Comptroller Glenn Hegar said Thursday that it is likely that Texas will not go into a recession. Instead, the state is expected to have more than $18 billion in unspent money at the end of this two-year budget cycle, thanks to an unexpected rise in state revenue in recent months.
“Despite sharply higher interest rates, inflation putting pressure on household budgets, and bad economic conditions among major trading partners, the national economy has continued to grow,” Hegar said in his Certified Revenue Estimate, which updated how much money lawmakers will have to spend. “Meanwhile, the Texas economy has done better than the national economy, and the economic outlook included with this revenue estimate does not assume a recession in Texas.”
The news comes just days before lawmakers are set to fight in a special session over public school funding, teacher pay raises, school vouchers, and possibly other issues that have recently caught the attention of Republican Gov. Greg Abbott. The updated report from the comptroller raises the amount of money that can be spent during the 2024-25 cycle from $188.2 billion, which is what lawmakers thought they would have when they passed the budget in May, to $194.6 billion.
It also says that the Economic Stabilization Fund, which is the state’s emergency fund, will have a balance of $23.8 billion. The new estimate says that the amount of money that can be spent in this budget will go up by 24.8% over the 2022-23 cycle, which ended in September.
In May, lawmakers passed a $321,3 billion budget for the next fiscal year, which will end in September 2025. In January 2025, they will get together again to pass a new budget for the next two years. At the start of this year, lawmakers went into their regular session with a record-breaking $32.7 billion surplus.
A number of constitutional changes that voters will decide on will determine how much money is left in the state’s coffers at the end of the two-year cycle. These include a $1.5 billion plan to expand broadband, a $1 billion Texas Water Fund to pay for infrastructure, and possibly a homestead exemption if lawmakers agree on a property tax relief plan.
In November, voters will decide if the state should spend $27 billion in taxes on programs like lowering property taxes, building water infrastructure, funding research institutions, and buying other expensive things. Even if all of them are approved, the state was already expected to have a surplus of at least $10 billion going into the next two-year cycle in 2025. On Thursday, Hegar almost doubled that number when he made his projection.
During this year’s regular session, lawmakers approved $4.5 billion in new spending for schools to use for things like teacher pay raises. However, this money was tied to very controversial legislation that would have created a voucher program that would have let some parents use this money to pay for private school tuition.
The plan to raise teacher pay died with the voucher program, but lawmakers may be able to bring them both back to life next week. Abbott has said that there will be at least two special sessions to help them reach a deal. He has also said that if a program isn’t passed, he will push for vouchers in the primaries next year.
Hegar hinted at such a bright economic future for Texas last month at The Texas Tribune Festival. He said that an increase in taxes collected from insurance claims, which are taxed by the state, would give this cycle an unexpected boost in revenue.
Also, public education in Texas is at a financial crossroads. Lawmakers are about to start one of the most heated fights in the Legislature over how much money to give to public school districts, how much pay to give teachers, and how much money to give parents for private school tuition.
Hegar said in an interview on September 22 that we should use the extra money to invest in public education. “We should spend money on our teachers. We need to put money into those who are on the front lines and teach the people who will work in the future. Hegar didn’t say on Thursday that lawmakers should spend the extra $6.5 billion on teachers, public schools, or vouchers, but she didn’t say they shouldn’t either. Most of the time, he stays out of budget fights that are about policy.