Ok, folks, here are the numbers we're working with going into the legislative session:
$27 billion shortfall
$9.4 billion rainy day fund
$4.3 billion deficit
An apparent goal for Brent Connett of the Texas Conservative Coalition is to balance the budget "without raising taxes and without tapping into the rainy day fund." House Appropriations Committee Chair Jim Pitts calculated his budget figures assuming that it wouldn't be available. He supports using the fund to close the $4.3 billion deficit. What do folks think? After all,it is a rainy day—literally!
Is it time to tap Texas' rainy day fund?
Established to help state through volatile economic times, $9.4 billion set-aside will be at the center of Legislature's budget debate.
By Kate Alexander
Published: 8:14 p.m. Friday, Jan. 14, 2011
Texas' $9.4 billion rainy day fund has never looked so plump, so ripe for the picking given the state's budget crisis.
Record sums have accumulated in the state's savings account, formally known as the Economic Stabilization Fund. And the state budget, facing a $27 billion shortfall, could use some stabilizing, say educators, employee groups and advocates for disabled Texans.
Yet some lawmakers, and Gov. Rick Perry, say now is not the right time to tap the fund.
If enough fellow conservatives agree with Perry, that money could be kept out of reach. The Conservative Caucus in the House of Representatives, for instance, boasts at least 67 members, and only 61 nays would be needed to block access to the fund.
"Balancing the budget without raising taxes and without tapping into the rainy day fund is the best possible outcome," said Brent Connett of the Texas Conservative Coalition's research arm, noting that the state will have substantial costs down the road to implement federal health care reform.
House Appropriations Committee Chairman Jim Pitts, R-Waxahachie , assumed the rainy day fund would not be available as he prepared the 2012-13 budget, legislation that will be introduced Tuesday and provide a starting point for budget discussions.
Pitts said he would support using the rainy day fund to close the $4.3 billion deficit in the current budget. Similar sentiments have been heard from key leaders in the Senate.
The Legislature proposed the rainy day fund in 1987 — and voters later authorized it — during a bruising legislative session that required sizable budget cuts and tax increases.
The state's budget had been heavily reliant on revenue from oil and gas production. When prices fell, so did state income.
To avoid that tumult again, the Legislature dedicated excess oil and gas production taxes and some unspent general revenue to the fund. The intent was to smooth out the effects of big fluctuations in the economy.
Dale Craymer , president of the business-backed Texas Taxpayers and Research Association, said the creation of the fund demonstrated some sound foresight on the part of that Legislature because it has proved instrumental in past downturns.
Almost $1.3 billion in rainy day fund money was used in 2003, a year state leaders hold up as an example for today's budget conundrum.
Since its inception, the fund has typically run a relatively modest balance, an annual average of $237 million over the fund's first 18 years. The Legislature has drawn more than $100 million from the fund only six times.
But in 2008, the balance ballooned along with oil and gas production.
The combined forces of high consumer prices and new natural gas fields fueled greater production, and the fund grew from $1.3 billion in 2007 to $6.7 billion in 2009, a 400 percent increase. A surplus of tax dollars in 2007 also contributed to that growth.
Since no money has been withdrawn from the rainy day fund since 2005, it will have amassed a projected $9.4 billion by the end of the next budget.
That money can be used for anything, if both the House and the Senate can muster support from two-thirds of the members. To close the deficit in the current budget, the threshold is lower: three-fifths of each chamber.
It's been used before to pay for public schools, prisons and health care during tight budgets. It also provided the seed money for two Perry-controlled economic development funds.
In flusher times, Perry even floated the idea of sending some of the rainy day fund back to taxpayers. This time around, the governor maintains that the fund should not be used to help balance the upcoming budget.
"Why in the world would we want to spend dollars just because they're sitting there, when those are going to be ongoing expenses?" Perry said in an interview this week.
Draining the rainy day fund would be a "high-stakes gamble" given the uncertain economy, Craymer said. But siphoning some of it off to close the immediate budget hole would be a responsible move.
"The fund was designed to be used in times of fiscal duress," Craymer said. "With the kind of deficit we have, it is clearly consistent with original purpose of the fund."
Additional material from Capitol Bureau Chief Jason Embry.
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