TRG | The Bottom Line – 9/9

“There’s going to be more money than they can spend,” according the Texas Comptroller in describing the current, rare circumstance where there are more funds available than the legislature is allowed to spend. Staggering collections in state revenues continued for a second year driven by the post-COVID boom and rising inflation. Our 15 core states set record collections in all three major tax categories in FY’22: Sales, Individual and Corporate Income taxes. Most states posted record revenue in FY’22 leading to massive revenue/budget surpluses: California nearly $100B, Texas $27B, Florida $22B. Record collections are allowing states to return some surplus revenues back to citizens, contemplate further tax cuts, and key to TRG’s coverage universe, providing additional funding to transportation projects as most recently seen in Florida and North Carolina. FY’23 revenue forecasts are less optimistic than in previous years with several states estimating a decline in revenues, citing growing risk of recession. Texas, however, has just boosted its Biennial revenue estimates by 10% given record oil and natural gas tax collections. Should FY’23 revenue collections decline at a low to mid-single digit rate, states will be far ahead of pre-pandemic collections allowing states to transfer additional funding to transportation projects.