Hey, Texplainer: Just what is the Rainy Day Fund and why can't lawmakers use it to help close our big budget shortfall?
Its boring (real) name is the Economic Stabilization Fund. It was established in 1989 after the oil bust, and it's basically a giant savings account. The fund is replenished every year with natural gas and oil tax revenues. Any tax revenue taken in above the amount collected in 1987 is split: 25 percent goes into the state's general fund and 75 percent is deposited in the Rainy Day Fund. The comptroller estimates the fund will have $9.4 billion available for the 2012-13 budget that lawmakers are currently writing.
The Texas Constitution says money from the fund can be spent to “prevent or eliminate a temporary cash deficiency in general revenue.” With the state facing a budget shortfall estimated somewhere between $15 billion and $27 billion, some say if it ain't raining now, it ain't ever going to.
But Gov. Rick Perry has said repeatedly he doesn't want to use the fund, and the initial budgets filed by the House and Senate leave it untouched.
Those opposed to drawing from the fund now make a couple of arguments. One is that nobody knows for sure how long this economic downturn will last. If the fund is sucked dry, there will be nothing left if things get worse or if the economy doesn’t recover quickly enough. Another argument is that drawing too deeply from the fund could hurt Texas’ bond rating.
But Horacio Aldrete-Sanchez, a credit analyst with Standard & Poor's, says using the Rainy Day Fund will not necessarily hurt Texas’ relatively strong bond rating as long as the state adopts measures “that over the long term would put the state in a position where it can eventually restore the fund balance or at least not resort to the use of the Rainy Day Fund.”
Using the fund to help balance the budget requires a two-thirds vote from lawmakers. The fund can also be tapped in the middle of the biennial budget if the comptroller says a sudden budget deficit has developed. That would require a three-fifths vote from lawmakers.
Bottom line: Tapping the fund — or not — is a political decision.
Texas Tribune donors or members may be quoted or mentioned in our stories, or may be the subject of them. For a complete list of contributors, click here.