Tribpedia: Rainy Day Fund

The Rainy Day Fund is a savings fund that allows states to set aside excess revenue for use in times of unexpected revenue shortfall. It can plug holes in the budget, defend against an economic perfect storm and keep the deficit clouds at bay.

Using the fund itself isn’t particularly easy. If the comptroller says that revenue will decrease between legislative sessions or if a budget deficit unexpectedly develops, it requires a three-fifths vote to transfer money away from the fund.

Of course, if members want to use the money for any other situation — like say, a budget shortfall — then they’ll need to reach two-thirds of their colleagues, an even higher threshold.

If the economy went to hell after the Legislature wrote its budget, the fund would offer an escape from deficit. They could rely on it to fill in budget holes.

When the fund first came into being, few believed it would ever generate much money.

The money comes from several sources, but natural gas and oil tax revenues have been the driving factor in the fund’s growth. For instance, if the state collected $1,000 of oil revenue in 1987 and this year collected $3,000, the first thousand is subtracted and the Rainy Day Fund would get 75 percent of $2,000 (which would be $1,500). The rest of the money simply goes back into general revenue, the pot the Legislature uses to pay for almost everything.

The fund is capped at 10 percent of the total general revenue budget. But even if the fund grows quickly, it won’t reach the cap any time soon.


State Rep. Donna Howard, D-Austin, speaks to the press on June 9, 2011, after successfully attaching an amendment to SB 2 that would activate up to $2 billion of the Rainy Day Fund for education under certain conditions.
Texas teachers wave signs during the Save Our School education rally at the Texas Capitol on March 12, 2011.

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