Analysis: Lawmakers are changing role of rainy-day fund

Posted Sunday, Apr. 14, 2013  comments  Print Reprints

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AUSTIN -- When Texas lawmakers established the state's economic stabilization fund in 1987, they had just suffered a bleak recession that caused a huge budget shortfall and wanted to set up a savings account to help them through future rainy days.

But with the economy booming and the state coffers flush with cash, state leaders are turning the fund's intended purpose on its head. Instead of using the fund to offset temporary budget gaps, Republican leaders are proposing taking $6 billion out of the $11.8 billion fund to set up two development banks for water and highway projects.

The lawmakers who created the fund during the 70th Legislature said it was "to be used primarily to prevent or eliminate temporary cash deficiencies in the state's general revenues," according to the original paperwork for the fund.

Legislators were tired of the booms and busts of the oil industry sending their state budgets on a roller coaster. They wanted something to smooth out the dips. Voters approved a constitutional amendment that set aside a portion of the state's oil and gas revenues to establish what is officially called the Economic Stabilization Fund.

During the Great Recession in 2011, though, Gov. Rick Perry and the Republicans who controlled the Legislature decided to take only $3.8 billion from the $8.6 billion balance that was available. They said it was imprudent to take any more and instead decided to balance the budget by cutting $5.4 billion from public schools, prompting angry cries from the Democratic minority and schoolteachers.

Two years later, the economy has improved and now Republican leaders want to use the money to fund the water and highway projects. After decades of diverting funds away from the state's crumbling roads and dwindling water supply, Sen. Tommy Williams, R-The Woodlands, says it's time to tap the taxpayers' piggybank to solve these problems.

On Friday, Perry endorsed the idea, adding, "We don't need $12 billion in the rainy-day fund."

Perry has consistently seen the fund as an alternative to taxation and as a source of money for special projects. He used it to establish the Texas Enterprise Fund in 2003 and the Emerging Technology Fund in 2005, which his office uses to help private businesses get started or expand in Texas.

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