Texas Comptroller Glenn Hegar has completed the transfer of funds, allocating approximately $3.06 billion to 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 received $2.41 billion more than usual due to a general revenue (GR) surplus at the end of fiscal 2023.
Hegar attributed the surplus to the strong Texas economy and prudent budgeting by lawmakers. This surplus, the first in over a decade, enables the state to set aside additional funds to weather potential future economic downturns.
The combined $6.11 billion severance tax transfers to the ESF and SHF are based on crude oil and natural gas production tax revenues exceeding 1987 collections. If either tax generates revenue surpassing the 1987 threshold, Texas transfers an amount equal to 75 percent of the excess.
A constitutional amendment approved by voters in November 2014 allocates at least half of these severance taxes to the ESF, with the remaining portion going to the SHF for non-toll highway construction, maintenance, and right-of-way acquisition.
The Texas Constitution mandates an additional transfer to the ESF equal to one-half of any unencumbered GR surplus at the end of each biennium. This transfer, totaling $2.41 billion, marks the first occurrence since 2008.
According to constitutional guidelines, ESF and SHF transfers must be completed within 90 days after the end of the fiscal year. As of the end of fiscal 2023 on August 31, the ESF balance stood at $14.17 billion. With the recent transfers, the new ESF balance will be approximately $19.63 billion, excluding an outstanding spending authority of approximately $400 million. The ESF balance will fluctuate as agencies spend down remaining appropriation authority and the state realizes investment earnings.
