The Economic Stabilization Fund: Designed for Texas to Use

Everyone fortunate enough to have a savings account knows it’s a blessing during hard times. Texas is fortunate to have a savings account in its Economic Stabilization Fund — often called the Rainy Day Fund — created to prevent or reduce sudden massive cuts to schools, health care and other state services. Many states have state savings accounts, but Texas has one of the largest in the nation.

Though use of the Fund has sometimes been a point of contention, the Legislature has used the Fund frequently, both for one-time and ongoing budget items. The following are common-sense situations when lawmakers should consider using the Fund:

  • when needed to prevent state service cuts that further destabilize the economy and prolong a recession, such as teacher layoffs or nursing home closures
  • when one-time uses could prevent larger costs in the future, like unfunded state pensions
  • when, like a household, dipping into savings will help the state get through a temporary shortfall

The Economic Stabilization Fund is not designed to correct chronic underfunding of state services. If something needs additional funding in general then the Legislature should devise a way to provide permanent, additional funding.

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