By Kate Alexander (AMERICAN-STATESMAN STAFF)
Published: 9:33 p.m. Tuesday, Feb. 7, 2012

With each new bit of positive economic news, Texas has been beating expectations and that feeds the bottom line of the state budget.

The latest positive sign comes from the Texas comptroller's estimate of statewide property values, which showed a 1.3 percent increase from $1.67 trillion in 2010 to $1.69 trillion in 2011.

In 2010, Texas suffered the first decline in statewide property values in 17 years, and state budget writers had anticipated another 1 percent decrease in 2011 in the assessed value of all residential and commercial property in Texas. That number is a key variable in school funding, which is based on a mix of local property taxes and state dollars.

The difference will save the state perhaps $300 million to $400 million by reducing its obligation to school districts, according to Joe Wisnoski of Moak Casey & Associates, a school finance consulting firm.

That amount is a relative pittance in relation to Texas' overall two-year budget of $173.5 billion. And it won't necessarily be used to undo some of the $4 billion reduction in school aid that the Legislature enacted last year.

"It probably will make very, very little difference in the bottom line of school districts," Wisnoski said.

But the increase in property values, combined with tax revenue that has been better than projected, adds to the sense that Texas is climbing out of the budget hole.

"We're certainly above the trend line across the board, but it's still early," said Dale Craymer, president of the business-backed Texas Taxpayers and Research Association. "If current trends hold, we will be in relatively good shape."

Since the state's fiscal year began in September, sales tax revenue has come in about double the projected rate of growth. The sales tax accounts for well over half of the state's tax revenue and pays for basic services, such as schools and prisons.

Other key sources of revenue have performed exceedingly well, particularly the natural gas production tax, which is expected to be up 25 percent compared with the previous budget. Much of that money goes to the state's rainy day fund, which is expected to have $7.3 billion available by the end of the two-year budget.

An oil and gas boom is afoot because of technological improvements and higher oil prices. The boom drove a 72 percent increase in that industry's sales tax receipts last year, and that was a big factor in the state's overall collections.

As the financial picture has brightened, some critics of the Legislature's budget cuts have suggested that Texas could restore some of the state aid to schools.

"The Legislature made the decision to not fully fund the public schools because we had no more money at that time and they did not want to tap into the rainy day fund," said state Rep. Donna Howard, D-Austin. "That situation has changed."

But the only way to address the situation before 2013 would be for Gov. Rick Perry to call a special legislative session. The chances of that are slim to none, Howard acknowledges.

Craymer said that legislators left a $4.3 billion Medicaid tab unpaid, and that must be the first order of business when they return to Austin in 2013.

And Texas Comptroller Susan Combs sounded a note of caution even as she reported in December that the state would have $1.6 billion more than previously expected in the 2012-13 budget.

Europe's debt crisis is likely to affect the world economy and could drag down Texas' recovery, Combs said.

The historically high level of oil and gas activity is bound to taper off, and other key industries, such as housing construction, show no sign of picking up the slack, she added.

See the article in its entirety here!