A brief history of each time Texas dipped into its savings account known as the ‘Rainy Day Fund’
Much like a savings account in any Texas household, the statehouse has its own account in which lawmakers store money for future rainy days—thus, the “Rainy Day Fund” was established.
Officially called the Texas Economic Stabilization Fund, here is an overview of each time money was withdrawn from the Rainy Day Fund and a forecast for when it might rain next.
During a year defined by slumping oil prices, Texas voters agreed to a measure aimed at protecting Texas against future economic downturns that impact the state budget. The Economic Stabilization Fund was created by the previous year’s legislatures as a savings account to help fund the state’s spending needs during periods of low revenue. The fund, which was officially established in 1989, receives revenue from three main sources: oil tax revenues, natural gas revenues and half of whatever is leftover in the General Revenue Fund at the end of each biennium.
In the time since its establishment, the savings has primarily been funded by natural gas revenues to the tune of roughly $9.54 billion. Oil has contributed just less than $7 billion, and leftover money from the two-year state budget has provided an additional $1.8 billion. The fund has earned approximately $740 million in interest in its 28-year lifespan.
Shortly after its approval, lawmakers agreed to withdraw $29 million from the Rainy Day Fund during a special session. The Legislature can take money from the savings account three different ways: a three-fifths vote to cover a budget deficit, a three-fifths vote to cover an estimated revenue decline and a two-thirds vote for any other purpose deemed fitting. In 1990, state lawmakers chose to take money out of the fund to cover a revenue shortfall, per Senate Bill 7.
Two years after the first withdrawal, the statehouse again took money out of the ESF in two separate actions, SB 171 and SB 532, this time for the purpose of solving capacity issues within the Texas Department of Criminal Justice. The withdrawals totaled about $200 million.
Nearly a decade after the last withdrawal, Texas called again upon its savings account to cover another revenue shortfall. The $1.26 billion withdrawal helped appropriate funds for Health and Human Services and the Teacher Retirement System, among other agencies.
Senators and representatives alike helped pass House Bill 7 to withdraw more than a $2 billion for continued revenue gaps.
This Rainy Day Fund withdrawal marked the first time lawmakers used the savings to cover a budget gap for FY 2011. The Legislature took roughly $3.2 billion this time.
In the most recent withdrawal, legislators took $2 billion from the Rainy Day Fund to inject money into SWIFT, which helps fund water projects in local communities. The Legislature also appropriated $1.8 billion to pay back the Texas Education Agency for a delayed payment to the Foundation School Program.
Together, these seven withdrawals totaled $10.6 billion taken from the Rainy Day Fund.
In total, 46 states maintain similar Rainy Day funds. Only Montana, Colorado, Kansas and Illinois do not. Texas has the largest Rainy Day Fund balance of all 46 states with $10 billion in savings. Without a withdrawal, the fund could reach $11.9 billion by the end of the current 2016-17 biennium.