Original intent and the Texas Rainy Day Fund

Photo by Todd Wiseman

With last week’s hearings in Washington leading up to the confirmation of Neil Gorsuch to the Supreme Court, attention has been focused on the concept of “originalism” espoused by Judge Gorsuch and more famously, by the late Justice Antonin Scalia. Simply put, originalism is the principle or belief that the interpretation of the Constitution or a statute should follow closely the original intentions of those who drafted it.

In 1987, I authored the committee substitute for HJR 2 — the constitutional amendment that created the Economic Stabilization Fund, or as it is more commonly known, the “Rainy Day Fund.” I then was the person who laid the joint resolution out to the House and explained it to the members.

Dale Craymer of the Texas Taxpayers and Research Association has brilliantly described the whole process and the subsequent history of the Fund in a TTARA publication. As he points out, voters approved this ballot language: “The constitutional amendment establishing an economic stabilization fund in the state treasury to be used to offset unforeseen shortfalls in revenue.”

Texas budgets had been repeatedly impacted by the sharp swings in oil and gas prices, but the unsustainability of dependence on current revenue from those sources was driven home by the crash in oil prices in December 1985. A special legislative session in 1986 and the regular session in 1987 saw passage of massive spending cuts and tax increases to balance the budget.

The impact of those spending cuts was magnified by a previously little-recognized consequence of recession: the demand for government services goes up at precisely the time that government revenues go down. This is true not just in obvious areas like welfare (a very small part of Texas’ budget) and Medicaid. In particular, enrollment in higher education and especially in community colleges rises sharply as laid-off workers seek to retrain for entry into different areas of work.

When I presented HJR 2 to the full House, I likened our situation to the Biblical story of Joseph, who prophesied a coming famine and urged Pharaoh to set aside surplus grain from an initial seven years of plenty to provide for the following seven lean years. I concluded with: “That’s what this amendment does and I move adoption.”

Joseph didn’t advise Pharaoh to save up grain to impress others as to how wealthy Egypt was. He didn’t urge that the grain be added to mud for building temples and pyramids. The grain was to be saved so that the people could be fed when the famine hit.

We did not create the Economic Stabilization Fund to improve our credit rating. We did not create it for the primary purpose of paying for natural disasters, although the expense of recovery from a disaster can create a “shortfall in revenue”. We did not limit the use of the ESF only to “one-time” expenditures, although such expenditures, if truly necessary, could be part of the budget that it would be expected to fund.

The reason we created the fund was to flatten out the available revenue stream from the up-and-down swings of the economy so that constant levels of services could be provided, including covering higher costs as those needing or qualifying for government services increase.

Anyone who tells you different is not an originalist. They are merely reinterpreting the law to mold it to their own interests or ideologies. With a balance in the Fund approaching $12 billion, let’s use our savings for their intended purpose.

Paul Colbert

Former legislator