Texas voters approved the rainy day fund’s creation in 1988 as an emergency piggy bank to rescue state government in case future leaders faced the sort of oil and gas crash that beset the state budget in the 1980s.

Now, with another sharp drop in oil prices — combined with the far-reaching effects of the coronavirus — wreaking havoc on the state’s economy, will Gov. Greg Abbott see fit to dip into the $8.5 billion dollar fund?

He’s not saying.

Comptroller Glenn Hegar, who provides state leaders with revenue projections, is already sounding alarm bells, saying he expects rainy day fund spending to be necessary to keep up core government work.

Unemployment numbers mount; restaurants and retail stores are shuttered; and oil prices remain in the cellar, down by two-thirds since January. With sales and other consumption taxes making up the lion’s share of state general revenues, a $3 billion budget surplus projected by Hegar last year has evaporated.

"The rainy day fund is a tremendous asset in Texas’ fight against this virus," Hegar, the state’s chief accountant, told the American-Statesman. "While we do not yet know what the full extent of the health care-related needs will be, we do know that the economic toll will be significant."

The fund, drawn from oil and gas taxes, ballooned in recent years until lawmakers tapped it last year for a series of large, one-time expenditures.

To withdraw money directly from the fund, Abbott would need to call the Legislature back to Austin for a special session — but that’s seen as unlikely.

In the short term, Abbott and a cadre of top elected state officials could redirect nearly $3 billion in rainy day fund money — earmarked last year for flood prevention work and other initiatives — to cover a burgeoning budget shortfall.

That money, close to half of the $6 billion appropriated from the rainy day fund in 2019, has not yet been spent, according to officials at the comptroller’s office.

Lawmakers are scheduled to return to Austin in January and could decide then whether to again tap the fund.

The comptroller last year had estimated that the fund would have at least $9 billion by 2021, but now, with the downturn in the oil market, Hegar said it’s probably "somewhere in the $8.5 billion range."

"The amount Texas will need from its savings account and the timing of that need will depend on the coming weeks and months," Hegar said. "Texas is currently well-positioned to meet cash flow needs through the current fiscal year, but tremendous uncertainty remains concerning the extent of the virus’ impact on the state’s balance sheet." The fiscal year ends Aug. 31.

Hegar said his office will present ways for the governor and top lawmakers "to move some dollars around," will "identify dollars available for emergency purposes" and offer ways for them to reclaim "dollars for projects that have not been initiated" and, if they choose, "freeze projects if necessary" — in other words, figure out every possible way to find — or conjure — coins beneath the couch cushions.

In the meantime, Hegar said he will present the state’s political leadership in coming weeks with a menu of budget cuts they could undertake as the crisis unfolds.

Where will the cuts come from?

Public school finance and pensions for teachers and state employees are off-limits. But cuts could come to group health insurance for state employees or retired teachers.

Some agencies, like the Texas State Board of Dental Examiners, are unlikely to see cuts since the agencies’ costs only amount to the costs of regulatory work.

Law enforcement and criminal justice budgets might be hard to cut.

And agencies cannot cut their debt service obligations.

After that, it’s open season for just about any agency that does not deal directly with health care, said Talmadge Heflin, a former Republican chairman of the Texas House Appropriations Committee who directs the fiscal policy center at the Texas Public Policy Foundation.

"You can’t just go after one or two agencies and get your money," said Heflin, who estimated agency heads could be asked to slash their budgets by as much as 15%. "Everyone has to share it in every way."

Medicaid eligibility is protected under agreements with the federal government, but based on the actions state lawmakers have taken in other budget crises, pay cuts for social service providers involved in foster care or early childhood education could be on the horizon, said Eva DeLuna Castro, a budget analyst with the Center for Public Policy Priorities.

Other budget cuts might come to programs that haven’t yet taken effect.

"People notice when you take something away from them, but when it’s for something due to start next year or the year after that, they don’t feel it as much," DeLuna Castro said.

One example: Lawmakers in 2019 finally agreed to start spending money out of a $1.8 billion environmental fund designed to get old, polluting diesel engines off Texas roads and waterways. Money has accumulated in the fund for years, but was not being used for its purpose.

Now that money could instead be redirected to fill holes in the budget, DeLuna Castro said.

The size of those holes depend on the depth and length of the crises.

Of the $59 billion in tax revenue the state collected in 2019, 10% was from oil and gas, and $3 out of every $5 collected were from sales tax.

Abbott and the Legislative Budget Board, chaired by Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, R-Lake Jackson, could shift money around within the budget, including to public health initiatives.

Such moves are unlikely for at least a month, when Abbott’s office will have more concrete numbers from Hegar — March sales tax figures, for example, are not set to be reported to the state until late April.

Abbott did not respond to questions about whether he would consider using rainy day fund money in the coming months.

Tapping the fund

The Economic Stabilization Fund, better known as the rainy day fund, was set up as a management tool to smooth out a volatile source of revenue: oil- and gas-related tax collections.

At the time, the Legislature dedicated 75% of oil taxes to the fund as a countercyclical tool for recession.

Heading into the 2019 legislative session, GOP lawmakers had been reluctant to touch the fund.

But by early 2019, the fund topped $12 billion — and Hegar estimated it would have a balance of $15.4 billion by August 2021 if it wasn’t touched before then.

So, in the face of pressing needs, lawmakers took out $6 billion.

Now, the recent downturn in the oil-and-gas market, sparked by a geopolitical skirmish between the petro-states of Russia and Saudi Arabia, has sent the rainy day fund balance down by nearly $1 billion.

"Low gas prices are good for people buying gasoline, but bad for the state budget," DeLuna Castro said.

Lawmakers on sidelines

For now, a special session appears unlikely for a combination of policymaking and political reasons.

"Right now, I don't know what we can do, unless we figure out a way to cure this crap, and that'll take people a lot smarter than us," said state Rep. Charlie Geren, R-Fort Worth, who chairs the House Administration Committee.

Tapping the rainy day fund directly might fill the gaps in sales tax revenue for just a month or two, he pointed out.

"The problem with having a special session right now is that it’s very difficult for state policy to influence the economic environment," said Dale Craymer, president of the Texas Taxpayers and Research Association, which tracks budget issues. "The state’s powers are really fairly limited. It’s kind of like trying to move the Titanic. Even the federal stimulus package is not going to be enough, and the state’s toolbox is much more limited."

The prospects of a special legislative session also appear doomed by politics and the uncertainty of how long the crises will last.

With a free fall perhaps only beginning, lawmakers risk passing something, suggesting it’s a big deal, but quickly learning it has done little, say veteran Capitol watchers.

Meanwhile, Abbott, who has issued a slew of orders responding to the spread of the virus in Texas, would relinquish the spotlight if he were to call lawmakers back to session.

It’s also unlikely that Abbott would convene the Legislature while his order banning gatherings of more than 10 people is in place.

There’s also the wild card of House leadership: Once Bonnen gavels the House into session, do the members, still stung by his betrayal last summer in a political scandal, move to take up a vote for a new speaker? (Bonnen isn’t seeking reelection, meaning House members would vote for a new speaker when they reconvene in January.)

For now, lawmakers remain on the sidelines, seeing for themselves the destruction wrought by the pandemic.

After the Fort Worth restaurant he owns, the Railhead Smokehouse, was forced to close to eat-in diners as part of Abbott’s statewide order meant to stymie the virus’ spread, Geren laid off 80% of the staff.

"Some of them have been working for me for 30 years," he said.

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