With Revenues Rising, Texas Sees $1.6 Billion Surplus on Horizon

One of the biggest budget shortfalls in recent Texas history could give way to a $1.6 billion surplus by the end of next fiscal year, according to Susan Combs, the state comptroller.

Combs reported Monday (December 12) that state tax revenues, especially those on sales and natural gas production, are expected to climb significantly over the coming year and a half. Sales taxes will climb 10 percent and natural gas-related revenues will jump 25 percent, she said.

Overall, state lawmakers will have 8.6 percent more money to work with than they did during the current biennium, in which legislators dramatically slashed funding for education and Medicaid.

The forecast is good news for lawmakers, and shows that the Texas economy has been performing well in comparison with the rest of the country. During fiscal 2011, Combs noted, Texas added more jobs than any other state, and saw a net in-migration of 227,000 people, though it still has an 8.4 percent unemployment rate.

But the depth of the state's fiscal problems during lawmakers' most recent legislative session, along with worrisome national and international trends, means that the budget surplus is not as straightforward as it may seem. Lawmakers pushed $4.8 billion in Medicaid payments into the next biennium, for example, meaning that those obligations still await them.

In addition, "events now unfolding throughout the world are of great concern," Combs warned. "Some observers believe a broad eurozone recession to be likely, and is expected sooner rather than later. The economies of some European countries may already be contracting and contagion from the ongoing financial crisis is possible. China, as well as India, shows signs of a slowing economy; further, the Chinese property boom is in sharp reversal. And the ongoing political gridlock in Washington is adding to the atmosphere of uncertainty, negatively affecting business and consumer confidence."

Today's Take" provides a quick analysis of the day's top news in state government.