Conservative Fiscal Policy in Texas Keeps Option Open for Rainy Day Fund Use in Harvey Recovery

​This commentary was published in The Dallas Morning News on September 15, 2017. 

Hurricane Harvey recovery, especially for the families of the 70 Texans who lost their lives, will take years. The economic impact is also staggering.

Early estimates show this storm could cost $190 billion in lost economic output, according to AccuWeather, roughly 14 percent of the state's personal income and 1 percent of the nation's total gross domestic product. In addition, more than 1 million people have been displaced, struggling to find resources to meet basic needs. But this is Texas, where strangers become quick friends and where people don't wait for government assistance.

Armies of private trucks and trailers, driven by Texans acting on their own initiative, brought resources to fellow Texans in need.

Texans helping Texans. Americans helping Americans. Truly a remarkable sight, especially for anyone who has bought into the media narrative that the threads of civil society are frayed. In just one week, businesses and individuals have donated more than $150 million, according to estimates from the U.S. Chamber of Commerce, highlighting the willingness of Americans to help each other.

Historical evidence proves that private charity has long been the most effective way to assist those most in need, and we predict that Harvey recovery will set the new standard for how private resources can be marshaled efficiently.

But given the scope of the recovery, there is also a role for government. With Congress taking swift action on an initial recovery package, what should the Texas Legislature do?

We at the Texas Public Policy Foundation are strong advocates of Texans keeping more of their hard-earned dollars by limiting the size and scope of all levels of government. Our research shows that when this is done, Texans prosper more, allowing them to donate in times of need — just as they have done over the past several weeks.

Their generosity proves the wisdom of the Texas Model of low taxation, fair regulation, and freedom. Consequently, families, community organizations, and private charities should be the first line of defense in helping Texans recover. State government ought to complement these private efforts, and augment federal action, in ways that private sector efforts aren't crowded out and tax dollars aren't wasted.

What a perfect opportunity to do so via the Economic Stabilization Fund, commonly known as the "rainy day fund." Created in 1988, the fund has grown substantially in recent years to approximately $11 billion because of Texas' impressive growth in economic output, namely in oil and gas activity.

Texans should be grateful to Gov. Greg Abbott, Lt. Gov. Dan Patrick and the Legislature for restraining growth of state spending: That fiscal discipline has provided a substantial rainy day fund for what is literally the rainiest period in Texas' recorded history.

So what's the most appropriate use of the state's rainy day fund? Considering that state and local governments will see a short-run decline in revenue from a drop in Texas' economic output, the fund's balance would be well-spent on bridging the gap while cutting spending where possible.

This would be a proper, effective way for the state to play its role in the recovery. But as we say in Texas, there may be alligators in the water, as problems lurk just beneath the surface. In politics, that would be the ever-present temptation to spend too much of the people's money.

In this case, frivolously spending the state's rainy day funds on unrelated items — think Congress' actions following Hurricane Sandy — would be an affront to the recovery. But most of all, it would be an affront to Texans, whose compassion, grit, and can-do attitude have captivated a nation. All aspects of this recovery, the response of individuals to their neighbors, state and local leaders so effectively coordinating decisions, and state government having a sizable emergency fund, provide evidence of what good public policy can do.

Protecting people's freedom supports human flourishing. This is yet another example that the American Dream is not dead, it's simply moved to Texas.

https://www.texaspolicy.com/blog/detail/even-conservative-texans-agree-its-time-to-tap-the-rainy-day-fund