Maybe Texas shouldn’t be saving so much money

Posted Thursday, Jun. 13, 2013  comments  Print Reprints

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norman It’s easy to imagine how much Texas legislators’ eyes widened in early January when Comptroller Susan Combs said the rainy-day fund, the state’s savings account and its primary shield against the effects of a sudden economic downturn or other financial calamity, could be expected to swell to around $11.8 billion by 2015.

The biggest task ahead of them during the regular session set to end on May 27 would be to write a 2014-15 state budget, and right away they had to be tempted to save less and spend more.

It’s easy to say that legislators and people in Congress are too prone to spend, but the flip side is that there’s always an abundance of worthy ways to spend money. What’s tough is finding the wisest ways to spend within a reasonable limit.

Casting eyes of desire on that $11.8 billion in savings is not a shameful thing. Creating the rainy-day fund (voters approved it back in 1988) was very smart, but the Legislature has never devoted any time to deciding how much savings is the right amount to have on hand.

No surprise, they landed on ways to spend some of that money. First, they took $1.75 billion to undo an accounting trick they used two years ago to help them claim they were producing a balanced budget.

Then they laid claim to another $2 billion so voters could decide in November whether to use it to help fund water supply projects.

And, again no surprise, they’re still coveting rainy-day money in the current special session scheduled to end in less than two weeks. Senate Transportation Committee Chairman Robert Nichols, R-Jacksonville, has proposed taking some of the money that goes into the rainy-day fund each year and funneling it to transportation projects instead.

But some of the Senate heavyweights are debating whether that’s wise. Certainly, they say, we want to keep enough money in savings for an emergency.

But how much is that? And how do we weigh that potential emergency need when we also have some very serious transportation needs?

And if we say we’re going to trim future rainy-day fund additions so we can pay for transportation projects, does that mean voters might get worried about having enough savings on hand and decide to vote against the water project funding?

Texas faced some very serious financial problems during the economic troubles of the mid-1980s. Gov. Mark White had to call the Legislature into special session in 1986 because it was clear there would not be enough money to pay for allocations called for in the state budget.

That’s when the idea of the rainy-day fund was born. It was to be financed primarily though growth in revenue from oil and gas taxes, plus half of whatever money might be left unspent from any subsequent state budget.

Lawmakers occasionally have dipped into the fund to pay for things they saw as real needs, but during most of its first decade there was very little growth in oil and gas tax revenue to build up the account.

Then horizontal drilling and hydraulic fracturing brought an oil and gas boom. Transfers to the rainy day fund grew from $83.6 million in 2003 to $3 billion in 2008, according to reports from the comptroller’s office.

The pace slackened when gas prices trailed off, but it picked up again last year with more drilling in west and south Texas.

Combs said in January the transfers into the rainy-day fund during the next two years are expected to total $3.6 billion. That’s up from her initial estimate of $866 million for the 2012-13 budget cycle.

One more way to measure the fund’s growth: The money added to it in 2003 equaled 0.01 percent of all state spending that year. By 2015, the total growth is expected to be about 1.8 percent of spending.

We’re definitely saving more than we used to. The question is how much we really need to save.

Mike Norman is editorial director of the Star-Telegram. 817-390-7830 Twitter: @mnorman9

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