Don’t make Rainy Day Fund unreachable
This is a great time for the Texas Legislature to talk about improving the state’s $10.2 billion “Rainy Day Fund” — and the House has kicked off the discussion in spectacular fashion.
By a vote of 139-0 on Wednesday, House members approved a plan by Comptroller Glenn Hegar and Rep. Giovanni Capriglione, R-Southlake.
House Bill 855 would give Hegar and his successors freedom to invest part of the fund to earn more money.
The 1988 constitutional amendment that created the fund required a very conservative investment strategy, one that Hegar has compared to “burying the money in a hole on the Capitol lawn.”
Projections put the fund at almost $12 billion when the next budget cycle ends in 2019. So it’s high time to talk about a better investment strategy.
Hegar and Capriglione have good ideas. There’s plenty of time to consider HB 855 in the Senate before the session ends May 29.
Still, good ideas may not be the best ideas. Senators should study HB 855 very carefully.
The bill would split the fund into two parts, a stabilization account to mirror the current fund with a conservative investment strategy, and a “Texas legacy” account structured as an endowment with a “prudent investor” growth strategy.
Were the changes in effect today, the stabilization account would be required to hold about $7.5 billion.
The rest of the $10.2 billion balance would be in the Texas legacy account, where investment returns would be reserved for long-term state needs such as paying down debts, reducing pension liabilities and maintaining state buildings.
Part of what makes this a good time to have this discussion is that the House has proposed spending $2.5 billion from the Rainy Day Fund to close a gap in the 2018-19 state budget. The Senate has balked at that.
If the revisions were in effect today, how would that affect the budget dispute?
Hegar and Capriglione say lawmakers could still tap the stabilization account for budget needs. But that would leave the stabilization fund short or reduce the amount going to the Texas legacy endowment.
Fixing the “Rainy Day Fund” must not mean restricting how lawmakers use it.
This story was originally published May 8, 2017 at 5:54 PM with the headline "Don’t make Rainy Day Fund unreachable."