Rainy Day? Texas Economy Faces Coronavirus Impact

The coronavirus is slamming the U.S. economy, and is likely to hit the Texas economy pretty hard as well. With plunging oil prices and shuttered businesses across the state, the pandemic has threatened two of Texas' biggest budget sources---oil revenues and sales taxes. State Comptroller Glenn Hegar has already signaled he may revise the budget downward for the next biennium, and is now offering to work with businesses who are struggling to pay their state taxes.

Last fall, Hegar estimated a $3 billion state budget for the 2020-21 biennium, with about $9 billion in the Economic Stabilization Fund a.k.a. the rainy day fund. "It does appear that we can manage the current challenges for the short term with the revenue that we have," says Dale Craymer, president of Texas Taxpayers and Research Association (TTRA).

Long-term revenue projections are more murky, with a revised budget forecast not expected until at least July. "It's going to take a few months before, with any precision, we can estimate the amount of the challenges that we're dealing with on the budget front," says Craymer. "We don't know when oil markets are going to stabilize, and we don't know how long our economy is going to be at a screeching halt because of the coronavirus...as we get into the summer months, hopefully we'll have much of that behind us."

Governor Greg Abbott is also taking a wait-and-see approach. Abbott told a town hall last week that he is considering all options for mitigating the economic fallout of coronavirus, including tapping into the state's disaster relief fund or the rainy day fund. "The rainy day fund has become more popular over the last couple of years," says Craymer. "But in all honesty, these are the circumstances for which the fund was designed to address."

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