Much of what you may read and hear about the Coronavirus (COVID-19) relates to immediate concerns regarding personal health and safety. In addition to those serious concerns, the health of the global ec
onomy is also in trouble. This may have some immediate impact as as well as an effect that is felt during the 87th Session of the Texas Legislature in 2021 and beyond.
While the economy in Texas is not as heavily wedded to the price of oil as it once was (due to some intentional diversification efforts), the saying "as goes the price of oil so goes Texas" still holds a lot of weight. Natural resources isn't our only industry, but it is a big one. In case you haven't heard,
oil prices dropped by more than 30 percent this morning
. This is the largest decline in almost 30 years. Specifically, the price of West Texas Intermediate crude fell by almost 10 percent, to $31.57 per barrel, as of 8:00 a.m. this morning. A
ccording to the Federal Reserve Bank of Dallas, m
any oil companies in Texas need a price of $50 per barrel just to break even. We haven't seen that big of a same-day loss since the first Gulf War in 1991, and experts say prices could continue to fall due to the impact of the virus.
The price of oil obviously impacts other aspects of the economy as well, as we have seen a decline on futures tied to the Dow Jones Industrial Average and the market overall. These circumstances may be good for the sales of government bonds, but little else.
We know this will have an immediate effect on many districts in the Coalition that serve students and communities that are heavily reliant on the price of oil as an economic driver for jobs and other services and values. Unless the price of oil rallies quickly, this will likely result in a loss of many jobs statewide.
Additionally, this change will likely impact all Texas school districts as we look towards a legislative session that is less than a year away in which lawmakers may not have access to the level of funding necessary to sustain the tax rate compression put in motion by HB 3, much less any additional funding to support other components of school finance.
While there are plenty of reasons for concern, it should also be noted that prior to this instability with the price of oil and markets in general, the
Texas Comptroller reported
that sales tax revenue (which is the largest source of funds for the state budget) exceeded last year's revenue for the month of February by 3.5 percent. Much of this increase in revenue has been attributed to the change put into law last session regarding sales taxes for all online purchases. Whether this increase in sales tax collections will continue in the face of an economic downturn remains to be seen.
This situation is developing, and it is something we will continue to monitor as we attempt to determine what the impact of these circumstances may be.
