When revenue falls short, the Economic Stabilization Fund is here to help

//When revenue falls short, the Economic Stabilization Fund is here to help

Everyone fortunate enough to have a savings account knows it’s a blessing during hard times. Texas is fortunate to have a savings account in its Economic Stabilization Fund — often called the Rainy Day Fund — created to prevent or reduce sudden massive cuts to schools, health care and other state services. Many states have state savings accounts, but Texas has one of the largest in the nation

Though use of the Fund has sometimes been a point of contention, the Legislature has used the Fund frequently, both for one-time and ongoing budget items. The following are common-sense situations when lawmakers should consider using the Fund:  

  • when needed to prevent state service cuts that further destabilize the economy and prolong a recession, such as teacher layoffs or nursing home closures  
  • when one-time uses could prevent larger costs in the future, like unfunded state pensions  
  • when, like a household, dipping into savings will help the state get through a temporary shortfall 

The Economic Stabilization Fund is not designed to correct chronic underfunding of state services. If something needs additional funding in general then the Legislature should devise a way to provide permanent, additional funding. Learn more

This blog was written by CPPP Invest in Texas Team Leader Eva DeLuna Castro and Senior Fiscal Analyst Dick Lavine.

At the Center for Public Policy Priorities, we believe in a Texas that offers everyone the chance to compete and succeed in life. We envision a Texas where everyone is healthy, well-educated, and financially secure. We want the best Texas - a proud state that sets the bar nationally by expanding opportunity for all. CPPP is an independent public policy organization that uses data and analysis to advocate for solutions that enable Texans of all backgrounds to reach their full potential. We dare Texas to be the best state for hard-working people and their families.