Texas Revenues Begin To Plateau After Two Decades of Big Growth

For the last 20 years, Texas revenues have seen a steady, often times healthy growth. From 2003 to 2022, the revenues grew at an average annual rate of 6.1 percent, going from around $60 million to over $180 million in recent years. It has led to budget surpluses and huge growth in the state.

But after two decades of steady incline, Texas revenue is beginning to plateau a bit. Growth slowed to just 2 percent in 2023, before a 4 percent decline in 2024. That is the first recording drop since 2009. Through 2027, there is very little projected growth as well.

Economist Hank Lewis says there is a variety of factors that go into the wall Texas seems to be hitting.

"The rate of relocation to Texas has stalled...a bunch of government transfer payment programs that were used to fund different benefits to society during the pandemic dropped off...on top of that, people are spending less on taxable merchandise, so sales taxes are slowing down," he says.

The so-called 'government transfer payments' from the pandemic played a bit of a bloating role. Historically, they account for about 30-40 percent of state revenue, but they significantly ramped up during the pandemic. They accounted for about 48 percent of the state's revenue in 2021.

A tightening economy has also had people spending less, which as Lewis mentioned, is not helping the matter.

Now, fixing it is a matter of asking a question. Is there anything to be fixed? The state is still puling in loads of revenue every year, just not with the growth they had previously. So, there are two routes to go.

"If these programs are running surpluses, based upon the current rate of tax intake before the slowdown, they will need to balance the budget," Lewis says. "If it involves cutting programs, they need to look at reshuffling."

Regardless of the drop, Texas remains in much better shape than other states. So now is not the time to panic.