Texas lawmakers will have new money going into special session on education, comptroller says

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When Texas lawmakers meet next month for a special session on funding public education, they will have more money available to them to spend than they anticipated when they passed the state’s $321.3 billion budget earlier this year, Texas Comptroller Glenn Hegar said Friday.

The rise in state revenue, driven largely by increasing insurance premiums, means there will be new funding opportunities to invest more money in public education, Hegar said, adding that he hoped the Legislature would focus some of the new money on teacher pay raises.

“We have to reserve part of this because of the unknown,” Hegar said in an interview at the Texas Tribune Festival. “But with that being said, ”We need to take advantage [and] invest in public education,” Hegar said in an interview at the Texas Tribune Festival. We need to invest in our teachers. We need to invest in those that are front line, that are educating the future workforce.”

Hegar declined to specify how much more in dollars he would add to the state’s bottom line when he releases the new projections in his October update.

“The revenue this year has continued to outpace our expectations,” he said.

Hegar also said he’s no longer forecasting even a mild recession for Texas, which he had been warning about for several months.

“The Texas economy continues to grow,” Hegar said.

The rosy economic outlook comes less than a year after Hegar told lawmakers they could plan on $165.9 billion in new revenues to work with over the next two years — a number that will rise when the October update comes out.

They also had a historic $32.7 billion cash surplus when they began their budget process in January, a number driven by record-breaking sales tax and gas tax collections.

In November, voters will decide on whether to spend $27 billion in state taxes on several programs, including property tax relief, water infrastructure, research institutions and other big-ticket items.

During the regular session this year, lawmakers approved $4.5 billion in new spending for schools to use for programs like teacher pay raises, but it was tied to highly divisive legislation that would have created a voucher program letting some parents use that money for private school tuition. The teacher pay raises died when the voucher program died, but lawmakers have a chance to revive them both in October.

Even if all of them are approved, the state is already expected to have at least a $10 billion surplus going into the next two-year cycle in 2025, said Rahul Sreenivasan, policy advisor at Texas 2036, an Austin think tank.

“This signals a strengthening of an already strong fiscal position Texas is currently in,” he said.

The projected increase in revenue comes largely from an unanticipated rise in state tax collections from insurance premiums, Hegar said.

When insurance companies have to pay for more damages after events like Winter Storm Uri and other weather events, as the building and labor costs continue to climb, those costs are passed on to the policyholders who pay the premiums, Hegar said.

The state collects taxes on those premiums, which increased dramatically in recent months, Hegar said.

“That is one I didn’t expect,” Hegar said. “Normally there's no change, so when they go from $3.2 billion [in collections] to $4.2 billion, that catches you off guard.”

Sales and gas tax collections, meanwhile, have grown more slowly this year than last cycle and are keeping up with inflation, rather than outpacing it as it did before, he said.

The comptroller’s office typically updates state revenue estimates each year as the new two-year spending cycle starts.

State revenues are overwhelmingly driven by sales tax, followed closely by oil and gas taxes.

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