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Oil Downturn Shrinks Texas 2018-19 Spend By 2.7%

Glenn Hegar

Texas is expected to have around US$104.9 billion in revenue available for general-purpose spending in 2018 and 2019, down by 2.7 percent compared to the 2016-2017 period, Texas Comptroller Glenn Hegar said in the state's Biennial Revenue Estimate on Monday.

Hegar was quick to note that the projected drop in revenue available for spending is not the result of an expected decline in total revenue collections.

“Ongoing weakness in activity related to oil and natural gas has been a drag on state economic growth and led to lagging revenue collections in 2016,” the official said, but added that thanks to its diversified economy, Texas managed to keep its economy growing in 2016, albeit at just 0.2 percent.

“Texas stands in contrast to other states with large energy industries, many of which have suffered declines in employment and economic output,” he added.

The 2018-19 budget expects Texas economy to grow by 2.5 percent in 2017 fiscal year, by 3.0 percent in 2018 fiscal year, and by 3.1 percent in fiscal 2019. Employment is also seen rising, by 1.9 percent next year and by 1.7 percent in 2019.

In a sign that Texas has turned the corner of the downturn, the state comptroller office sees production tax collections jumping by 32.3 percent to US$4.7 billion in 2018-19 compared to 2016-17. Natural gas tax collections in 2018-19 are expected at US$1.7 billion, a 27-percent rise from 2016-17.

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Signs that Texas is making an energy recovery started showing already in the third quarter of 2016.

For the fourth quarter of last year, the Dallas Fed Energy Survey of oil and gas executives showed that business activity in the Eleventh District (Texas, northern Louisiana and southern New Mexico) continued to grow, and several indicators expanded on a quarterly basis for the first time in 2016, including employment and production. Oil and gas production stopped declining in the fourth quarter after falling throughout the year, the survey showed.

By Tsvetana Paraskova for Oilprice.com

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