HOUSTON – The full financial impact of the pandemic won’t be known until the summer, but Texas lawmakers are already bracing for the impact. State Comptroller Glenn Hegar said he expects to revise the state’s revenue estimates in July.
Many small businesses and communities dependent on tourism felt the impact the swiftest.
“We’re kind of in a crunch time here,” said Patti Snyder, owner of Front Row Signs.
Snyder has owned the business for five years but said she only has enough money to keep the doors open for another two weeks. Synder, like many small businesses, saw the federal Paycheck Protection Program run out of money while her application was pending.
“It’s something temporary just to get us through this hump would be... pretty much what we need,” said Snyder.
With so many businesses going dark or slowing to a crawl, Texas is expected to take a massive hit in sales tax revenue. Just since March 14, the state has processed more than 1 million unemployment claims.
“When will we know exactly how much of a hit Texas is going to take financially from this?” asked KPRC 2 Investigator Robert Arnold.
“We’re going to have real numbers, being able to look at this, probably the beginning of June is when we get our first true glimpse from an impact to the state treasury,” said Hegar. “We’ll provide a revised revenue estimate and I have no doubt when we do that in July, we’re talking about in the billions of dollars, but the question is we don’t know how many billions of dollars.”
Communities dependent were early signs of the financial troubles facing the state. KPRC 2 already reported how the city of Kemah had to cut part of its police force, along with several other positions, because of lost revenue. The oil and gas industry is another area hit hard. Hegar said in simple terms there’s just more supply than demand. Part of that came from a price war between Russia and Saudi Arabia that preceded the pandemic.
“With so many people staying at home or distancing, not just in Texas and the US, but literally around the world, we’ve seen prices go down significantly,” said Hegar.
Fortunately, Texas has a $10.2 billion rainy day fund, Hegar said. While some of that money is earmarked for other projects, the governor and legislature can redirect those funds to emergency spending during this disaster.
“From Texas’ cash flow perspective, we’re in very good shape compared to other states,” said Hegar.
State Senator Paul Bettencourt echoed Hegar’s sentiment.
“Fortunately, we’ve already done a two-year budgeting cycle, which means we’ve got a lot of flexibility to move money around,” said Bettencourt.
He said while Texas is in far better shape than many states, we are in for tough times. How tough won’t be known until April and May sales tax revenues are in and what Texans can afford when property taxes are due.
“When we get through with what we’re collecting, what the public can afford to pay us, then what the federal government is going to give us, then we’ll know what the delta is and how much we’re going to have work with,” said Bettencourt. “Government is going to have to push deadlines out, be flexible about interest and penalties.”
Bettencourt said getting the economy restarted by summer is key to staving off irreparable economic damage.
“How do you restart an economy while making sure you don’t restart another pandemic?” Arnold asked.
“I think we can bring people back with skeleton crews and a strong social distancing in all the businesses to start with,” said Bettencourt.
The other unknown is exactly how Texans will react once the state fully reopens.
“Are people going to want to go back to mall are they going to want to go back to the movie theater,” said Hegar.