Email responses, Dale Craymer, president, Texas Taxpayers and Research Association; Eva DeLuna Castro, senior budget analyst, Center for Public Policy Priorities; Talmadge Heflin, director, Center for Fiscal Policy, Texas Public Policy Foundation, June 5, 2013
(W. Gardner Selby inquiry:) I seek your comment/expertise because we are fact-checking Michael Sullivan’s May 22 Twitter post: “#txlege will be drawing current Economic Stabilization Fund down by half: $4 billion from current $8 billion.”
My sense now is that lawmakers approved $1.94 billion in spending from the rainy day fund through August 2013 and, if voters approve, $2 billion more (to start the water funds) by the end of August 2015, for $3.94 billion in total. So it looks like the rainy day fund stands to be reduced by about 25 percent as of the end of August 2013--from a balance of $8.1 billion to a little more than $6.1 billion. And the fund could ultimately shrink from an Aug. 31, 2015, projected balance of about $12 billion to about $8 billion, down 33 percent. These calculations assume, of course, both HB 1025 making it into law and SJR 1 winning voter approval.
If so, the $4 billion in described spending approximates legislated withdrawals from the state’s rainy day fund over more than two years, but it’s not so that the fund balance would be cut in half. One could say, in contrast, that the expected August 2013 balance of $8.1 billion would be cut by nearly $2 billion, or about 25 percent. More broadly, one could say the fund’s projected balance of nearly $12 billion as of the end of August 2015 would shrink by 33 percent, again if the nearly $4 billion in approved withdrawals plays out.
Does this seem correct to you? What else matters?
I am hoping to complete this check today or Thursday. Feel free to suggest additional sources.
W. Gardner Selby
(Dale Craymer:) Your assessment is correct. Basically it is an issue of timing. If all of the appropriations would take effect in 2013, the twitter statement would be correct as of the end of 2013; however, all of the appropriations don’t take effect in 2013. The water appropriation won’t happen until and unless voters approve, with the election in November of 2013, which falls in the 2014 fiscal year. However, about the same time as that election, the Comptroller will make a substantial deposit into the fund of excess oil and gas severance taxes collected in 2013. That deposit is currently estimated at $1.7 billion, but will probably be higher. In 2015, another deposit currently estimated at $1.8 billion will be made, so essentially the fund is rapidly replenishing itself.
This chart compares the status of the Economic Stabilization Fund under the two scenarios (in $billions):
Official Projected Balance
Balance if All Appropriations Take Effect
Essentially, the Rainy Day Fund is filling so fast, if all of the $3.9 billion in appropriations do take effect, we’re essentially running in place. While there will certainly be less money in the fund compared to what could be there, the actual balance itself will remain somewhat flat (assuming a fairly conservative oil and gas revenue forecast).
(DeLuna Castro:) Sounds right to me, at least based on the Comptroller’s BRE projections for the RDF. (Many people said the transfers for this year and next could be even higher.)
My understanding of Table A-8 in the BRE is:
The $1.94 B for FY 13 would be spent by August 2013, taking the balance down to $6 B. The next transfer of money ($1.8 B) into the RDF happens this fall, before the November election. So: balance goes back up to $8 (almost). The other $2 B from the RDF can’t be transferred out (into the water plan) until after the voters’ approval.
(Heflin:) As I look at the subject of your email I see the term “fact check” used.
As I see it the facts are that the legislature authorized $4B (round numbers) to be drawn from the Economic Stabilization Fund (ESF) which has $8B (again rounded). I think the key word is ‘authorized’.
So if you look at the facts, half of the current balance is authorized to be withdrawn.
When you start playing the ‘what if’ game, will the Governor veto HB 1025, will the voters turn down the proposition in November, will the $2B be withdrawn before another deposit is made – you depart from the facts and begin to speculate. Will the projection by the Comptroller as to how much money goes into the fund between now and the end of August 2015 be accurate? More speculation.
So if you are fact checking, the facts are that the legislature authorized $3.94B to be withdrawn from the ESF which currently has a balance of $8.1B, so that amounts to an authorization to withdraw 48.6%, almost half of the fund.
So the question is will it be drawn down one half or 48.6%?
Since we are rounding numbers, if you stay with the facts and not speculation, it looks like the legislature authorized the fund to be drawn down by half of the current balance.
That is my opinion –
All the Best,
Director, Center for Fiscal Policy
Texas Public Policy Foundation
(DeLuna Castro:) See my earlier answer to Gardner below. That answer was based on “current balance,” i.e., not a fixed number but something that changes as appropriations are made out of the fund, and transfers made into the fund. What I was trying to work out in my head is: the fund balance will not drop to $4 billion (which is what many who saw the tweet might think, with “the half” reference and the future tense). But the original Tweet doesn’t say “current balance”, it says “current $8 billion.” Does it matter more what was literally said, or what people will think they read?