Otherwise known as the “Rainy Day Fund,” this account was created in 1988 after an economic depression and severe drop in oil prices. The ESF exists as reserve funds in the event of an economic downturn or depression, and its funds are increased through taxation—some portion of tax dollars are always set aside to build the account. As of now, taxes on crude oil and natural gas are the primary sources for the fund. The legislature has constitutional authority to tap the ESF fund in response to three circumstances:

  • budget deficit during a biennium;
  • projected revenue shortfall in an ensuing biennium; or
  • any other purpose the Legislature chooses at any point.

The first two require approval from three-fifths of the Legislature in order to pass, the final circumstance requires a two-thirds majority.

[Source: Texas Comptroller of Public Accounts – FiscalNotes: the Texas Economic Stabilization Fund]