Texas Comptroller Glenn Hegar recently announced that the state’s Economic Stabilization Fund, better known as the Rainy Day Fund, grew by $1.13 billion this year.
The fund would have actually seen $1.6 billion transferred its way if not for the pandemic-driven recession and weak oil prices, according to the comptroller. It’s just one of the revenue-related shortfalls state and local governments are facing as the outbreak continues.
With the latest transfer, Texas is sitting atop a $10.7 billion economic stabilization fund that has yet to be used to do exactly that, stabilize the state’s economy and prevent budget cuts to essential state agencies and services.
Some budget cuts have already gone through. In May, Gov. Greg Abbott ordered a 5 percent budget reduction for a vast majority of state agencies with the exception of several state agencies that make up the majority of the state’s budget.
And while plenty of good ideas are floating around to make up for the dip in sales tax revenue (like legalizing retail marijuana or expanding Medicaid, for example), the Rainy Day Fund remains the simplest and best solution in the upcoming session to shore up the state’s budget, or provide direct relief to Texans.
At least 17 states in 2020 tapped into their own rainy day funds and savings to address budget gaps and the pandemic. California, for example, withdrew $1.3 billion from its savings fund in April to buy personal protective equipment (about five times what Texas would spend on PPE).
Lawmakers are already expecting discussions over the rainy day fund in the upcoming legislative session in January.
But with a COVID-19 vaccine on the horizon, a state revenue shortfall for the upcoming budget less catastrophic than the $4.6 billion shortfall projected in July, and a Republican majority in the legislature intact, who knows if GOP lawmakers will have the appetite to use the state’s savings to plug budget holes — much less provide direct relief to Texans. After all, Texas Republicans have a history of jumping the gun on budget cuts during economic recessions.
One looming question is what type of federal aid states will receive in the upcoming (hopefully?) pandemic relief package. Senate and House Democrats are now backing a slimmer $908 billion bill that includes $160 billion for state, local and tribal governments. It will be up to Sen. Mitch McConnell and the Republican-controlled Senate to pass it.
Photo: Bill Clark/CQ Roll Call