A lot of speculation is going on about whether a special session will be necessary before the budget can be finalized. I have even heard a date mentioned: July 11. No doubt many readers have heard the same thing; there aren’t many secrets in the Capitol. Is a special session a good idea? Here’s the scenario I’m worried about: Budget writers will rush to finish their work in the regular session, and they will make their draconian cuts, and then the data will show that the economy is improving so rapidly that the cuts in the budget went deeper than they needed to. For example, compare sales tax receipts for March 2010 with those for March 2011: March 2010 $1,458.9 billion March 2011 $1,603.8 billion Increase over 2010: 9.9%, or about a $150 million increase. If sales taxes were to experience a similar growth over the next biennium–that is, roughly a 10% increase for each monthly pairing–the total increase ($150 million a month times 24 months) would be $3.6 billion. I realize that this is not how the comptroller’s office does its revenue estimate. Nevertheless, the point is that if the Legislature adopts a cut-to-the-bone budget in the regular session, they may well turn out to be wrapping state finances in a straitjacket, when a boom could be on the horizon. Here are some more figures that suggest more good news is on the way. It’s the compilation of the latest U.S. rig counts for the four weeks beginning April 8, 2011. The table I have reflects the work of two companies, Baker Hughes and RigData.com. In each case the rig count represents a four-week average, going forward from April 8. These numbers are for Texas only: Baker Hughes Number of rigs in use, week of April 8, 2010: 609 Number of rigs in use, week of April 8, 2011: 768 Increase: 159 (26.1%) RigData Number of rigs in use, week of April 8, 2010: 645 Number of rigs in use, week of April 8, 2011: 840 Increase: 195 (30.23%) Price of oil, April 8, 2011: $109.07 I don’t have the tools to turn these numbers into projected revenue, but I can say with confidence that if the rig count is up by 1/4 to 1/3, and the price of oil is in excess of $100, a lot of money will be flowing into the state’s coffers and into the Rainy Day Fund. It is imperative that the comptroller take note of these numbers. (I include this sentence because I heard today that she was bearish on energy prices.) It would be a terrible mistake to base a budget on pessimistic projections when it turns out that economic conditions are improving at a fairly rapid rate.
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