Facing a shortage of cash to pay for the needs of a growing state, Texas lawmakers are frantically searching for spare change in the pockets of the budget.

They’ve ordered a 4 percent across-the-board spending cut for most state agencies. They’re considering an escape-hatch maneuver that could take some money away from the state highway fund and use it for other purposes, such as health care and schools. They’ve written base budgets that do not account for projected cost growth in some state programs, all but ensuring they’ll need to plug holes with a supplemental budget when they return in 2019.

And they’re eyeing the massive piggybank that tempts budget writers every time there's a budget shortfall: the state’s Economic Stabilization Fund, better known as the Rainy Day Fund. It's a sort of savings account available to state lawmakers that currently holds $10 billion — the largest such fund in the nation.

Texas’ Economic Stabilization Fund is projected to reach $12 billion at the end of fiscal year 2019 if left untouched. The state established the fund in 1989, filling it with a portion of oil tax and natural gas revenues and half of any unspent cash left over during good years; lawmakers have withdrawn $10.6 billion from the Rainy Day Fund since then.

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Decision makers at the Capitol have largely played coy about their exact position on the fund, and it’s too early in the negotiating process for most politicians to make a firm commitment before they pass a final state budget later this summer.

The Texas Tribune asked seven key players whether they would consider using the fund this year. Gov. Greg Abbott reiterated that he wants to leave the fund alone, but others hinted that the Rainy Day Fund could be on the table this year. Four did not respond. Here are their responses:

Eva DeLuna Castro, a budget analyst at the left-leaning Center for Public Policy Priorities, said there were several reasons to consider using the Rainy Day Fund in 2017.

By cutting taxes in 2015, Texas lawmakers reduced state revenue available to them by about $4 billion. Lawmakers also dedicated nearly $5 billion that year to highways — a move that voters later approved in a statewide election — which left fewer dollars at budget writers’ discretion. Finally, a moderately sluggish economy slowed revenue growth, leaving the state's coffers emptier than state officials had projected.

DeLuna Castro said the purpose of the Rainy Day Fund was to help weather such crises, which are not infrequent at the state Capitol. “Fiscal disasters are a recurring thing,” she said.

But some fiscal hawks are urging lawmakers not to use the fund, saying it is intended for times of more serious economic hardship.

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“There’s not a shortfall,” said Talmadge Heflin, a budget analyst for the conservative Texas Public Policy Foundation and a former state budget writer who oversaw withdrawals from the Rainy Day Fund. When you include the $4.7 billion set aside for state highways, Texas has more money to spend this year than it did in 2015, he said.

“We believe that they should work to make ends meet by making reductions” in areas like health care and education, he said.

Read more of the Tribune's budget coverage:

  • At a Feburary hearing of the House Appropriations Committee, the Rainy Day Fund took center stage.
  • Members of the Senate Finance Committee in February questioned whether the first payment of $5 billion for the state highway fund should move forward as planned.

Disclosure: The Center for Public Policy Priorities and the Texas Public Policy Foundation have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors is available here.

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