Texas Comptroller Glenn Hegar announced recently that he has completed the transfer of about $3.06 billion into the State Highway Fund (SHF) and $5.46 billion to the Economic Stabilization Fund (ESF; commonly known as the “Rainy Day Fund”). The Rainy Day Fund, which normally receives the same amount as the SHF, received $2.41 billion more because of the general revenue (GR) surplus at the end of fiscal 2023.
“The strong Texas economy and judicious budgeting by lawmakers netted a surplus that, for the first time in more than a decade, allows us to set aside an additional bucket of money to ensure we are able to weather future downturns,” Hegar said. “The Rainy Day and State Highway funds are tremendous assets for the taxpayers of Texas and help provide the foundation needed for the future of this great state.”
The combined $6.11 billion severance tax transfers to the ESF and SHF are based on crude oil and natural gas production tax revenues in excess of 1987 collections. If either tax generates more revenue than the 1987 threshold, an amount equal to 75 percent of the excess is transferred.
In November 2014, voters approved a constitutional amendment allocating at least half of these severance taxes to the ESF, with the remainder going to the SHF for use on non-toll highway construction, maintenance and right-of-way acquisition.
The Texas Constitution provides for an additional transfer to the ESF equal to one-half of any unencumbered GR surplus at the end of each biennium. That transfer amounted to $2.41 billion of unobligated GR to the ESF. The last time such a transfer occurred was 2008.
According to the Texas Constitution, the ESF and SHF transfers must occur within 90 days after the end of the fiscal year.
When fiscal 2023 ended on Aug. 31, the ESF balance was $14.17 billion. With the most recent transfers, the new ESF balance will be about $19.63 billion, not accounting for currently outstanding spending authority of approximately $400 million. The balance in the ESF will change as agencies spend down this remaining appropriation authority and investment earnings are realized.
