State senators look at rainy day reserve to cover schools’ hurricane losses: In spite of damaging shortfalls in key areas of the state’s budget in recent years, the Texas Senate has been resistant to spending from the state’s budget-stabilization fund (formally known as the Economic Stabilization Fund, informally dubbed the Rainy Day Fund). This reserve fund now exceeds $10 billion and is expected to top $11 billion by next August. But at a state Senate Finance Committee hearing today there were strong indications that lawmakers are ready to tap the fund next session for as much as $4 billion, largely to cover costs related to Hurricane Harvey—and prominently including the loss of local school taxes formerly generated from properties now damaged or destroyed by the storm.
Even senators with a strong penchant for treating the reserve fund as an inviolable savings account seemed resigned to using the Rainy Day Fund, as originally intended, to make up for unanticipated revenue declines and avoid needless disruption of core public services like our public school system. Several made a point of saying they don’t want school districts’ shrinking local tax collections to trigger teacher layoffs. As Sen. Lois Kolkhorst (R-Brenham) summed it up, for students whose lives and education already were disrupted by Harvey, “we don’t want to victimize them twice” by now allowing their teachers to be laid off.
However, the timing of funding relief from the state will make hurricane-impacted districts’ budget planning for next school year dicey, because the state aid to make up for lost local revenue likely will not be provided until the Legislature meets again in 2019.
Today’s hearing also raised two other ideas for overcoming lawmakers’ habitual reluctance to use the Rainy Day Fund to meet budget needs. State Comptroller Glenn Hegar asked the committee to support new authority for him to keep less of the reserve in cash and instead invest a sizable chunk in assets that will earn greater returns. He touted the option of turning part of the reserve into a permanent endowment, with investment earnings ideally going to meet long-term state obligations such as for employee pensions. Other witnesses suggested that too much state income is being channeled into the reserve in the first place and “lying fallow” instead of being productively invested in state priorities like public education.
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