Texas has so far weathered the current recession better than any other state, although we have not been immune to economic downturn.   As you have probably read in the news, the state government is facing a serious budget shortfall for the next biennium, which is estimated to be between 13 and 18 billion dollars.  

Per the Texas Constitution, Texas is not able to run a deficit budget as do some other states and the federal government, and is only allowed to pass a budget that is based on the estimated revenues for the two-year budget cycle.  Therefore, this upcoming session in January will be challenging, as legislators have to decide how to balance the budget.  In addition to reducing costs, legislators may consider using money from the Economic Stabilization Fund, which is commonly referred to as the Rainy Day Fund.

In 1988, voters approved a constitutional amendment creating the Rainy Day Fund.  The fund was created in response to the economic turmoil of the 1980's, and its purpose was to act as a savings account for the state in order to protect against future cash shortages.

Deposits into the fund consist of transfers of half of any General Revenue Fund surplus in each biennium and 75 percent of any oil and natural gas production taxes exceeding levels established in 1987. Deposits into the fund were minimal until 2002 and 2003, when the balance of the fund approached $1 billion. 

When the session begins in January, the fund is expected to have a balance of around $9 billion.  In order to use all or part of the fund to balance the state budget, 2/3 of the members of each chamber must vote to remove the money from the Rainy Day Fund.

In addition to serving as a financial cushion the Rainy Day Fund helps the state resolve its cash flow issues through inter-fund borrowing.  Since the receipt of state revenue does not match the timing of its expenditures, borrowing from the fund is allowed, so long as the loan is paid back, with interest, within the fiscal year.

For more information on this or any other matter of state government, please contact my office by writing to P.O. Box 2910, Austin, TX 78768-2910 or by emailing me at larry.phillips@house.state.tx.us.    My district office phone number is (903) 891-7297.