Texas ended fiscal 2023 with a hefty cash balance of $48.4 billion in its general revenue fund due largely to higher, but slowing tax collections, the state comptroller reported Monday.
The annual cash report for the fiscal year that ended Aug. 31 said the balance rose $14.6 billion or 43.4% from fiscal 2022. After transfers to the state’s rainy-day and other funds, the available balance was $39.24 billion, which surpassed a January forecast of $32.7 billion, according to the comptroller’s office.
The report said growth in sales tax collections, which are the largest source of state funding for the Texas budget, slowed in the second half of fiscal 2023 “as declining inflation and higher interest rates began to take their toll.”
Actual all-funds sales and use tax collections totaled $46.6 billion, up 8.4% from fiscal 2022, which notched a 19% increase over fiscal 2021.
Slower tax growth is expected to continue. Texas Comptroller Glenn Hegar’s revenue estimate released in October projected a surplus of only about $18.3 billion for the current biennium that began Sept. 1 with a $176.28 billion general fund budget.
At that time, he said it would not be prudent to assume “robust economic growth and consequently revenue growth will continue unabated.”
Last week, Hegar reported sales taxes were down 0.3% at $3.81 billion in October, marking their first decrease in 31 months.
“October sales tax collections are in line with our recent Certification Revenue Estimate, which predicted slower economic growth in the months ahead,” he said in a statement. “Contributing to the year-over-year decline was erratic refund activity this month, as well as notable declines in receipts from some sectors which could indicate a slowing economy.”
Expectations for a huge pot of cash at the end of the fiscal 2022-23 biennium spurred a legislative spending spree this year, topped by a massive property tax cut.
The $18 billion package reduces school property taxes for homeowners and businesses by $12 billion through rate compression, while raising the homestead exemption to $100,000 from $40,000.
Full implementation of the package was on Tuesday’s state-wide ballot along with 13 other constitutional amendments, including one to create a $1 billion New Water Supply Fund For Texas and another to set up a nearly $4 billion fund for certain state universities.
More spending could be coming. Gov. Greg Abbott last month ordered lawmakers into a third special session that ends this week to create and fund a universal private school voucher program, as well as appropriate billions of dollars for public school safety improvements and teacher pay increases and $1.5 billion for continued construction of a border wall with Mexico.
With no consensus reached between the House and Senate on those issues, the Republican governor is expected to order a fourth special session.