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As state senators edged toward a party-line divide on the 2012-13 state budget, state Sen. Kirk Watson, D-Austin, questioned the chairman of the Senate Finance Committee on GOP Gov. Rick Perry’s past positions on taking money from the state’s Economic Stabilization Fund, better known as the rainy day fund.
On the Senate floor May 3, Watson said to Sen. Steve Ogden, R-Bryan: "A couple of times, Gov. Perry has actually ... advocated for spending the (fund), hasn't he?" Ogden replied: "He's advocated to liquidate it."
Ogden added: "I believe it was four years ago and that proposal was made and soundly rejected by" the Senate.
Ogden’s comment caught our attention because Perry declared in March he won’t sign off on a 2012-13 budget that taps any dollars in the fund.
Some background: The stabilization fund, created in 1988, accumulates money from portions of oil and/or gas production taxes; it also receives half of any unencumbered state revenue -- unspent dollars not reserved for a specific purpose -- at the end of each two-year budget period. Money has been taken from the fund in the past, including more than $3 billion during Perry’s tenure as governor.
In 2003, lawmakers diverted $295 million in rainy-day dollars to launch an enterprise fund overseen by Perry to lure businesses to the state. Two years later, more money was taken from the fund to start an emerging technology fund overseen by the governor.
Sharp increases in natural gas prices have boosted its balance, which was nearly $8.2 billion in January and is projected to be $9.4 billion at the end of August 2013.
In March, Perry revealed he’d support taking $3.1 billion from the fund to shore up the current budget, which runs through August. However, Perry said, "I remain steadfastly committed to protecting the remaining balance of the" fund "and will not sign a 2012-2013 state budget that uses" it.
Ogden has thrown the liquidation jab before.
A May 3 commentary by Peggy Fikac of Hearst Newspapers quotes Ogden recalling Perry’s 2007 stance on the rainy day fund: "Four years ago, the governor said we didn't even need one. And in fact, the governor tried to get us to liquidate it... his theory was, as I remember . . . that it's excessive taxation on the people, and why are we collecting all this money and doing nothing with it?"
The article also quotes a Perry spokeswoman saying the governor did not propose to liquidate the fund.
When we tried to follow up with Ogden, he declined to elaborate on his floor statement. Separately, we checked news archives, finding that during the 2007 legislative session Perry was willing to tap the fund to finance additional school property-tax cuts. In 2005 and 2003, Perry signed off on budgets that basically drained the fund’s existing balance, mostly to meet budget shortfalls. In the latter instance, the fund ended up with more money in it than projected, thanks to unexpected revenue due to higher oil and gas prices.
A May 3, 2007, Associated Press report quotes Perry urging lawmakers to divert money intended for the fund to finance additional school property tax cuts. But Ogden spokeswoman Constance Allison told us Ogden’s liquidation comment was not referring to that proposal. Instead, she said, Ogden was talking about Perry’s 2007 desire to return rainy-day monies in the form of rebates to Texas taxpayers.
The governor included legislation authorizing rebates among his emergency items for that session, according to a Jan. 12, 2007 press release from his office in which he said: "To keep government fiscally responsible, state leaders need the authority to rebate surplus funds directly to taxpayers."
In his February 2007 State-of-the-State address to lawmakers, Perry said he was proposing a budget that "grows the Rainy Day Fund to more than $4 billion" while setting aside $2.5 billion more for property tax relief. His speech continued: "One way to provide tax relief is in the form of a rebate. The appeal of a one-time rebate is that future legislatures don’t have to find the money to sustain it. However, the will of the Legislature may be to provide rate relief instead. Either way is better than the alternative: which is having the money spent on more government."
According to a Jan. 29, 2007, Houston Chronicle news article, Ogden was cool to the rebate idea. Asked his opinion of it, he said: "Not much . . .The big issue to me in this session is to make sure that we set aside enough of the surplus to guarantee that we'll be able to meet our property tax promises in future years." Lt. Gov. David Dewhurst aired a similar sentiment.
Neither the Chronicle article nor Perry’s formal messages say the governor wanted to empty the Rainy Day Fund to provide rebates. In an interview, Perry spokeswoman Catherine Frazier said Perry did not call for depleting the fund then and now considers it prudent to leave the fund intact. He has, however, said he’ll go along with taking out $3.1 billion to cover gaps in the current budget, which runs through August.
In the end, the 2007 Legislature took no money from the fund, according to a 2011 policy paper on the fund’s history by the liberal Center for Public Policy Priorities, which has urged the 2011 Legislature to maintain existing government programs through 2012-13 by leaning on the fund.
According to the state comptroller’s office, the state later ended fiscal 2008 with more than $4.3 billion in the fund and closed the next year with a balance of more than $6.7 billion.
End of story? Not quite.
In a May 5 blog post by Fikac on the Houston Chronicle website, Perry acknowledged he advocated liquidating the rainy day fund — in 2005. "I did," Fikac quotes Perry saying. "If you’ll recall, it was during a period of time when we had major surpluses. I don’t see any reason to have huge amounts of money in a rainy day fund when you have just massive surpluses. If you recall, in 2005 we had a $10 billion budget surplus relative to the two-year budget before."
As for what he was going to do with the fund after it was liquidated, Perry said he didn’t remember the details. "You’re asking me things I can’t give you specific answers to. I’ll speak to you philosophically about what I was thinking about, which is why have a big stack of money sitting over in the side when you have large budget surpluses."
Winding up: We found no record that Perry proposed to empty the rainy day fund to pay for rebates in 2007 — he never specified what they would cost — or that the Senate "roundly rejected" such an idea. The record does show that Perry’s rebate proposal got nowhere in the Legislature.
It also shows that despite Perry’s avowed distaste for tapping the rainy day fund, he has repeatedly approved state budgets that effectively spent it all. And that was the larger point Ogden and Watson were trying to make in their exchange on the Senate floor.
We rate Ogden’s statement Half True.
The Associated Press, news article, "Perry pushes for more property tax relief,"May 3, 2007 (Nexis search)
Austin American-Statesman, news article, "Property tax cuts called for by Perry,"May 3, 2007
Peggy Fikac, Hearst Newspapers, Twitter poston Gov. Perry and rainy day fund, May 5, 2011
The Houston Chronicle, Texas Politics blog post, "Gov. Perry on liquidating the Rainy Day Fund,"May 5, 2011; news article, "Rebates not seen as a top priority," Jan. 29, 2007
Office of Gov. Rick Perry, press releases, "State Leaders Reach Consensus on Closing FY 2011 Budget Gap,"March 15, 2011; "2007 State of the State Speech,"Feb. 6, 2007; Perry Designates Property Tax Relief for Senior Citizens, Tax Rebates Emergency Items for Legislature,"Jan. 12, 2007
Telephone interview, Catherine Frazier, deputy press secretary, May 4, 2011
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