Budget estimate gives flexibility for legislators
The numbers are in, and they are positive — with an asterisk. The numbers are the estimate by State Comptroller Glenn Hegar about how much money the Legislature will have available to spend in the 2020-21 biennium in the new legislative session that begins today. The asterisk is the uncertainty hanging over the future of oil and gas in Texas — which directly affects how much the Legislature should allocate over the next five months.
The two main statistics are total projected state revenue available for general purpose spending ($119 billion) and how much that differs from the 2018-19 biennium (it’s up 8 percent). Those are positive figures by any standard, and they show that lawmakers should have the flexibility they need to adequately fund state government while prudently increasing spending in key areas like public education.
Perhaps the biggest number that will jump out for average Texans is the projected growth of the Rainy Day Fund to $15.4 billion at the end of the 2020-21 biennium, the budget cycle that will be planned in this session, from $12.5 billion. The growth in the fund, technically called the Economic Stabilization Fund, is a tribute to the frugality of lawmakers and state officials. Texas needs a decent sum of money like that set aside for emergencies, from natural disasters to recessions, to keep state government functioning smoothly.
But $15.4 billion is too much to sit on while the state has glaring needs, from education to highways, right now. As long as lawmakers keep that fund stable with at least $10 billion, they can and should peel off some of that money to help Texans now.
Beyond that, the Legislature should adopt Hegar’s proposal to invest some of the money in the Rainy Day Fund more aggressively. Right now, it’s basically sitting in accounts than do little more than keep pace with the rate of inflation. That’s not good enough, just as no wealthy individual would park large sums of money in a savings account in a bank or credit union to gain 1 percent or 2 percent interest.
Other state funds are invested more aggressively, and they provide better returns for Texas taxpayers. There is some element of risk in this approach, but not much if the investment is managed well.
Even with this good financial news, the House and Senate must not expand state government excessively in this session. The state economy is heavily influenced by the oil and natural gas industry, which is generally strong now but subject to challenges from international trade and flat consumption rates. As a reminder of this sector’s uncertainty, oil and gas revenues for the state government rose 83 percent in 2001 but then fell by 50 percent the next year.
Another wild swing like that is unlikely, but it can’t be ruled out. Lawmakers can avoid being vulnerable by focusing on priorities instead of hiring more state employees. They have the resources to keep Texas moving forward, and they must use them wisely.