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Using the Rainy Day Fund to Ensure our Recovery and Prosperity

  

Authors:
Scott McCown /(512) 320-0222 x 109
Dick Lavine /(512) 320-0222 x 101
Eva DeLuna Castro /(512) 320-0222 x 103

February 21, 2011

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Texas faces a devastating revenue shortfall. We are about $18 billion short of being able to maintain spending at its current level and at least $27 billion short of being able to maintain services at their current level. Whichever way you look at it, we face a larger revenue shortfall than during the last recession in 2003 and even larger than during the global energy price collapse in the 1980s.

A cuts-only approach to dealing with a shortfall this large would undermine our economic recovery and threaten our future prosperity. Instead, we need a balanced approach, one that includes using our Rainy Day Fund to minimize damaging cuts to critical public services such as education. As part of a balanced approach,the Rainy Day Fund can cover about a third of the shortfall. This paper explains how the fund works and why it should be used.