Texas’ newly-minted Comptroller Glenn Hegar on Monday defended a revenue estimate he unveiled earlier this month that assumes the price of oil will rebound this year and continue to rise in 2016 and 2017.
In a keynote speech to the Texas Broadcasters Association, Hegar cited comments from the secretary-general of OPEC on Monday that oil prices may “have reached a bottom” after lingering in the $45 to $50 per barrel range in recent weeks.
Hegar’s higher-than-expected revenue estimate, released Jan. 12, predicts the average taxable price of oil for the current fiscal year, which ends Aug. 31, will be about $64 per barrel and that the average will rise to $65 in 2016 and $69 by the end of 2017. The last revenue estimate, released in 2013, assumed average taxable oil prices of about $80 per barrel for each year of the state’s two-year budget cycle.
The revenue estimate is an educated guess about how much money the state Legislature will have to spend during the forthcoming biennium and depends in part on oil prices as the state taxes energy production and its other tax collections and economy in general are closely tied to the industry.
However, on Monday Hegar emphasized — as he did when unveiling his revenue estimate earlier this month — the increased diversity of the state’s economy.
“I think Texas’ future is going to continue to be extremely bright,” said Hegar, who was sworn into office Jan. 2.
Still, he said that predicting oil prices into the future is “almost impossible to get to the exact penny, to get to the exact dollar” and promised to update his revenue estimate, if needed.
Hegar’s spokeswoman said last week he has no plans to revise his projection yet. State law gives the comptroller authority to update the revenue estimate whenever he or she deems it necessary.
Revenue estimates of the recent past have never predicted oil prices exactly.