Oil and natural gas production may have recently slowed, but the more productive wells remain online as production has not declined as much as expected through mid-2016. For several years, the oil and gas production boom contributed to a large increase in severance taxes that primarily fund the Economic Stabilization Fund (ESF). 

The ESF is broadly considered the state’s “rainy day fund” or “savings account” that was put in place with passage of a constitutional amendment in 1988. The ballot language that Texans approved was “The constitutional amendment establishing an economic stabilization fund in the state treasury to be used to offset unforeseen shortfalls in revenue.” However, there is no language in the constitution or statute identifying a specific purpose for the ESF. Regardless, the ballot language sold to Texas seems to be clear that this money is to fill unexpected revenue shortfalls. More clarity of the purpose of the fund is warranted.