As Texas Rainy Day Fund Overflows, Money Could Trickle Toward Pensions

Texas’ rainy day fund is overflowing – and one lawmaker wants to use the state’s excess cash to help fund its pension system, according to the Dallas Morning News.

Texas maintains a rainy day fund, funded mostly by oil and gas-related taxes.

But the fund is growing so large – it totaled $8.5 billion as of February – that it could soon hit its “cap”.

One lawmaker has proposed a constitutional amendment that would let lawmakers take the “overflow” – or, money that exceeds the fund’s cap – and divert it to the state’s pension systems.

From the Dallas Morning News:

[Sen. Van Taylor’s] constitutional amendment would take excess money, over the rainy day fund’s ceiling, and wall it off for use in shoring up the Teacher Retirement System, Employees Retirement System and savings accounts parents can open for college tuition.

Taylor noted that under the transportation funding measures enacted two years ago, the rainy day fund has a floor of $7 billion. If lawmakers take it below that, the road money dries up.

That creates an incentive to protect the fund. Taylor said he wants to give pensioners the same motive to oppose casual use of the savings account.

“If the [rainy day fund] were to become full, and money started to be used to make pension funds stronger, you would watch a new constituency, retired teachers, say, ‘Hey, don’t pull money out of the rainy day fund because if you do that, it has to fill back up again before you can use that money to make our pension fund sound,’” he said.

Texas manages over $200 billion in pension assets between its seven major systems.

Photo credit: “Flag-map of Texas” by Darwinek. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Flag-map_of_Texas.svg#/media/File:Flag-map_of_Texas.svg