Elections 2022Statewide NewsTaxes & SpendingComptroller Glenn Hegar Seeks Final Term Amidst Inflation-Driven Record Tax Collections, Potential Recession

The office serves as the state’s fiscal officer; it writes revenue estimates, disburses consumption tax collections, certifies state budgets, and fulfills a medley of other tasks assigned to it by the Legislature.

Comptroller Glenn Hegar said last month that should he win in November, he will not seek another term as comptroller — but stopped short of specifying his next move. The Republican has $8 million in the bank as of the latest filing deadline, 170 times more than his Democratic challenger, Janet Dudding, a certified public accountant.

Prior to running for comptroller in 2014, Hegar served two terms in the Texas Senate.

Since taking over as the state’s CFO, Hegar’s seen more responsibilities dumped into his lap by the Texas Legislature. In addition to the budget- and tax-related responsibilities, the comptroller now oversees the Broadband Expansion Office that disburses state and federal dollars for internet expansion projects in rural Texas; maintains a list of “fossil fuel boycotting” financial entities ripe for divestment by state pension systems; and determines which localities have “defunded” their police departments, a process playing out right now in Harris County.

In an interview with The Texan, Hegar described his role as one of “managing expectations.” That task also involves being the bearer of both good and bad financial news, something Hegar has had to do a lot in the last few months.

Three months ago, Hegar provided the state with an updated revenue estimate, projecting a massive $27 billion treasury balance available for the state to spend through the next biennium. Many of Hegar’s Republican colleagues rejoiced at the windfall now at their fingertips ahead of the 2023 legislative session. Gov. Greg Abbott has since called for the “largest property tax cut in Texas history” using “at least half” of the projected balance. Other expenditures have already been proposed as politicians and interest groups hope to funnel some of that money to their priorities.

That estimated windfall is a sign of Texas’ resilience to the economic downturn wrought by the state and local government-mandated lockdowns during the pandemic. But it is also a sign of economic turbulence ahead.

Large portions of this record treasury and savings account balance are due to the rampant national inflation, according to Hegar. Higher prices paid for goods or services mean more consumption taxes remitted to the state.

But whether they’ve listened to the comptroller’s proviso or not, the very thing that is largely responsible for the windfall may lead to its disruption down the road should the U.S. fall into a recession.

“The global and national economy is slowing,” Hegar said. “A recession will present a significant headwind for Texas, which we can weather but will still feel.”

But overall, Texas is at the helm of a rudderless ship, vulnerable to the winds and shifting tides of global events — such as China’s continued COVID-19 lockdowns and the global energy sector’s turmoil due to Russia’s actions in Ukraine and refusal to sell European countries its natural gas.

Both of those things are gumming up supply chains, which are among the chief drivers of cost inflation everywhere. For the comptroller, that reality makes his task of forecasting all the more necessary.

Hegar cannot control what the Legislature does with the money, but he can provide his advice, summed up as “appropriate with caution.”

Next session, Hegar said he hopes the Legislature will approve a cost-of-living salary increase for his employees lowest on the totem pole. “Finding and retaining good employees is very difficult right now for everyone, including the state,” he said. “Without trained employees, it’s impossible to provide good, responsive service to Texans.”

Other than that, should he win re-election, the comptroller will trudge on doing what the Legislature has already tasked him with — some of which has become a point of criticism from his opponent.

“It’s about holding government accountable to the people,” Dudding told The Texan, of her bid for comptroller.

She said her priorities next session are for the state to expand Medicaid, a measure that received some GOP support in the Texas House last year before almost all of it washed away at the last minute; raise teachers’ wages; use a portion of the projected surplus to eliminate the tax on menstrual products, something Gov. Greg Abbott indicated support for earlier this summer; and “targeting appraisals” to facilitate property tax relief.

She also wants to use the State Energy Conservation Office, an arm of the comptroller’s office, to prod oil and gas companies operating on public lands into eliminating methane leaks — “Methane is money.”

The state and federal fight over methane is long ranging and while Texas leads the nation in carbon emissions, Texas operators have reduced methane flaring intensity — the amount of methane flared per barrel of oil produced — declined 64 percent last decade. Dudding, endorsed by the Sierra Club, said “Climate change is a massive problem and it’s not too late to curb the root causes of it, but it’s time to move.”

This time around, compared with his last run, Hegar seems at peace with being overshadowed. In fact, he says as much.

“[I’m] a few pegs down the ballot and in the shadow of the governor’s race and the debacle that is the Biden administration,” he said. Such is life for a lower-ballot statewide candidate with a job title that isn’t immediately obvious; the Railroad Commission race is in a similar boat.

“While trying to juggle campaign events and family stuff, we’re still doing what we can to help down ballot Republicans,” he added.

“I had someone ask me what’s the difference between us and Democrats. I said, ‘I have three answers and it’s: inflation, inflation, inflation.’”

Last week’s Texas Politics Project poll showed Hegar 12 percent ahead of Dudding, with 12 percent undecided. “It seems things have finally shifted [Republicans’] way with independents,” Hegar said, which he attributed to the state of the southern border and the 8 percent inflation rate drilling holes in household budgets.

Referring to that record windfall of tax collections, Hegar said, “We see the inflation so clearly in the tax receipts and voters are moving our way because the Biden administration has made it worse with its continuous spending.”

Another issue that greatly affects household budgets is energy, something Hegar has discussed more and more in conjunction with the list of “fossil fuel boycotters.” The task is part of a broadside against the Environmental, Social, and Governance (ESG) movement that aims to funnel capital away from carbon-based energy sources and toward renewables.

“We are seeing the consequences of the shift toward an all-renewable economy and I’m very worried about that energy shift,” he said, pointing to the current state of Europe, which appears primed for a rough winter due to high electricity costs. This along with Texas’ toiling oil and gas industry, struggling to find investment due to grim outlooks sparked by the federal government’s regulating posture.

Dudding has criticized Hegar’s actions in relation to the “boycott” list, saying, “Comptroller Hegar once again wastes Texas’ money, this time proposing to waste an estimated $600-million in public pension funds.”

Hegar objected to this criticism, stating that the estimate was done before the list of “boycotters” was even finalized. “That campaign is perpetuating that falsehood. It’s not worth the paper it’s printed on,” he said.

Dudding said Senate Bill 13, the legislation behind ordering the “boycott” list, is “unenforceable.”

“It is unethical for the comptroller to force himself into pension investments,” she said, pointing to the “fiduciary duty” that pensions look out for the best financial interests of their clients. The matter comes down to a disagreement on what constitutes the pensioners’ “best interests”: the Republicans who passed the bill believe that driving capital away from fossil fuels will hurt the long term health of those portfolios while Dudding views the intervention as interrupting the organic flow of capital.

She has also criticized Hegar’s determination that Harris County exceeded limitations set by House Bill 1900 passed last year that prescribes certain punishments for localities deemed to have cut law enforcement budgets. “What is the comptroller doing getting involved in a county budget” she asked rhetorically, adding that the state needs a “restoration of local control.”

Asked how she would approach responsibilities of the comptroller directed by the legislature — like the SB 13 list or the audits of police funding — that she disagrees with, Dudding pointed to the attorney general’s office. In those situations, Dudding said she’d seek an official legal opinion of the attorney general and then follow whichever way it falls.

While it disputes the claim of budget cuts overall, Harris County removed over $3 million in rollover funds from its constable offices last year. Dudding has accused Hegar of “defunding the police” by issuing the finding against Harris County.

But Hegar said it’s clear as day, and added that, “People do not see the law enforcement presence in the community that they used to” — a phenomenon he sees building upon what inflation started: driving voters toward Republicans.

Dudding has made the legalization and taxation of marijuana a focal point of her platform. “Texas needs a new revenue stream to reduce property tax, fund education, health (& mental health) care, and public safety,” her website reads. Without this, she says, the state will not be able to provide meaningful property tax relief. 

Hegar said taxing marijuana sales is neither viable nor practicable. “Taxing marijuana is almost impossible because it’s a cash-based system,” he said. “It’s not a viable source of tax revenue and the compliance cost required to enforce it is prohibitive.”

Ultimately, while the comptroller’s office can apply some proactivity and force in certain areas, it’s mainly a passive numbers-crunching position at the whims of offices above and below it on the ballot.

In that, it resembles the electoral reality of Hegar’s self-described position: left to the mercy of prevailing winds out of his control.

Editor’s Note: This article has been updated to include comments from Dudding.