Texas In Better Shape Than Most States As U.S. Economy Sours

By APRIL CASTRO, Associated Press Writer

AUSTIN (AP) – The Texas economy has so far bucked the increasingly dire national downturn, largely because of the thriving oil and gas industry and healthy employment rates.

But experts warn that the state is not immune to the effects of the souring economy and typically lags national trends by several months.

As other states confront deficits with plans to trim government health care to children, disabled and the elderly, lawmakers in Texas so far expect to have enough money when they convene in January to write a state budget without such cuts.

“Right now, things are looking very well,” said John Heleman, the state’s chief revenue estimator. “Probably one of the things there that’s actually helping us in the short run is oil prices … higher oil prices are good for Texas because we’re such an oil-intensive state.”

The amount of money projected to be available for the next budget was estimated with the assumption that an economic slowdown would be in play. Still budget officials expect the state to have money to spare while writing the 2010-2011 state spending plan.

A healthy oil industry in Texas means stout employment rates. It also helps the state because proceeds from oil and gas production taxes are divied up among public education and the state’s so-called Rainy Day Fund.

Several billion dollars are expected to be sitting in the fund by the time lawmakers meet next January.

Further padding the next two-year budget, lawmakers expect to have more than $8 billion left over from the last spending cycle. But, things can still change.

Nearly two dozen states are grappling with deep cuts and tax proposals to close shortfalls totaling more than $34 billion. That includes California, where lawmakers have made emergency cuts and authorized billions in borrowing to halve a deficit once projected at $16 billion through June 2009. Another dozen states are bracing for falling revenue.

“In the long term, we’re going to feel the same effects as every one else,” Heleman said.

The state’s robust oil industry may eventually be offset as high fuel prices make many things more expensive and people start to change their buying habits.

“As they buy less, it could start to even further cool off our economy,” he said.

Several key indicators will be watched closely over the next few months. Employment rates and sales tax revenue will help determine how severely the state will be impacted by the national economic downturn.

Sales tax revenue, which accounts for more than half of the state’s income, is still growing steadily, though it has slowed from the double-digit percentage increases that had become common over the last two years.

And because public education is funded primarily by local property taxes, housing values also could impact costs to the state. So far, property values statewide are holding steady. But declines could have an impact on the 2010-11 state budget.

“I think, yes, you could see that,” Heleman said. “I don’t know what the answer would be, but wait and see how housing prices continue to change.

“Right now, it’s good to keep an eye on it. That’s about it.”

(Copyright 2008 by The Associated Press. All Rights Reserved.)