Enlarge Paul Lowry

While oil prices have been on the downturn for the last year, many fiscal experts remain unfazed by the plunging prices’ potential impact on several key state revenue funds.

Revenue generated from oil and gas production is divided among the General Revenue fund, the Rainy Day Fund and the state highway fund, said Chris Bryan, a spokesman for Comptroller Glenn Hegar.

Here’s a quick breakdown:

General Revenue Fund: this fund is built through a variety of means, including tax revenues and fees resulting from licenses, fines and other penalties. Taxes on motor fuel, oil production and natural gas production make up a significant source of the fund’s revenue. 

Rainy Day Fund: this serves as a “just in case” fund where the state stores excess revenue for revenue shortfalls. Money in the fund comes primarily from natural gas and oil tax revenues. The total contents of the fund cannot exceed 10 percent of the total general revenue budget.

State Highway Fund: this fund is filled using state motor fuels tax proceeds as well as federal funds. The money is used to support the state highway system, environmental damage from highway construction and DPS law administration.

Using historical tracking of certain data, James LeBas, an economist with the Texas Oil and Gas Association, said he was able to calculate the revenue generated by oil and gas industry taxes that would go towards these state funds. Every dollar, if the price per barrel were $40, would generate about $43 million for the General Revenue fund and about $17 million for the Rainy Day Fund and the highway fund, he said.

While many experts agree fluctuating oil prices and production rates can certainly impact state finances, the extent of that impact remains unclear. Bryan said none of these funds would likely see a significant dip in their contents due exclusively to these falling commodity prices. 

The highway fund is the most vulnerable because of the transportation department’s reliance on the fund and constant withdrawals from the fund.

We asked a couple of state revenue experts to weigh the impact of fluctuating oil prices on state finances. Here’s what they had to say:

Oil prices and secondary effects of oilfield activity impact the balance of revenue funds and also impact the economy of local communities…

Dick Lavine, a senior fiscal analyst for the Center for Public Policy Priorities: “We have a much more diversified economy, so not only do we get oil and tax revenue, but, for instance, the sales tax gets a moderate amount of money from oil drilling because a lot of the drilling equipment being purchased, especially the pipe, is subject to sales tax. You have to look several places to see where the money is coming from… The point is we now have a diversified economy. We have high tech, we have manufacturing and we have all sorts of services.”

Dale Craymer, president of Texas Taxpayers and Research Association: “We’re going to see some dramatic changes at the local level. The oil industry is still probably one of the biggest taxpayers in the state, but it has ancillary effects well beyond that because, particularly in South Texas as you see drilling slowdown, they’re not building the homes they used to. It will impact construction activities.”

A revenue cushion exists even if oil prices don’t rebound to previously anticipated levels of $65 to $75 per barrel...

Craymer: “In general, the revenue estimate is probably in pretty good shape, which means we’re on target for a surplus. As prices get below that estimate, that surplus probably diminishes.”

Lavine: “Today, it looks like the $65 [estimate] is probably going to be too high, but we’re talking about the full biennium that starts next week. So it’s always difficult for any comptroller to forecast that far in the future, but because they left so much available revenue unspent, there should be no problem paying for the entire 16-17 budget, even if the oil never gets back up to $65.”

A sustained plunge in oil prices is unlikely to dramatically alter any state funds for now...

Lavine: “We would have less oil and gas severance tax revenue, but we have a cushion because [lawmakers] didn’t spend all the money available to them last time, mainly because they were unwilling to exceed the constitutional limit on spending.”

Craymer: “We’re sort of standing on unusual ground for us. In years past, the Legislature spent every dollar that was available. But this time, they left [money] in general revenue. That’s even outside of the Rainy Day Fund. We’ve got a good cash cushion on the state level to weather this.”

If oil prices remain at $40, state officials could alter the state budget accordingly…

Craymer: “Once oil prices stabilize, even if they stabilize at a lower level, that at least provides the industry with some degree of certainty. If they’re less concerned about prices dropping, they can work with the prices at that time and make some adjustments.”

Lavine: “As it turns out, for better or for worse, they have a cash balance that will allow them to fully fund the coming budget, probably with lower oil prices not being a problem.”

While the oil and gas industries play a major role in financing the state budget, this reliance can be detrimental to state finances because of a lack of diversity in funding and the difficulties that come with predicting it…

Craymer: “It’s a challenge because your revenue estimate is often times as good as your oil prices forecast. It’s just a fact of life that we’ve become used to on the Texas fiscal front.”

Lavine: “We are in better shape than 25 years ago because we’re not as reliant on oil to fund the state budget and the state’s economy is not as reliant on oil. Now, there are obviously certain parts of the state that just exploded in the last five years that are going to shrink back if things don’t change… But the state as a whole should be able to be OK unless something happens in the global economy.”

Disclosure: The Center for Public Policy Priorities is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

Enlarge Patrick Svitek

U.S. Sen. Ted Cruz, R-Texas, eats a pork chop sandwich Friday at the Iowa State Fair. Cruz fielded questions throughout his trip to the fair about real estate mogul Donald Trump's controversial immigration proposals.

U.S. Sen. Ted Cruz, R-Texas, is planning to join forces with GOP presidential foe Donald Trump for a rally against President Barack Obama's nuclear agreement with Iran.

Cruz's campaign said Thursday afternoon the senator has invited Trump to the U.S. Capitol for an event to "call on members of Congress to defeat the catastrophic deal that the Obama Administration has struck with the Islamic Republic of Iran."

Later Thursday afternoon, Cruz tweeted that Trump had accepted his invitation.

The rally is set for Sept. 9, said Mike Rudin, a spokesman for Tea Party Patriots, one of three sponsors of the event. The others are the Center for Security Policy and Zionist Organization of America.

*****

A super PAC supporting Cruz is taking aim at Democratic presidential frontrunner Hillary Clinton with a series of ads suggesting voters are tired of the controversies surrounding her.

The super PAC, known as Keep the Promise I, released the first video in its "Clinton Fatigue" series Tuesday, a 30-second spot that shows two doctors walking through a hospital ward, diagnosing illnesses such as "email scandals" and "questionable donations from foreign governments." At the end, a voice on an intercom says, "Paging Dr. Cruz, Dr. Cruz."

The video "will run initially online," according to the super PAC, which said it "enlisted an A-List Hollywood Team to create the ad." Asked if the super PAC will put the ad on TV at some point, Keep the Promise I president Kellyanne Conway replied, "If Hillary is still in the race then, we'll consider it."

*****

Clinton, meanwhile, is set to visit Texas next month for a campaign swing through Dallas.

The former U.S. secretary of state will drop in on the city for a public event on Sept. 22, a campaign official said Friday. Clinton will also attend a fundraiser while in Dallas.

In June, Clinton held her first public event in Texas, a speech on voting rights at Texas Southern University. She has since returned to raise money in the Rio Grande Valley.

*****

Former Arkansas Gov. Mike Huckabee dropped in on Texas on Tuesday, the latest presidential candidate to bring his campaign to the Lone Star State.

Huckabee's trip did not include any public events, as it did when he visited Houston in May and gave a speech on energy policy. Instead, Huckabee participated in "private meetings" while in the state Tuesday, according to a spokeswoman for his campaign, Alice Stewart.

*****

Gov. Greg Abbott has ordered a special election for Nov. 3 to fill the Bexar County House seat vacated by state Rep. Joe Farias, D-San Antonio, who resigned his seat Aug. 10.

According to the election proclamation, those interested in running in the special election have until Sept. 2 to file candidacy papers with the secretary of state.

The San Antonio Express-News previously reported that Tomas Uresti, the brother of state Sen. Carlos Uresti, is in the running for the seat as is Joe Farias’ son, Gabe.

On the Republican side, the Express-News’ Gilbert Garcia reported that retired firefighter John Lujan and Army National Guardsman Robert Casias are interested in running.

Early voting in the special election begins Oct. 19.

Enlarge Dave Wilson

While few state leaders have weighed in yet on the city of Austin's lawsuit challenging the state's property tax system, representatives for the Big Three were asked to give their take on it at a panel discussion Thursday morning.
 
Throughout the event hosted by the Texas Association of Counties, Carolyn Merchan Saegert, tax adviser to Lt. Gov. Dan Patrick, Meredyth Fowler, an attorney for House Speaker Joe Straus, and John Hryhorchuk, senior budget adviser for Gov. Greg Abbott, repeatedly pointed to property taxes as the top issue their bosses heard about from voters.
 
At one point, a county official asked the panelists about Austin's lawsuit and whether their bosses would ever back efforts to improve the accuracy of commercial appraisals, such as mandatory disclosure of real estate transaction prices, an issue at the center of the suit.
 
“I think in light of the new litigation going on, I think that’s going to be a discussion," said Fowler. "It could be an interim charge even... It wouldn’t surprise me if we start directing our focus on more ways than just property tax relief in the traditional sense.”
 
Saegert was more vague about Patrick's take.
 
“I can’t say that my boss has taken a position on the subject matter of the litigation," Saegert said. "I know he finds issues in the appraisal system but we did not purposely block any legislation related to that matter.”
 
Hryhorchuk didn't respond to the question.

*****

Hillary Clinton's campaign on Tuesday recruited state Sen. Royce West to make the case for her plan to curb college costs and ease student debt. 
 
On a conference call, West told reporters the Democratic presidential frontrunner's New College Compact would build on similar efforts over the years in the Legislature.
 
"It’s right up the alley ... what we’re talking about but more improved," said West, a Dallas Democrat.
 
Clinton's campaign put out a report before the call that said students in Texas who have loans graduate with an average debt ranging from $11,000 to $40,400. The report estimated her plan could save a family earning $50,000 a year more than half that in costs related to a four-year college. 

On the call, West also made official his support for Clinton's bid for the White House. He told reporters he was endorsing her because she is the "most qualified candidate in the race."

*****

GOP SD-24 candidate Dawn Buckingham is going up with the campaign’s first two radio ads.
 
One, “Pioneer,” introduces and gives a bio of the Austin ophthalmologist. The other, “Pretty Simple,” addresses illegal immigration, which is one of Buckingham’s highlighted issues.

*****

During a visit to an Austin elementary school for the first day of school on Monday, Abbott mentioned that he hasn’t spoken to Ken Paxton since the Texas attorney general was indicted Aug. 3 on three felony securities fraud charges.

“The process needs to work its course,” he said when a reporter asked whether he believed Paxton should resign. “Everyone is innocent until proven guilty.”

Disclosure: The Texas Association of Counties was a corporate sponsor of The Texas Tribune from 2011-13. A complete list of Tribune donors and sponsors can be viewed here.

Enlarge

For this week’s nonscientific survey of insiders in government and politics, we asked about what a bear market for oil portends for Texas.

The price for West Texas crude spent a good chunk of this week below $40 per barrel, trading well below the $60 price from early summer and a far cry from the $100 oil of the spring and summer of 2014.

We began by asking the insiders how long this bear market might last. Just 10 percent thought prices would rebound by the end of this year. But beyond that, the insiders did not have a consensus view. Responses to the next three options — prices rebound in the first half of 2016, the second half of 2017 or sometime in 2017 — were clumped closely together.

Twenty-eight percent of the insiders thought prices would rebound in the first part of 2016, while 29 percent thought prices would rebound in the second half of next year. Another 26 percent said the price correction would happen in 2017.

The larger national story running parallel to the drop in oil prices has been volatility in the stock market in response to fears of a slowdown in the Chinese economy and uncertainty about when the Fed will begin boosting interest rates again.

We asked what effect all of that might have on the comptroller's revenue forecast and on the overall state of the Texas budget.

Nearly 80 percent of the insiders believed a revised forecast is coming while a slight majority didn't think the economic conditions would blow a hole in the state budget.

We closed by asking the insiders how they viewed the position of the energy sector in the overall Texas economy. Nearly two-thirds agreed with the statement that the energy sector drives the economy along with other sectors. Just 23 percent thought the energy sector maintains a dominant presence in the economy while another 10 percent thought the energy sector no longer determines the state economy's direction.

We collected comments along the way, and a full set of those is attached. Here’s a sampling:

Enlarge Emily Albracht

.

The price of West Texas crude dipped below $38 per barrel on Monday. When will prices rebound?

• "There is always a rebound when a commodity falls to an artificially low price."

• "We have to anticipate a big outbreak of hostilities in Mid-East in the final months of an 8-year presidency. And oil price increases will follow."

• "If I knew the answer to this, I wouldn't be lobbying."

• "Unless Third World demand picks up, there will probably be no price increases in the short run. After 3 or 4 years, shale oil production may run short, so price could pick up then. After, Texas producers are broke."

• "It actually depends on your definition of 'rebound'. If you mean $100 a barrel, that will take a long time but if you mean stabilize, it may be sooner."

Enlarge Emily Albracht

.

Comptroller Glenn Hegar has estimated oil will sell between $65 and $75 per barrel through 2017. Will the slowdown in oilfield activity and a possible slowdown in the U.S. economy force Hegar to revise down the revenue forecast?

• "The price of oil will be at $85 per barrel starting in 2017 and we will count all our blessings."

• "Depends on sales tax but rainy day fund growth will slow down considerably."

• "Would be interesting to read the emails between Hegar and Railroad Commissioners."

• "The Comptroller left a cushion in the way he averaged the cost per barrel so I think his estimate will stand. Also, revising the estimate would not support the 'strong Texas economy' message."

• "It is more than the price of oil... It is the multiplier of all of the layoffs, their salaries, equipment, etc."

Enlarge Emily Albracht

.

Thinking more apocalyptically… will a slowdown in oil production and a possible slowdown in the U.S. economy blow a hole in the state budget?

• "The feds will print more money and cities and counties will sell more bonds. The state will ride their coattails."

• "Until the Legislature takes a serious approach to generating new revenue streams, Texas will remain in a very precarious place financially."

• "NO. The only thing that will blow a hole in it is serious property value decline and sales tax crisis."

• "No. School finance will blow a hole in the state budget."

• "Sure, a real recession in the U.S. would blow a hole in the budget. But, for better or worse, they decided to sit on $18 billion in GR or Rainy Day Fund balances, so we could survive without slashing 16-17 spending."

Enlarge Emily Albracht

.

What best describes the role of the energy sector in the larger Texas economy?

• "It's as important as your arm is, and you don't want to cut it off either, but you could survive without it."

• "Sales tax drives the state's economy..."

• "It is not as big a factor as it was, but fracking bloated the spending and tax side beyond the Lege's wildest dreams."

Our thanks to this week's participants: Gene Acuna, Cathie Adams, Brandon Aghamalian, Brandon Alderete, Clyde Alexander, Jay Arnold, Charles Bailey, Andrew Biar, Allen Blakemore, Tom Blanton, Chris Britton, Raif Calvert, Lydia Camarillo, Kerry Cammack, Elna Christopher, Kevin Cooper, Beth Cubriel, Randy Cubriel, Curtis Culwell, Denise Davis, June Deadrick, Glenn Deshields, Tom Duffy, David Dunn, Jack Erskine, Jon Fisher, Tom Forbes, Bruce Gibson, Eric Glenn, Kinnan Golemon, Jim Grace, John Greytok, Clint Hackney, Bill Hammond, Ken Hodges, Steve Holzheauser, Deborah Ingersoll, Mark Jones, Lisa Kaufman, Robert Kepple, Richard Khouri, Tom Kleinworth, Nick Lampson, Pete Laney, Dick Lavine, James LeBas, Luke Legate, Ruben Longoria, Matt Mackowiak, Jason McElvaney, Mike McKinney, Steve Minick, Bee Moorhead, Mike Moses, Steve Murdock, Nelson Nease, Todd Olsen, Nef Partida, Gardner Pate, Robert Peeler, Allen Place, Gary Polland, Jay Pritchard, Jay Propes, Patrick Reinhart, David Reynolds, A.J. Rodriguez, Andy Sansom, Jim Sartwelle, Barbara Schlief, Stan Schlueter, Robert Scott, Christopher Shields, Nancy Sims, Martha Smiley, Larry Soward, Leonard Spearman, Dennis Speight, Colin Strother, Sherry Sylvester, Sara Tays, Jay Thompson, Trey Trainor, Vicki Truitt, Corbin Van Arsdale, Ware Wendell, David White, Darren Whitehurst, Christopher Williston, Seth Winick, Angelo Zottarelli.

Enlarge Todd Wiseman

Friday, Aug. 28

• 2015 Capitol Commission Legislative Golf Classic; 7401 Texas 45, Austin (8:30 a.m.)
  

Tuesday, Sept. 1

• Oral arguments at Supreme Court of Texas in school finance legal challenge; 201 W. 14th St., Austin (9 a.m.)
• State Senate candidate Bryan Hughes, R-Mineola, fundraiser with special guest, Lt. Gov. Dan Patrick; 110 E. Ninth St., Austin (4-6 p.m.)

Thursday, Sept. 3

• This is #CruzCountry Rally with state Sen. Konni Burton, R-Colleyville; 130 E. Exchange Ave., Fort Worth (11 a.m.)

The undercover videos of Planned Parenthood executives discussing fetal tissue donation were manipulated, according to an analysis commissioned by Planned Parenthood that was released on Thursday. Planned Parenthood sent the analysis to congressional leaders and a committee that is investigating the organization in an effort to render the recordings inadmissible in an official inquiry.

Hours before the controversial Waters of the U.S. rule was supposed to take effect, a federal judge in North Dakota blocked it. The judge's action was a victory for 13 states that sued the Environmental Protection Agency over the rule, which the federal government says is meant to better protect public waterways from pollution. Texas was not among those 13 states, but it did file its own lawsuit along with Louisiana and Mississippi challenging the rule.

A state district judge on Thursday threw out a challenge filed by the Sons of Confederate Veterans, clearing the way for the University of Texas at Austin to move the statue of Confederate President Jefferson Davis to the Dolph Briscoe Center for American History.

Attorney General Ken Paxton made his first courtroom appearance as a criminal defendant on Thursday. In addition to the expected not guilty plea, Paxton's lead lawyer quit for unspecified reasons and the attorney general insisted no cameras be allowed at his trial.

Saying that Chris Kyle's "remarkable, selfless service may be unrivaled in the annals of our proud history," Gov. Greg Abbott on Wednesday posthumously awarded the late Navy SEAL sniper the Texas Legislative Medal of Honor, the state's highest military honor.

Comptroller Glenn Hegar said Wednesday that he will not authorize more than $200 million in funds approved by the Legislature but vetoed by Abbott as he waits for the attorney general to settle the issue.

The Texas Health and Human Services Commission will proceed with $100 million in cuts made by lawmakers to a therapy program for poor and disabled children, a spokesman said Wednesday afternoon.

A former high-ranking official with the Cancer Prevention and Research Institute of Texas was found not guilty Tuesday by a 12-member jury in Austin. He had been accused of deceiving colleagues in order to secure an $11 million grant for a biotechnology firm.

In a rebuff to state lawmakers, the Texas Racing Commission on Tuesday declined to outlaw historical racing in the state. The action puts at risk funding for the agency, which oversees the racing industry in the state.

Lt. Gov. Dan Patrick, who initially planned to stay away from endorsements in open Republican Senate primaries, said Tuesday he is backing state Rep. Bryan Hughes of Mineola in the Republican primary race to replace state Sen. Kevin Eltife of Tyler.

Disclosure: The University of Texas at Austin is a corporate sponsor of The Texas Tribune. The Dolph Briscoe Center for American History was a corporate sponsor of The Texas Tribune in 2013-14. Planned Parenthood was a corporate sponsor of The Texas Tribune in 2011. A complete list of Tribune donors and sponsors can be viewed here.

Gov. Greg Abbott has tapped former Texas Supreme Court Justice Dale Wainwright to lead the Texas Board of Criminal Justice. Abbott also appointed Tom G. Fordyce and Derrelynn Perryman to the board. All three were named to terms to expire Feb. 1, 2021.

Abbott made three judicial appointments this week. They are :

•    Chad Bridges of Sugar Land was named judge for the 240th Judicial District Court in Fort Bend County. His term runs until the next general election. 
•    Susan Rankin of Dallas was named judge for the 254th Judicial District Court in Dallas County for a term to expire at the next general election. 
•    David Perwin of Richmond was named judge for the 505th Judicial District Court in Fort Bend County. His term runs until the next general election. This appointment will be effective Sept. 1.

Abbott appointed state Sen. Charles Perry, R-Lubbock, and state Rep. Lyle Larson, R-San Antonio, to the Southwestern States Water Commission for terms to expire in 2019 and 2017, respectively.

The Republican Party of Texas has selected Kyle Whatley to succeed Beth Cubriel as the party’s executive director. Whatley, a Houston native, worked most recently for Pennsylvania Congressman Mike Fitzpatrick and has prior stints working for Arlene Wohlgemuth and Quico Canseco.

The Ted Cruz campaign announced on Tuesday that he has the backing of Ron Robinson, the leader of conservative youth group Young America’s Foundation. Robinson also is a founder of the Conservative Political Action Conference (CPAC) and Citizens United.

State Sen. Brian Birdwell of Granbury will serve as one of three co-chairs of "Vets for Ted," Cruz's campaign announced Wednesday. The other co-chairs are former U.S. Sen. Bob Smith of New Hampshire and U.S. Rep. Jim Bridenstine of Oklahoma.

State Sen. Bob Hall, R-Edgewood, has endorsed Cruz for president. Hall joins his colleagues Konni Burton, R-Colleyville, and Brian Birdwell, R-Granbury, in backing Cruz.

Burton, meanwhile, announced on Wednesday that she has endorsed David Simpson in his bid to win the open Senate seat being vacated by Tyler Republican Kevin Eltife.

The Houston Professional Firefighters Association, IAFF Local 341 announced its support for Mary Ann Perez who is running to regain the HD-144 seat that she represented in 2013.

Deaths: Dr. James "Red" Duke Jr., 86, of natural causes in Houston. Duke's surgical career spanned from attending to Gov. John Connally on the day of the John F. Kennedy assassination to founding Houston's helicopter ambulance system to his syndicated television appearances that made him a nationally recognized figure.