By Aisha Ainsworth
There’s no money—that was the sentiment that plagued budget discussions and the fiscal analyses of many lawmakers’ bills this legislative session.
Despite Texas’ wide tax base and diversified economy, the recent decline in oil prices brought a loss of tax revenues and budget shortfalls — about a $10 billion drop from the last time lawmakers crafted the state budget two years ago.
A twist on the standard budget debate — that usually centers on the amount of money to spend on certain items — was how to pay for services.
Budget writers in the Texas House proposed pulling $2.5 billion from the state’s savings account, better known as the Economic Stabilization Fund, or
Rainy Day Fund, which has accrued about $10 billion and is currently the largest of the 46 states with some form of savings account. While lawmakers eyed Medicaid and education programs for deep funding cuts, House budget writers asserted that remedying the budget deficit was exactly what former Rep. Stan Schlueter had intended for the account when he created it in 1987.
Their counterparts in the Senate, however, maintained that the fund should not be used for “ongoing expenses” but for one-time expenditures to cover costs associated with natural disasters and other emergencies. Senate budget writers suggested deferring a payment to the state highway fund to have sufficient revenue to cover the state’s expenses.
The ESF was born after a boom and bust. Following the Iranian Revolution in 1979, oil prices skyrocketed, and the Texas Legislature basked in the glory of record-high oil and gas tax collections. Those good times, however, came to a screeching halt in the early 1980s when oil prices collapsed and the Legislature could no longer pay for services.
Shortly thereafter, Rep. Schlueter proposed a constitutional amendment that would save some of the oil and gas tax money collected in the good times so it would be available for the bad times. Taxes collected over the 1987 collection amount were to be spent in two ways: 25 percent for immediate use and 75 percent deposited in the ESF. Not just a savings account, the fund was designed to be a check on spending.The constitution states that the ESF can be used for budget deficits, projected revenue shortfalls or any other purpose as long as a supermajority of lawmakers votes to tap it. In the 1990s, lawmakers tapped the account three times, exhausting almost the entire balance each time.
Notably, the all-Republican “big three” — former Gov. Rick Perry, former Lt. Gov. David Dewhurst and former House Speaker Tom Craddick — agreed in 2003 to use $1.3 billion to ease spending cuts, and then-Gov. Perry tapped the account again in 2011, using $3.2 billion to minimize budget cuts.
Fast forward 30 years, and the ESF has become a political lightning rod. Lawmakers on the far right vehemently oppose using the fund, casting
anyone who proposes tapping into it as violating the tenets of fiscal conservatism.
It is in this environment that today’s lawmakers debated its use. In the 11th hour, the Texas Legislature passed the 2018-19 budget that included a compromise on the use of ESF funds: $1 billion to pay for bulletproof vests for police officers and past-due repairs and new construction for the state’s mental health hospitals. Lawmakers also agreed to employ the Senate’s proposal to defer $2 million in transportation funding to free up state
general revenue to avoid even deeper cuts to health care and higher education.
Turns out, rainier days are upon us … at least in the form of light sprinkles.