Texas’s reserve fund may climb to 28 percent more than officially forecast by 2013 as energy prices rally, a gain that might help the second-most populous state avoid some spending cuts, a key senator said.
The fund, fed by energy taxes and forecast by the state comptroller to reach $9.4 billion by the end of August 2013, may gain much more by then, Senate Finance Committee chairman Steve Ogden, a Bryan Republican, said yesterday.
“That fund could easily rise to $12 billion,” Ogden said at a committee hearing. He based his estimate on revenue increases from taxes on oil and natural-gas production in the state as energy prices climb….
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I reported something similar earlier this month (See “Oil’s Well that Ends Well,” posted April 14.) Sales tax receipts are up over the previous year, and the rig count is up by 26% to 30%, depending upon which reporting service you prefer. The sales tax numbers are particularly encouraging:
March 2010 $1,458.9 billion
March 2011 $1,603.8 billion
Increase over 2010: 9.9%, or about a $150 million increase. If this rate of increase, or something close to it, holds true for the next biennium, the increase in revenue would be $3.6 billion.
Meanwhile, Ogden is saying that the Rainy Fund could increase by as much as 28% by the end of the biennium. Previous calculations were that the fund would have $9.4 billion by August 31. A 28% increase would yield an additional $2,632,000,000. That’s a total of $12 billion.
And yet, the Legislature is moving forward with a budget plan that is going to decimate state services. They are going to send it to Rick Perry and he will sign it gleefully, and then go out and brag how Texas cut its budget without raising taxes or spending its reserve fund.
It’s time to slow down and give this some thought. It’s one thing to say that the Rainy Day Fund is off limits when we are so broke we can’t pay our bills without it. It is another thing when general revenue from sales taxes is up, when oil prices are up, and when anything we spend from the Rainy Day Fund is about to be not only replaced but enhanced.
Isn’t there some way to avoid this ideological folly?
The first question that should be asked is whether Comptroller Combs has accurately forecasted the projected price of crude oil and natural gas. Her revenue estimate in January forecast pegged revenue from oil and gas for 2012-2013 at $72.2 billion for the years 2012-2013. But these projections assumed that prices would be stable ($80 a barrel for crude). These predictions were made based on stable price projections of natural gas in the $4+ range and crude oil based on $80 per barrel. The price per barrel of crude oil today is around $107 per barrel, due to unrest in the Middle East and North Africa. Shouldn’t the comptroller revise her revenue estimate based upon current oil prices? It is madness to maintain that the Rainy Day Fund should not be touched when economic conditions for oil are extremely bullish. Lawmakers need to recognize that any money the Legislature might spend from the Rainy Day fund today will be replenished tomorrow.
Here’s how I ended my previous post:
It would be a terrible mistake to base a budget on outdated pessimistic projections when it turns out that economic conditions are improving at a rapid rate.
No one ever intended for the Rainy Day Fund to be untouchable.