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Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts

The Comptroller's office proposes a way to use the state's Economic Stabilization Fund (ESF) to generate additional revenue for long-term obligations of the state without endangering the fund's original purpose of protecting state finances against economic shocks.

Current ESF Structure

50% of the annual severance tax is transferred to the State Highway Fund (SHF), and the other 50% is transferred to the ESF.

State statute requires the ESF to maintain a "sufficient balance" on hand — an amount set at $7.5 BILLION for the 2018-19 biennium.

The ESF is invested in two ways:

  • an amount equal to the sufficient balance is invested in the Treasury Pool – which is highly liquid and produced an 0.7% yield in FY2017
  • Amounts above the sufficient balance are invested in the Texas Economic Stabilization Investment Fund (TESTIF), which offers a slightly higher return than the Treasury pool – 2.4% return in FY 2017.

TESTIF has two primary performance objectives:

  1. maintaining purchasing power; and
  2. delivering returns in excess of short-term cash equivalents.

Proposed ESF Structure

We’re proposing to split the ESF into two tiers. Tier 1, the Texas Stabilization Fund, would be required to maintain a balance equal to 8 percent of general revenue spending and would be managed in a conservative way that still protects its purchasing power against inflation. It would maintain a healthy reserve for protection against any disruption in state finances.

The Texas Stabilization Fund replaces TESTIF.

As long as the Texas Stabilization Fund contains the required reserve balance, 50% of the annual severance tax would be transferred to the SHF, and any additional new dollars headed for the ESF would flow into a second tier, the Texas Legacy Fund, which would function much like an endowment, creating investment earnings dedicated to addressing the state's long-term obligations.

If the Texas Stabilization Fund does not contain the required reserve balance, then 100% of the annual severance tax would into the Tier 1 fund.

Downloadable version (PDF)

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