BIENNIAL REVENUE ESTIMATE REVENUE VOLATILITY January 2019 Glenn - - PowerPoint PPT Presentation

REVENUE VOLATILITY

Glenn Hegar Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

January 2019

Glenn Hegar

Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

Revenue Available for General-Purpose Spending

General Revenue-Related (GR-R) Tax Collections Other GR-R Revenue

Total GR-R Revenue

Beginning Balance

Total GR-R Revenue & Fund Balances

Revenue Reserved for Transfers to the Economic Stabilization and State Highway Funds Amount Needed for Transfer to the Texas Tomorrow Fund*

Total Revenue Available for General-Purpose Spending

SUBTOTAL SUBTOTAL

TOTAL

2018-19

2020-21

+ + = + = _ _ =

In Billions of Dollars

$99.27 $14.55 $113.82 $1.94 $115.77 $5.57 $0.00 $110.20

* The original, constitutionally guaranteed prepaid tuition program is projected to have a cash shortfall of $211 million in the 2020-21 biennium. The BRE assumes the shortfall will be paid from general revenue. Note: Totals may not sum because of rounding.

$107.32 $14.16 $121.48 $4.18 $125.67 $6.34 $0.21

$119.12

Glenn Hegar

Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

Sources of General Revenue-Related Revenue for 2020-21

Sales Taxes Motor Vehicle Sales & Rental Taxes Oil Production Tax Franchise Tax Natural Gas Production Tax Motor Fuel Taxes Fees, Investments & Other Non-Tax Revenue All Other State Taxes

STATE TAX REVENUE OTHER REVENUE

8.1% 6.1% 5.0% 2.7% 1.7% 10.2% 11.7% 54.5%

Glenn Hegar

Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

Sales Tax Collections, Annual Change All Funds

Percent Change Average Annual Change

• 15%
• 10%
• 5%

0% 5% 10% 15% 20% 25% 2018 2016 2014 2012 2010 2008 2006 2004 2002 2000 1998

5.05%

Glenn Hegar

Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

Severance Tax Collections, Annual Change All Funds

Percent Change Average Annual Change

• 60%
• 40%
• 20%

0% 20% 40% 60% 80% 2018 2016 2014 2012 2010 2008 2006 2004 2002 2000 1998

7.1%

Texas Rating - Five-Year History

Fitch Moody’s Standard and Poor’s KBRA

Texas

AAA Aaa AAA AAA

2014 2015 2016 2017 2018

Glenn Hegar

Texas Comptroller of Public Accounts

Alaska

1

Louisiana New Mexico2 North Dakota Oklahoma West Virginia3

Energy-Related Downgrades

(Reliance on tax revenue from oil and gas, coal) State Rating - Five-Year History

AA Aa3 AA AA- Aa3 AA- Aa2 AA

2014 2015 2016 2017 2018

AA+ AA AA AA Aa2 AA-

2014 2015 2016 2017 2018

1 Rating agencies also cited pensions. 2 Rating agencies also cited pensions, Medicaid. 3 Downgrades are due to reliance on coal-related revenue.

Glenn Hegar

Texas Comptroller of Public Accounts

Texas Rating - Five-Year History

Fitch Moody’s Standard and Poor’s KBRA

1 Rating agencies also cited reliance on oil- and gas-related revenue. 2 Rating agencies also cited state debt increase. 3 Rating agencies also cited structural imbalance.

Pension-Related Downgrades

State Rating: Five-Year History

Texas

AAA Aaa AAA AAA

Alaska1 Connecticut2 Illinois Kansas AA Aa3 AA A+ A1 A BBB Baa3 BBB- Aa2 AA-

2014 2015 2016 2017 2018

Kentucky Mississippi New Jersey Pennsylvania3 Aa3 A AA A A3 A- AA- Aa3 A+

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

Glenn Hegar Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

Tobacco Settlement - Permanent Trust Account Corpus and Distribution

$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 2018 2016 2014 2012 2010 2008 2006 2004 2002 2000

$958

MILLION

$2.60

BILLION

Distributions

Market Value

The Tobacco Settlement Trust Account was funded with an initial investment of $1.68 billion between 2000 and 2003. When adjusted for inflation, that amount would now be worth $2.41 billion assuming no distributions were made from the trust. Our investments have yielded a trust account with a market value of $2.6 billion (nearly $200 million more than the inflation-adjusted value would be), while at the same time making regular yearly distributions that together total nearly $1 billion from inception to date.

In Billions of Dollars

Glenn Hegar Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

Texas Legacy Fund Potential Distribution Projections

$0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 2020-2021 2024-2025 2028-2029 2032-2033 2036-2037 Cumulative Distribution Biennial Distribution

In Billions of Dollars

90% Distribution 10% Distribution Median Expected Distribution

REVENUE VOLATILITY

Glenn Hegar Texas Comptroller of Public Accounts

BIENNIAL REVENUE ESTIMATE

January 2019

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