Texas collected $2.58 billion in state sales tax revenue in April — a roughly 9% drop from what the state collected the same month last year, Comptroller Glenn Hegar announced Friday. That drop, from $2.8 billion to $2.58 billion, marked the steepest decline since January 2010, Hegar said.
April's revenue, which the state collected from purchases made in March, is among the first official glimpses at the dramatic blows state and local budgets will take from widespread social distancing measures first taken last month to stop the spread of the new coronavirus. And Hegar warned that the state’s largest single source of funding will continue to "show steeper declines" in the coming months compared with a year ago as the economy continues what will likely be a slow crawl out of a weekslong virtual shutdown due to the pandemic.
“The steepest declines in tax remittances were from businesses most quickly and dramatically affected by social distancing," Hegar said in a statement. "However, those losses were, to a degree, offset by increases from big-box retailers, grocery stores and online vendors. Remittances from oil and gas-related sectors also fell significantly as oil and gas exploration and production companies slashed capital spending in response to the crash in oil price.”
Friday’s announcement was not entirely unexpected. For the past several weeks, Hegar has been referring to the state of the economy as a recession both in private talks with state lawmakers and in interviews.
The figure, though, is the latest reminder that the state’s economy has been upended on virtually every level since the virus hit — and that the road to recovery is expected to last months, if not years.
Parts of the economy have been given the green light to reopen under certain restrictions, but it is unclear how quickly businesses will recover and return to normal business operations, which feed into the state’s sales tax revenue.
Hegar, though, has made clear that there is a lag in the data as it comes in and that numbers his agency reported Friday are just a partial look at how severe the economic impact could really be. A majority of the latest sales tax revenue figure is based on sales made in March, including weeks before officials shut down large swaths of the economy.
“The ripple effect takes several months to spread out,” Hegar said Thursday on a tele-town hall with the Republican Party of Texas, “and impact different businesses.”
The state’s economic fallout is also prompting conversations about budget cuts and other avenues elected officials can take to begin tightening financial belts before the Legislature convenes for its regular session in January.
Retiring House Speaker Dennis Bonnen, R-Angleton, sent a memo to Gov. Greg Abbott and Lt. Gov. Dan Patrick last month, suggesting a directive to order all state agencies “to immediately identify and execute 5% budgetary savings.” It is unclear whether Abbott or Patrick responded to the speaker’s memo.
For his part, Hegar has said that the comptroller’s office has already suggested to other state agencies to begin considering cuts before official word comes from the governor.
"It's better to ask agencies to reduce their budgets for a longer duration than a shorter duration," Hegar said in an interview last month with The Texas Tribune, "so you're better to go shallow for long and still attain a significant savings for this biennium and next biennium than waiting six more months and [having] to go deeper.”
During a call with the Texas GOP on Thursday, Hegar emphasized how he thinks budget cuts will need to happen — and that, based on conversations with leadership, decisions on that could be made in the coming weeks.
“The governor and others … kinda needed to get through this month here to be able to get parts of the economy going back again,” he said, “and then we [can] look at what we should do.”
Disclosure: The Texas Comptroller of Public Accounts has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.