State Revenues Reflect Improving Texas Economy
Sales tax collections through April were $1.5 billion higher than last year
Eight months into fiscal 2012 the Comptroller’s fiscal forecast for improved state revenues is coming to fruition. As the state operates with a smaller state budget than the last biennium and amid continued pressures to fund services for residents of the fastest-growing large state, it is helpful that major state revenues are actually exceeding expectations.
Although forecast to account for about $2.6 billion, or just 6.5 percent of the state’s revenue, natural gas and oil production taxes have outpaced those expectations thanks to increased drilling and production activity as well as an increasing amount of valuable non-gas liquids flowing from gas wells and substantially higher oil prices than during the same period in fiscal 2011.
“Oil and natural gas production taxes have grown strongly in fiscal 2012. As a result of sustained higher oil prices in the first two-thirds of the year, oil tax collections have already exceeded anticipated revenue for the year,” Heleman says. “Although dry natural gas prices are down, the higher liquids value mean that tax revenue has grown. Given the generally poor performance of state taxes during the recession, these better-than-expected revenues are helpful.”
The 6.25 percent state sales and use tax, the biggest contributor to general revenue, generated $15.7 billion year-to-date in fiscal 2012, a 12.6 percent increase over the same period in fiscal 2011.
Motor vehicle sales and rental taxes totaled $2.2 billion in the first eight months of fiscal 2012, a welcome 14.7 percent growth over last year.
It is too early in the fiscal year to get a true picture of franchise tax collections, the second biggest source of GR, as almost all of that tax is remitted in the middle of May.
Texas drivers and freight movers are traveling more miles, too, evident in the 1.6 percent year-to-date growth in motor fuel tax collections to almost $2.1 billion. With ever-increasing fuel efficiency, (see More MPG, Less Tax Fiscal Notes June/July 2010) this revenue source isn’t growing as strongly as in past years when new cars and trucks were thirstier than today’s new vehicles — a trend forecasted to continue.
Overall, fiscal 2012 tax collections are 14.5 percent better through April than for the same period in fiscal 2011, a trend Texas lawmakers and citizens hope signal prosperous economic times ahead. The continued fragility of the global economy — seen in the slowing of China’s powerhouse economy and the return to recession of some European countries — can’t be ignored, Heleman cautions.
“There are some clouds out there on the horizon,” he says. “We have to be aware of the condition of the world economy. If things were to deterioriate, they would ultimately ripple to our shores and we would feel the effects.”
You can find regular updates to the Texas state government’s revenue collections on the Comptroller’s Monthly State Revenue Watch.