Texas’ so-called Rainy Day Fund is an emergency pool of money that comes from oil and gas taxes. The account has ballooned with Texas’ most recent oil and gas boom and has been turned to recently to shore up statewide water and road projects. State lawmakers established a minimum balance for the fund to make sure Texas always has some extra cash on hand.
Texas has turned to the Rainy Day Fund in two big ways in recent history: taking $2 billion from it last year to create a fund for water projects across the drought-stricken state. And this November Texas voted to divert half of the money going into the fund, sending it to the state highway fund instead.
In order to better ensure the fund is flush with cash, state lawmakers voted to set a minimum balance to keep in the fund—$7 billion dollars. Lawmakers say having that cash on hand will shore up the state’s credit rating, and to make sure there’s enough around for an emergency.
"If you have hurricanes like Ike or Katrina—Ike actually cost Texas $4 billion—we’ve got to be able to handle those emergencies and so the Rainy Day Fund is super important," Waco Republican State Representative Doc Anderson said. "It’s like a savings account, you don’t want to over invest in that, but you certainly don’t want to under invest in it."
Money for the Rainy Day Fund comes from the state’s severance tax on oil and gas. And in these oil and gas boom days, there’s a lot of that tax coming in. The fund has ballooned from less than $1 billion in the mid-2000's an expected $8.4 billion next year. But now half of that severance tax will go to the state highway fund. That is, unless the Rainy Day Fund ever dips below $7 billion.
John Barton is the Deputy Director for the Texas Department of Transportation. He’ll be keeping an eye on that $7 billion mark, especially as less money comes in because of cheaper oil and gas prices.
"Whatever that minimum balance is established at if the rainy day fund is already below it, this oil and gas severance tax 100 percent of it goes into that rainy day fund until it meets that balance and anything over it is split," Barton said. "So depending on where they set it, it will change the amount of revenues that ultimately will be made available for transportation."
The legislature will set a new minimum amount for the Rainy Day Fund every two years.