Senate panel debates reserves as natural-disaster bill could free $155 million
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Summary
Lawmakers on a Senate panel debated whether to keep reserves near 28% or plan for 30% if a pending natural-disaster bill is enacted; staff said the bill would remove a $155 million booking and free up operating reserves but warned that rating agencies consider multiple factors beyond a single percentage.
Members of the Senate reviewed House Bill 2 reconciliation language on funding and reserves and spent much of the session debating how to account for a proposed natural-disaster authorization.
Staff described a table showing how changes from the House version would leave general-fund reserves “at about 28%,” and said that “if the natural disaster reform bill passes and is enacted, that negative would go away, and it would boost reserves up to about 30%.” The staff presentation noted that revenue estimators currently treat the $155,000,000 as spent for natural disasters, so the bill’s enactment would reverse that bookkeeping treatment.
Why it matters: The difference between 28% and 30% affects what money is immediately available for emergencies, what must remain liquid for bond-rating agencies, and whether the Legislature would need a special session to address shortfalls. Staff cautioned that rating agencies “look at a number of different things” beyond a single reserve percentage and identified pension liability and recurring revenue trends as important factors.
The panel discussed trade-offs. Some members urged protecting higher reserves to avoid calling a special session if large disasters or revenue shortfalls materialize; others suggested modest reductions in reserves could free money for priorities now. Staff described alternatives: restoring part of the state-fair transfer to avoid deep cuts elsewhere, reducing authorization for disaster contingency (which could raise the prospect of an earlier special session), or accepting a lower reserve level in exchange for program funding.
On recurring costs, staff said the committee’s recurring capacity was limited and that the previously discussed 1% public-employee raise would not be funded this year because recurring needs exceeded the available recurring capacity. Staff put the approximate cost of a 1% raise at $62,000,000 including public schools and higher education.
The committee adopted drafting instructions by voice vote and directed a small technical cleanup group to review language before final adoption. The reconciliation work will continue the next day with additional hearings on related bills.