salary increments. However, the approval was contingent upon the passing of controversial legislation enabling a voucher program. The proposed voucher program, allowing certain parents to utilize the funds for private school fees, ultimately failed. Consequently, the teacher pay raises were also shelved. Yet, legislators will have an opportunity to resurrect both the pay raises and the voucher program in October.
According to Rahul Sreenivasan, a policy advisor at Texas 2036, an Austin think tank, the state is projected to have a surplus of at least $10 billion for the upcoming two-year cycle in 2025, even if all the approvals are granted.
He stated that this indicates a further consolidation of Texas’ already robust fiscal standing.
Hegar stated that the expected growth in revenue primarily stems from an unforeseen surge in state tax collections derived from insurance premiums.
Hegar stated that when insurance companies are obligated to cover additional damages resulting from events such as Winter Storm Uri and other weather occurrences, and with the ongoing rise in building and labor expenses, these costs are transferred to the policyholders who bear the responsibility of paying the premiums.
According to Hegar, the state has observed a significant surge in premiums recently, and as a result, taxes are being collected on them.
Hegar expressed surprise, saying, “I didn’t anticipate that. Typically, there is no alteration, so when the collections increase from $3.2 billion to $4.2 billion, it takes you by surprise.”
According to him, sales and gas tax collections have increased at a slower pace compared to the previous period, now aligning with inflation rather than surpassing it as they used to.
Every year, as the new two-year spending cycle begins, the comptroller’s office usually revises the state revenue estimates.
Sales tax is the primary driver of state revenues, with oil and gas taxes closely following behind.
As The Texas Tribune’s signature event of the year, The Texas Tribune Festival brings Texans closer to politics, policy and the day’s news from Texas and beyond. Browse on-demand recordings and catch up on the biggest headlines from Festival events at the Tribune’s Festival news page.
