Emails, Michael Quinn Sullivan, president, Empower Texans/Texans for Fiscal Responsibility, May 31 and June 5, 2013

2:25 pm

May 31, 2013

The Fund currently has $8.1 billion in it. That cannot be disputed. Taking out $4billion is taking out half of the money.

There are forecasts of Economic Stabilization Fund having $12 billion in it -- sometime in third-quarter 2015. That is a forcast. By definition, it is NOT money currently in the bank, or even an asset. In the bank is $8.1 billion. People hope that it will have $12 billion by late-ish 2015. Hope. 2015. $12 billion.

This is 2013.

Now, as you know, the proposals regarding the ESF were something of a moving target all session.

What we do know is that there is cash-on-hand -- not the forecast of a future promise -- $8 billion in the fund right now. Taking $4billion is taking out half.

I know legislators want us focused on the pre-hatched chicks, I prefer to count the chickens that have already emerged from the eggs. That is, the current fund balance IS $8 billion. Every other number about the ESF is a forecast. Indeed, looking out to 2015 is not even pre-hatched eggs, it's pre-conceived chickens

Now, let's assume we do draw out the $4 billion between now and the 4th Quarter 2013, as the legislature passed. Does the fund eventually replenish, by third-quarter-ish 2015, to $8billion? Hope so.

But, again, that is counting chickens not yet even conceived. Forecasting ESF balances is a pretty dicey endeavor. The revenues that go into the ESF are volatile, to say the least -- prone to very wide swings. If any state should know about the boom-and-bust nature of the oil and gas market (where the ESF funds come), it is Texas.

A quote something from your own newspaper. State Rep. Van Taylor writing April 17, 2013: http://www.statesman.com/news/news/opinion/taylor-texas-needs-to-keep-rainy-day-fund-full/nXPXh/

"Oil and gas tax revenue goes into the fund. However, of the last seven estimates, the comptroller has been off an average of 166 percent. "

The current balance sheet shows $8billion in it. That's what we should spend from, not from a hoped-for estimate 28 months out on a highly volatile revenue source. Now, some may say that spending $4billion out of an $8billion fund is the right thing to do. But I would suggest that this the appropriate discussion to have: spending $4 billion from $8. Not pretending like the $8 is really a $12.

-mq

__________________________________

Michael Quinn Sullivan

President, Empower Texans / Texans for Fiscal Responsibility

2:29 pm

Let me add, to original question...

No proposal sent to the governor actually grows the fund, or sets the fund, at $8 billion. The laws passed by the legislature reflect what forecasts show the fund to be when the ;late-2015 deposits are made, and assuming all the assumptions about those deposits, in the face of the estimates being off 166 percent over the last seven, and assuming no other liabilities hitting the fund.

What was sent to the governor does NOT consider a costly school finance decision, a big hurricane (or two), a downtown in the economy, etc.

-mq

__________________________________

Michael Quinn Sullivan

President, Empower Texans / Texans for Fiscal Responsibility

PO Box 200248, Austin, TX 78720

On Wed, Jun 5, 2013 at 1:45 PM, Selby, Gardner (CMG-Austin) <wgselby@statesman.com> wrote:

Michael:

 

As you know, I am fact-checking your May 22 tweet: “#txlege will be drawing current Economic Stabilization Fund down by half: $4 billion from current $8 billion.”

 

Right now, it looks to me like HB 1025 provides for up to $3.94 billion to be spent from the rainy day fund through fiscal 2015, with $1.94 billion of that to occur by the end of this August, if the legislation is signed into law. Make sense?

 

There is an “if” related to the other $2 billion in fund transfers permitted by HB 1025. They are authorized only if voters in November approve SJR 1 (the water-infrastructure fund proposal).

 

So, it looks like as little as $1.94 b to $3.94 billion could be spent from the fund.

 

If this is correct, the fund balance, which the comptroller has projected to reach $8 billion by the end of August, would be a little more than $6 billion.

 

As you acknowledged, the comptroller has projected the fund balance to reach $9.83 billion at the end of August 2014 and $11.76 billion a year later.  If SJR 1 is approved by voters, then, it seems to make sense to subtract $2 billion more from the fund.

 

Upshot: If all the rainy-day withdrawals occur, the nearly $4 billion would reduce the end of f 15 balance by about 33 percent. If voters reject SJR 1, the reduction would be about 16 percent. One might also say the $1.94 b transfer reduces this year’s end balance by 25 percent, though your tweet rolled together all the possible fund transfers.

 

I am sharing all this in case you see error, mathematical or otherwise, and also to see if you have more information on how you reached your conclusion at the time of the tweet. Perhaps there were other assumptions (or developing situations) at play.

 

?

2:24 pm

June 5, 2013

(Sullivan:) You are adding layers I did not write or imply in my Tweet of May 22.

Here is the Tweet.

"#txlege will be drawing current Economic Stabilization Fund down by half: $4 billion from current $8 billion."

The Legislature has authorized drawing out of the ESF $4 billion ($3.94 billion), and that the current $8 billion balance.

Some of this spending could be vetoed by the Governor or the voters, but the bottom line is that the Legislature did authorize spending half of the current balance of the ESF.

The Comptroller has projected a higher balance through the end of fiscal year 2015 – but that’s a projection vs. what’s actually in the account today. That's the word "current."

Looking at the very volatile history of ESF revenue, it’s premature to consider projections as being the same as banked funds—they aren’t.

Again, I referenced what the Legislature has said they want to draw (regardless of mechanism) from the current (the word I used) balance of $8 billion.

__________________________________

Michael Quinn Sullivan

President, Empower Texans / Texans for Fiscal Responsibility