about

Texas comptroller: Legislators face a tough budget this year. They still must invest in the long term

Flexible thinking and commitment to long-term success will help legislators grapple with a difficult budget year

Special to the Dallas Morning News
by Glenn Hegar

Jan. 10, 2021

Texas lawmakers will rightly focus on the immediate budget shortfall when they meet this session, but there’s another view that’s equally important to the health of our state. Despite the pandemic-related recession, our state’s population continues to grow rapidly. Our growth has fueled an expanding Texas economy, but it also brings long-term costs that require careful planning.

As Texas comptroller, I’ve talked continually about looking beyond our immediate two-year budget to the state’s long-term needs — needs that can’t be ignored without a substantial cost to us, our children and our grandchildren. Over the years, Texas has made strides at better funding transportation and water infrastructure, and the state recently increased funding for public education. We must build on these accomplishments, even during the more difficult budgeting cycles.

If we don’t address these challenges, the price we pay might be ailing pensions affecting both our state credit rating and the financial security of our teachers and state employees. The challenges might also threaten our physical well-being; droughts and floods, if we’re not prepared, could endanger not only Texans’ livelihoods but also their lives. And the pandemic, which created enormous demand for distance learning and telemedicine, highlighted both the immediate and long-term price we pay when Texans lack technology resources.

If Texans don’t have the tools they need to succeed, our state won’t maintain its leadership role in the U.S. economy after the pandemic has passed.

Major credit rating agencies ― Standard & Poor’s, Kroll Bond Rating Agency, Moody’s Investors Service and Fitch Ratings ― regularly assess our long-term prospects, crucial to the state’s ability to borrow on favorable terms. Their reports are instructive for our future, and while they acknowledge Texas’ strengths, they also detail our challenges.

Those include weak pension funding, which S&P says requires active management and has resulted in the 10th-highest pension burden among states; budget pressures facing lawmakers after their commendable commitment to public education in 2019; and our above-average environmental exposure.

Moody’s considers 203 of our 254 counties at high risk for scarce water resources, a risk mitigated through Texas Water Development Board water financing programs. Hurricanes pose a persistent threat in counties that contribute a third of Texas’ gross state product. Flooding legislation in 2019 is highlighted by Kroll Bond Rating as a “critical effort” to protect Texans and our economy.

Our rate of uninsured people, among the nation’s highest, and high poverty rate present more long-term challenges. And more than 2 million Texas households don’t have high-speed internet, increasingly an essential requirement for education and work, especially in the wake of the pandemic.

As a former state representative and senator, I know the pressure that comes with balancing a Texas-sized budget. As Texas comptroller, my job is to inform lawmakers about available resources and assist them as they consider their options. I must provide them with our very best information so they can ensure our state’s future remains bright.

Our current difficulties make it essential to think in new ways, and that includes the way we spend the money entrusted to us by taxpayers. The Legislature in 2019, for example, gave my office more leeway to invest our Rainy Day Fund to ensure we get more from our money while keeping it safe. Lawmakers also approved legislation following a Supreme Court decision that ensured we get our fair share of sales tax revenue on internet purchases.

As businesses change the way they operate and the nature of work evolves, state government also must examine how we regulate those businesses. It’s not only lawmakers who can tackle the challenges before us. Every government official needs to look at the way we interact with our customers, the Texas taxpayers.

At the comptroller’s office, we’re examining the rules and regulations we administer to make sure we’re giving taxpayers the flexibility they need to do business in a rapidly evolving economic landscape. We’re making online tools easier to use. We’re addressing rules that govern the sourcing of online sales tax revenue to ensure communities all over our state get access to the dollars generated by their residents’ transactions. And we’re adapting our customer service channels to serve taxpayers in increasingly virtual settings. As the economy evolves, government must too.

Despite our difficulties, Texas has some innate advantages that will help our lawmakers.

Rating agencies acknowledge our large, increasingly diversified economy and our strong long-term economic prospects, cited by Fitch despite significant near-term challenges. Our GSP is the nation’s second largest at close to $1.9 trillion. We also have strong reserves, with billions in our Rainy Day Fund.

There’s no question the pandemic has dealt an unprecedented blow. Many Texans have lost their lives or their health; many more have lost their jobs and businesses.

But Texans are nothing if not resilient. Our sales tax revenue has come in stronger than we predicted in our July revenue estimate. People who aren’t going on vacation are spending money on their homes and on safe leisure activities instead.

Our oil and gas industry, so important to Texas, has been buffeted by forces beyond our control. But innovation in the energy industry will help it emerge from the chaos, and the increasing diversity of our state economy means we’re better able to weather oil and gas downturns than we were in the past.

With the right tools, fresh thinking and the commitment to build on our strong foundation, I have confidence that our leaders can address the daunting task immediately in front of them, and also take action to pave the way for success in the years to come. Our future depends on it.