Editor's note: This story has been updated throughout.
Texas Comptroller Glenn Hegar on Tuesday faced some skepticism as he sought to soothe lawmakers’ fears about what plummeting oil prices mean for the state’s bottom line.
“Is the sky falling?” asked Sen. Royce West, D-Dallas, at a hearing of the Senate Committee on Finance, which helps write the state budget.
“No, sir,” Hegar replied, adding that while there are “clouds on the horizon,” he’d rather be in Texas than in any other state.
“I just don’t want to live in a state of denial,” West responded.
He wasn't the only lawmaker worried that Texas was being too optimistic. State Sens. Kelly Hancock of North Richland Hills and Charles Schwertner of Georgetown, both Republicans, also raised tough questions.
But Hegar stuck to his assessment of the state’s finances as neither excessively rosy nor particularly gloomy, even as per-barrel prices of West Texas crude hovered around $31 Tuesday — less than half of their value when he took office a year ago.
While the state’s petroleum and manufacturing sectors each lost more than 30,000 jobs from November 2014 through November 2015, Texas’ broader economy gained 179,000 jobs, the comptroller noted.
The oil and gas sector comprises around 14 percent of the state’s overall economy, Hegar said — far less than it did during the painful 1980s. Meanwhile, a Standard & Poor’s Ratings Services report notes that Texas' move 30 years ago to wean itself off of a direct reliance on petroleum severance taxes for its budget has "positioned the state well through this downturn in oil prices," and protected its credit rating.
Though Hegar has noted that oil's plunge means Texas will send hundreds of millions fewer dollars toward road construction and maintenance than originally expected, the drilling slowdown should not leave lawmakers with a revenue shortfall, he said.
In fact, much of the certified revenue estimate Hegar released in October has stayed accurate — even though it was based on significantly higher oil prices — because producers are pumping more oil than anyone expected, Hegar said.
“The budget you passed – it works, and it will continue to work,” Hegar said, noting that lawmakers also left a significant cushion of unallocated funds.
That wiggle room totals about $4 billion, said Ursula Parks, director of the Legislative Budget Board.
Still, Parks said, "everybody should probably be prepared for a budget environment that is somewhat limited" heading into the next legislative session in 2017.
Lawmakers pressed Hegar for more information about where the economy’s breaking points might be — how long is too long for cheap oil?
Hegar asked for more time. A few more months would give him a clearer picture of the complex ways in which low oil prices interact with the 12th largest economy in the world.
“I’m happy to give you numbers. That’s my job. I just don’t want to give you a false sense” based upon incomplete information, he said.
One model Hegar’s team uses to gauge the broader affects of oil prices involves 1,700 factors, he told reporters.
As Hegar's testimony wrapped up Tuesday, Republican state Sen. Paul Bettencourt, whose Houston district has been hit hard with layoffs, praised Hegar's work thus far.