It Would Be a ‘black Eye' on Texas If State's Credit Is Downgraded, Comptroller Tells Lawmakers

AUSTIN -- Credit rating agencies have warned Texas: If the state doesn't tackle its expensive obligations to pension systems and funding problems with public education, transportation and health care, it shouldn't be surprised to see its credit downgraded.That was the alarm Comptroller Glenn Hegar sounded at a Senate Finance Committee hearing Tuesday, where he proposed changing the state's rainy day fund to create a new revenue stream for some of the Legislature's most persistent long-term funding needs."I am actually very concerned ... that in the very near future if we don’t find creative ways to address these very real pressure issues, Texas can be downgraded," Hegar said. "I want to make sure we avoid that because that is a black eye on Texas."If the state's credit rating were to take a hit, it would cost Texas more to borrow money, which means less money would flow to the state's budget and overall economy.The Texas Economic Stabilization Fund, commonly known as the rainy day fund, has about $11 billion. The account is largely funded by the state's tax on oil and natural gas production, an industry that has boomed in recent years but leaves the state open to swings in its market.About $7.5 billion of the fund's money is in the state's Treasury Pool, which is readily available to lawmakers in case of an emergency and gathers some interest, though not enough to cover inflation. The remaining money — about $3.2 billion — is invested into its investment fund, which Hegar created in 2015 to allow a greater rate of return and cover some of the inflation increases.Since then, he said, the investment fund has netted $85 million for the state — money it would not have accrued if it had remained in the Treasury Pool.  Continue reading...