AUSTIN (KXAN) — Stocks took a plunge after oil plummeted to its lowest levels in 13 years. Oil Wednesday closed at just below $27 dollars a barrel. There is fear that “too much supply” and “too little demand” could last a lot longer. Analysts say oil will likely go much lower as the market tries to find a bottom.
For some perspective on just how much oil has plummeted so far, in July 2014, the price of crude was about $93 dollars a barrel. Prices then fell to $55 dollars a barrel in July 2015. Fast forward six months later. Since the start of the year, prices have dropped another 25 percent. Oil prices have a profound impact on Texas. Much of our state funding comes from taxes collected on oil production.
The downward slide could affect the roads you drive on. Taxes on oil production are a major source of funding for Texas roads. Voters connected the two in 2013 with Proposition 1. This fiscal year $1.1 billion is expected to go to the State Highway Fund. Next year – with oil at a low price – just under $600 million will go to roads. The year after that it’s expected to go up to around $750 million. This all according to Glen Hegar, the Comptroller of Public Accounts. He acts as the state’s accountant and tax collector. He gave a House highway transportation committee an update on recent voter propositions. .
“That funding stream was never viewed as a something that’s a guaranteed this is we are going to have,” Hegar told KXAN. “But, if oil and gas does well, that’s additional money to go toward our roads. It was viewed as one that would go up and down with oil prices because it is very cyclical with the national and global economy.”
Because Texas does it’s budget for two years, lawmakers are saying – nobody panic. The money from oil taxes is just one source of money. This last November, voters approved Proposition 7 – which sent sales tax money to roads as well. So, while oil around $30-dollars a barrel doesn’t look good for Texas roads in the long term, it won’t affect the construction project near your home in the near future.
Road projects are big, time consuming and they always need more money. TxDOT says they still need billions more to keep up current congestion levels.
Raising taxes or fees next session is something no lawmaker wants but they will have to find money somewhere – especially if oil stays low.
Low prices will impact several aspects of Texas government.
The burden of transportation funding doesn’t just fall on the state. In December, federal lawmakers approved a five year, $350 billion highway funding plan. It provides money for roads and rail projects – and almost a billion dollars for safety programs. It’s also partially dependent on federal gas tax revenue but lawmakers found $70 billion to use from other areas of the federal budget.
An overview of how Texas funds roads:
- Gas tax and Motor Vehicle registration – main source.
- Dedicated taxes on oil production – voters approved “Proposition 1” in 2013
- Dedicated taxes on sales tax and motor vehicle sales tax – voters approved “Proposition 7” in 2015
- Federal Highway Trust fund