The Texas comptroller said Monday that the economic recovery is taking hold, producing higher than expected tax revenues and possibly resulting in a budget surplus in 2013.
In a letter to the Legislature, state Comptroller Susan Combs said tax collections were on pace to produce a $1.6 billion budget surplus for the fiscal biennium ending in 2013. That means the state could earn $82.7 billion over the next two years, while the 2012-2013 budget is only $81.1 billion.
That represents an 8.2 percent increase in state revenues over the 2010-2011 budget cycle.
In the last two budget cycles, lawmakers were forced to slash government spending and tap the Rainy Day Fund to make up for budget deficits. For 2012-2013 they cut $4 billion in funding for public schools and shorted $4.8 billion for Medicaid, the health program for the poor and disabled.
The government sector was the only area where employment has gone down, with 35,000 eliminated. Local government employment fell by 1.9 percent and the federal government shedding 8,700 jobs in Texas.
The fastest growing sector of the economy, in terms of employment growth, was mining and logging, which includes the oil and gas industry.
"The number of operating oil and natural gas drilling rigs in the state increased by almost 170 percent since its recent low of 329 rigs in June 2009 to 885 rigs in August 2011," the comptroller's report said. "Mining and logging added 16,800 jobs during fiscal 2010 and another 36,400 jobs in fiscal 2011, growing by a robust 17.3 percent in 2011."
Combs said while the Texas economy is in recovery it still faces some hurdles.
"The recent national recession is over and the economy is once again expanding," Combs said. "Through October 2011, Texas has recovered 94 percent of the jobs lost during the recession; the U.S. just 27 percent."
She warned that while there was the threat of another recession, "the most likely scenario continues to be one of slow, steady recovery from the worst recession since World War II."
Combs said she expects Texas to increase jobs over the next two years by 1.5 percent, but that is a slower rate than in 2011. Her office also forecasts Texas' gross product to increase an average of 2.2 percent a year over the next two years, exceeding the 1.9 percent forecast for the country as a whole.
Slow single-family home construction will remain a drag on economic recovery, Combs added. Another potential threat to the Texas economy is an economic slow-down in Europe, where some nations that use the euro face financial crisis. Combs also said political gridlock in Washington is also producing uncertainty that could hurt the economic recovery.
As comptroller, Combs is responsible for tax collection and monitoring the state's economy. She is required by law to keep the Legislature and the governor apprised on economic conditions that could affect tax revenues and state spending.
The state's Republican leadership will likely feel justified in slashing the budget over Democratic objections and refusing to raise taxes. But many lawmakers, both Republican and Democratic, expect the Legislature to still face tough choices in 2013.
The state's Rainy Day Fund at the end of 2013 is forecast to reach $7.3 billion, the comptroller said.