At Last, Texas May Be Doing More Than Keeping Its Rainy Day Funds Under a Mattress

It’s nice to have cash in a bank account, but it is even better to have that cash working to make more cash.This is what Texas Comptroller Glenn Hegar sought for the state’s rainy day fund. And while what Hegar got from the Legislature this year falls short of his ambitious plan to fund an endowment plan for the state's long-term needs, state lawmakers have given the green-light on a more responsible and dynamic investment strategy.For years, the fund, also known as the Economic Stabilization Fund, basically put excess revenue from oil and gas production taxes into an account that barely kept up with inflation. Hegar says the returns could be better if the comptroller could more aggressively invest a portion of the fund into an endowment that could grow big enough to fund pensions, pay down debts and repair crumbling infrastructure. And most of all it would reduce the dicey politics that go with lawmakers dipping into the rainy day fund. What lawmakers delivered this session is a step in the right direction of getting more bang for the buck. Senate Bill 69 requires the comptroller to put aside about 7% of the state’s certified revenue estimate as a cushion to deal with unexpected economic downturns or natural disasters. The big change is that the comptroller will have greater flexibility to grow the state’s savings account through a diversified mix of fixed-income instruments in accordance with prudent investment guidelines.It is not the robust endowment that Hegar had sought, but let’s face it, this is a better investment strategy than keeping billions in cash under the mattress. Based on the $12 billion that was in the rainy day fund at the start of the legislative session, the fiscal note on this bill projects revenue gains of between $88 million and $273 million over the next five years. That is real money that can help pay for what Texas needs. And this is important because the Legislature already tapped the fund for billions this session. As a growing state with growing needs, Texas needs a dynamic money management strategy. The rainy day fund should be sufficiently liquid to allow for short-term access to dollars while offering an investment upside that didn’t exist previously.We urge Gov. Greg Abbott to sign this bill it into law to keep Texas’ financial future bright.  Continue reading...