Texas House looks to spend $2.5 billion from state’s rainy day fund


Highlights

The Texas House is looking to tap the rainy day fund to ease cuts.

Senate leaders appear skeptical about using any of the state’s reserves.

The two sides have found little common ground on the issue so far.

Texas House leaders are upping the ante in their bid to use money from the state’s $10.2 billion reserve fund to plug holes in the state budget.

House Appropriations Committee Chairman Rep. John Zerwas, R-Richmond, on Thursday unveiled a new version of House Bill 2, a stop-gap funding measure known as a supplemental budget, that includes almost $2.5 billion in money from the Economic Stabilization Fund, more commonly known as the rainy day fund. The original version of the bill included only $1.4 billion from the rainy day fund.

Facing a bleak budget outlook, Zerwas and House Speaker Joe Straus, R-San Antonio, have been advocating for the Legislature to use some money from the rainy day fund, projected to grow to $12 billion by the end of the next budget cycle.

Senate leaders, however, are crafting a proposal with deep cuts to many state agencies and programs, especially higher education, setting up what might be the defining dispute in negotiations over the state budget.

Lt. Gov. Dan Patrick, who leads the Senate, didn’t respond to a request for comment.

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Zerwas noted that the Texas comptroller’s office has said lawmakers could take billions out of the fund, which was created in 1989 and is primarily funded by oil and gas production taxes, without affecting the state’s credit rating.

“Not using the (rainy day fund) will lead to reductions that will cut to the core of our state’s public education system, would require our state’s retired teachers to spend more than half of their pension on health care, and it continues to place our state’s most vulnerable children at risk by failing to protect them from abuse and neglect,” Zerwas said Thursday. “Some members of our body have said publicly that our situation isn’t really that bad. I can’t disagree more with that.”

Lawmakers have less to spend on the budget for 2018 and 2019 than they did on the current two-year budget due to low oil and gas prices dragging down tax collections and recent fiscal decisions, including a business tax cut and a $5 billion set-aside for transportation funding adopted in 2015.

The supplemental budget plugs holes in the current two-year budget cycle, which ends in August, and can include other one-time expenditures.

Along with federal matching funds and reallocations of unspent money in the state’s current budget, Zerwas’ supplemental budget would spend $5.2 billion to shore up various programs, including $930 million to close a shortfall in Medicaid, $38.2 million for the Railroad Commission to plug abandoned oil and gas wells and $80 million to close a deficit in the state prison health care services.

In the new version, which will likely get a committee vote late next week, Zerwas adds spending on two programs that might have otherwise been included in the next two-year state budget: $653.1 million on the state’s border security campaign and $680.6 million on public education, including $500 million for the retired teacher health care system.

“What we’re trying to do is really lighten up the load on (the regular budget) as much as possible,” he said.

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Zerwas added that he separated border security spending from the regular budget in the hopes that the state would wind down the program as President Donald Trump’s administration increases federal spending on the border.

“We think that with border security spending and the new administration in Washington that we should see much less of a need for us to be funding that,” he said, “and so bringing that out and sort of framing it as a one-time expense is a good thing for us to do.”

Zerwas said Thursday that he envisions using the rainy day money only on the HB 2 supplemental budget, which in turn will lessen the burden on what needs to be funded in the full two-year budget.

The Senate Finance Committee, meanwhile, finished marking up its budget proposal for 2018 and 2019 and likely will vote on it next week. The Senate hasn’t put forward a proposal for the supplemental budget.



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