As the rains taper off for much of Texas, dark clouds remain on the economic horizon.
House Speaker Joe Straus wrote in a letter to his colleagues earlier in April:
“For nearly twelve years, Texas job growth outperformed many other states and the nation as a whole. However, with job losses in the energy and manufacturing sectors, that is no longer the case. The impact is also being felt in the state’s finances. Out of the last six months, the state’s sales tax – the largest single source of general purpose funding for government – has registered five monthly declines.”
Texas Comptroller Glenn Hegar, who monitors the state’s money supply, says this started with negative sales tax collection.
“(This) was forecasted because of the contraction in the oil and gas industry,” he says.
In the last twelve months, job losses have been concentrated in specific sectors: 60,000 jobs in the oil and gas sector and 40,000 in manufacturing, two of the state’s largest industries for gross state product. But over the same period, the state gained 185,000 jobs in other sectors.
“Texas faces some headwinds, with the global economic conditions and downturn of energy prices,” he says. “We also face a lot of tailwinds: Texas is a good place to call home.”
That doesn’t mean it’s all clear skies. Hegar did sound a warning about Texas oil and gas extractors, saying it’s possible a third could go bankrupt.
Having heard from “a lot of people in the oil and gas industry,” Hegar says “you’re roughly gonna see a third of the companies go bankrupt,” barring an unforeseen spike in production and/or prices. “And there may be only a third that survive, and another third that gets swallowed up by everybody else.”
“There’s not really any research as to that,” Hegar continues. “But if you look at the balance sheets of so many oil and gas companies, with lower prices the balance sheets are rough. People are having a hard time.”
What you’ll hear in this segment:
– What’s behind a recent memo that circulated saying a third of the state’s mining companies could go bankrupt
– How long we had negative sales tax collections and how that has changed in the last month
– Given our state’s coffers, how long Texas has until the state’s oil and gas-based budget could be running on fumes, so to speak
This post prepared for web by Hannah McBride.