Depleted sales tax revenue and a bust in the oil and gas industry during the coronavirus pandemic have legislators tightening their belts for the upcoming biennium.
With businesses closed during the pandemic, sales tax revenue fell more than 13% in May, with the steepest decline in collections from oil and gas companies after an oil bust caused by lack of demand.
“It’s looking pretty grim for the state’s budget, but we’ll work our way through it,” state Sen. Robert Nichols said.
Legislators will return to Austin in January and are required by law to pass a budget for the 2021-22 period. Gov. Greg Abbott has already predicted a 5% decrease in state spending over the next two years.
Sales tax revenue accounts for around 60% of the state’s budget, he said, noting that oil and gas taxes were down around 75% during May.
“The revenue the state gets is a combination of both price and volume of production,” Nichols said of the oil and gas industry.
State Rep. Travis Clardy said declining oil and gas revenue would likely have a bigger impact on state coffers than shutdowns from COVID-19.
The Senate Finance Committee will meet Tuesday to discuss the latest projections and get an update on coronavirus relief the state has received.
“There are literally billions and billions of dollars flowing into the state from the federal government. You would think it would be ridiculous that it would be hard to keep up with where all it’s going, but the federal government doesn’t necessarily tell us where it’s going. They write checks and start trying to follow up later with where it went, who got what and how it can be used,” Nichols said.