The Joint Select Committee to Study the Balance of the Economic Stabilization Fund – commonly known as the Rainy Day Fund – met briefly this morning and adopted a $7 billion minimum balance for the fund.
During the 2013 Legislature’s third special session, lawmakers passed H.B. 1, which asked voters to approve a constitutional amendment in November 2014 that changed how deposits of oil and gas severance taxes are made to the Fund. Voters approved the measure, which allows half of revenue that in the past was set aside for transfer to the Economic Stabilization Fund to instead go to the State Highway Fund.
This means that in fiscal 2015, rather than making a $3.4 billion transfer to the Economic Stabilization Fund, only $1.74 billion will be deposited there, and $1.74 billion will go to the Highway Fund. There, it will close about one-third of the current funding shortfall created by annual highway maintenance needs and the costs of repairing fracking-damaged roads.
One of the reasons given by committee co-chair Senator Jane Nelson for setting such a high balance was that it was necessary to maintain the state’s credit rating. However, Standard & Poor’s – the main credit rating agency – and outgoing Comptroller Susan Combs have both stated that credit ratings are based on a range of factors and not simply on the amount held in a reserve fund.
Future legislatures can still choose to appropriate any or all of the balance expected to be in the Rainy Day Fund. By the end of 2015, the fund will contain $8.4 billion, rising to $11 billion by the end of 2017. But if the balance drops below $7 billion, the transfer to the Highway Fund cannot be made until the fund is replenished back to the minimum balance.