The Texas House on Tuesday approved a resolution calling for a constitutional election over whether to send surplus dollars from the Rainy Day Fund into a new account to pay down state debt.
The Rainy Day Fund is a savings account that the state uses to set aside money to be used in case there’s an unexpected revenue shortfall. Its money comes from a portion of oil and natural gas taxes and is capped at 10 percent of the general fund budget from the previous session.
Under current law, such tax revenue that exceeds the cap is supposed to go into the general fund. If the constitutional amendment were approved, that money would go into a new account used to pay off debt early.
“To allow these funds to spill over to the general fund revenue would be unsustainable when a downturn occurs,” Otto said.
Under current law, the Rainy Day Fund has never reached its cap. But another bill authored by Otto and tentatively approved by the House would effectively lower the cap. House Bill 8, which was passed 143-2, would also stop the practice of depositing federal dollars received by the state into the general fund.
The money would still be used the same way, but its removal from the general fund would lower the cap that is automatically generated. Under current law, the cap is expected to be $16.1 billion by the end of the 2017 fiscal year. HB 8 would lower that to $11.8 billion. The balance at that time is expected to reach $11.1 billion, bringing it relatively close to that cap.
But any money generated from the change would only put a small dent in the state's debt, which was $44.3 billion at the end of the 2014 fiscal year.
House members were generally supportive of Otto's idea, but some expressed worry about creating a lack of flexibility in state spending.
"I don't have a problem with paying down debt, but I am a little concerned about putting it in the constitution, because that may tie our hands in the future," said Rep. Trey Martinez Fischer, D-San Antonio.
But Otto said the resolution shows a dedication to responsible budgeting and fiscal responsibility.
“The fiscally prudent way to use these balances is to pay off our state debt,” he said.