September 13, 2021
Texas’ End-of-Fiscal-Year Tax Collections Show an Economic Rebound from the Pandemic’s Slowdown
The Texan
By Brad Johnson
Since the pandemic’s onset, the Texas economy has rebounded but still struggles with staffing shortages across many industries.
Money is exchanging hands at a greater rate than a year ago, the Texas Comptroller of Public Accounts’ fiscal year summary shows, illustrating more fully the economic recovery developing since the global economy was brought to a screaming halt.
Fiscal Year 2021, which runs from September 2020 through August this year, experienced a 7.1 percent increase in overall tax collections and a 5.6 percent increase in sales tax collections from the previous year.
All funds tax collections amounted to $61.47 billion.
Since April, the state’s sales tax collections have been up compared with those same months in 2020 — the initial brunt of the pandemic and its derivative government shutdowns.
The tax collections illustrate a higher amount of commerce and, thus, a healthier economy compared with the dire environment during the throes of the pandemic.
Other tax collection categories posted significant improvements as well: Motor Vehicle Sales and Rental Tax revenues improved nearly 20 percent, Alcoholic Beverage Tax collections increased almost 12 percent, Cigarette and Tobacco Tax collections yielded a 7.5 percent increase, and the Hotel Occupancy Tax posted a slight 3.6 percent improvement.
Supremely important for Texas, being the premier oil and gas producing state, Natural Gas Production Tax collections increased nearly 70 percent while Oil Production Taxes yielded a near-7 percent increase.
Those two categories were especially hard-hit by the pandemic and its preceding supply glut. The demand for those products, oil especially, cratered during the coronavirus’ early onset. But travel has since returned steadily and as the supply recovers, the demand will be increasingly met — yielding more and more tax collections by the state.
Two of the state’s funds financed by those severance taxes, the Economic Stabilization Fund (i.e. the state’s “Savings Account”) and the State Highway Fund, will receive $1.46 billion deposits for the fiscal year, up $330 million from the previous year.
“Receipts from oil and gas mining exhibited the largest percentage increase among major economic sectors for the second straight month,” Comptroller Glenn Hegar said in a release, “but remittances from that sector remained well below pre-pandemic levels.”
Total net revenue by the state is up 20 percent.
One caveat to that number since the pandemic first began is that the amount of federal income, i.e. aid sent from the federal government, is also up dramatically — 41 percent, to be exact, to the tune of $82 million. Congress’s multiple relief packages resulted in billions of dollars flowing into the 50 states for pandemic response efforts. And that aid has helped Texas balance its books.
But that total does not affect the tax collection metrics that show an economy on the path to recovery.
“Yearly revenues were ahead of our projections in the revised Biennial Revenue Estimate (BRE) released in August,” Hegar said. “Motor vehicle sales and rental taxes and the natural gas production tax were particularly strong in the final month of fiscal 2021.”
Hegar also said that clothing sales and bar and restaurant remittances improved substantially from the previous fiscal year.
Texas’ unemployment rate has improved greatly since its double digit high in April 2020, settling down in July around 6 percent. The state will soon discontinue the extra unemployment benefits and has reinstated the work search requirement to collect payments, but many businesses still struggle with staffing shortages. That is one component preventing Texas’ economy from fully recovering back to its pre-pandemic roaring levels.
Since July 2020’s dire projection of a $4.6 billion budget shortfall, the state’s fiscal outlook has steadily and dramatically improved. It improved so much that the legislature concluded the 87th regular session with a $725 million surplus.
The state legislature adopted a $248.5 billion budget for Fiscal Year 2022-2023 but still has $16 billion in federal coronavirus aid it must allocate in the next special session that begins on September 20.
But the fiscal recovery shown by the tax revenue update allows those funds to be spent on items other than shoring up the previously projected budget hole.