In the past, Gov. Rick Perry has made maintaining the fund's $8.1 billion a top priority. When Democrats wanted to tap the fund last year to avoid cutting $5.4 billion in school funding, Perry said such a move was fiscally unwise.
Yet on Thursday, Dewhurst told the Dallas Regional Chamber that lawmakers should consider taking $1 billion from the fund to start a "water infrastructure development bank" to help cities and counties pay for environmental studies, permits and other groundwork for new construction. He said the fund could also help the state build more roads.
"I think, as a fiscal conservative, we could draw down a little bit and still keep a very healthy balance in the Rainy Day Fund," said Dewhurst, who presides over the Texas Senate.
Dewhurst was clearly letting the public in on an idea already circulating around the Capitol. No conservatives immediately denounced the suggestion and Perry's spokeswoman said the governor was ready to talk about such solutions to the state's water problems. Business and environmental groups praised the recommendation.
Dewhurst's recommendation fits within Perry's Texas Budget Compact, a conservative fiscal agenda the governor announced earlier this year.
"An adequate Rainy Day Fund is critical to our ability to respond to and recover from disasters and emergencies, whether they're natural or man-made," the compact states. "When we do pay money out of the fund, it's important it be used exclusively for one-time-only needs, and never be tapped simply to meet ongoing expenses."
The Legislature created the Economic Stabilization Fund -- as it's officially known -- in 1987 from oil and gas taxes to deal with swings in the state's economy due to the unstable price of petroleum products. Lawmakers have drawn from the fund in 12 of the last 22 years.
In 2003, Perry and the Legislature nearly drained the fund when the Texas economy suffered and tax revenues plummeted. The fund was last tapped in 2011 when Perry and lawmakers used $3.7 billion to make up a budget deficit, a move required by the Texas Constitution.
But tapping the fund to create an infrastructure development bank is more in keeping with how Republicans want to use the fund in the future. Perry tapped the Rainy Day Fund to create his Texas Enterprise Fund in 2003 and his Emerging Technology Fund in 2005.
Perry uses those funds to convince companies to open shop in Texas or invest in promising start-ups already in the state. His office says those funds bring economic development to Texas and more than pay for themselves.
A well-designed water infrastructure development bank could become a self-sustaining way for Texas to prevent major water shortages as the state's population continues to skyrocket.
A water plan approved last year by the Texas Water Development Board said the state should eventually spend $53 billion over the next half-century on new reservoirs, dams, pipelines and wells. So far the Legislature has not set aside a penny to implement the plan.
The bank could become a resource for local governments during the early development of new water resources. Those governments could eventually pay back the bank through their construction budgets, Dewhurst said.
Texas is also facing a transportation crisis after years of shrinking income from fuel taxes and $17 billion in borrowing for road building. Rather than raise fuel taxes, the Republican-controlled Legislature has been allowing the Texas Department of Transportation to cover its budget with voter-approved bond money, an approach that will end next year when the last of that money runs out.
Finally, there is another good reason to tap the fund: It could max out. The Texas Constitution limits the fund to 10 percent of general revenue collections and the present limit is $12.1 billion. Once the fund reaches its limit, those oil and gas revenues start going into the state's normal coffers.
Tapping the fund for a special purpose gives the state's leadership greater control over how the money will be spent.