System Benefit Fund Nears $1 Billion, Is There Hope for Reform?

Mose Buchele for StateImpact Texas

Edith Williams lives with her dog in an apartment in Round Rock. She says she depends on low income assistance from the System Benefit Fund to make ends meet.

“Fiscal transparency” and “cost cutting” are just a few of the buzzwords to watch for as state lawmakers gather in Austin next January for the 83rd Texas legislature.  But with all that talk, you might be surprised to learn that there’s a pile of nearly one billion dollars that’s been growing in a state fund for years. And it’s not being used for its intended purpose.

Meet the System Benefit Fund, a pot of 850 million dollars overseen by the Public Utility Commission of Texas. You might already be acquainted with the fund. After all, if you’ve ever paid a bill to a private electric company in Texas, you’ve paid fees into it.

Now meet Miss Edith Williams.

Williams is a 69 year old retired housekeeper. She and her dog live in an apartment in Round Rock, Texas. And she’s one of the hundreds of thousands of people who receive money from the System Benefit Fund to help pay her utility bill. In fact, the day I visited her, she said that I may have found her sitting in the dark if it weren’t for the fund.

“I only get social security and therefore, with the light bill, its over one third of my income,” she explained.

Williams is exactly the kind of person the fund was set up to help. In 1999, when Texas lawmakers deregulated the state’s electricity market, they weren’t really sure how it would impact low income and elderly Texans. So the fund was created to pay a portion of their bills and educate ratepayers about their options.

Mose Buchele for StateImpact Texas

State Rep. Sylvester Turner helped create the System Benefit Fund. He is now one of its most vocal critics.

State Representative Sylvester Turner [D-Houston] was one of the lawmakers that created it. But he’s since become one of its fiercest critics.

“It started off fine. And for the first two years it operated as we envisioned,” he remembered recently in his office. “And then the Public Utility Commission [PUC] and the legislature did not follow through on the third year on the education program. [They] stopped funding that completely.”

The flow of money leaving the fund continued to slow. In 2003, the PUC changed the eligibility rules, purging thousands of names from the benefit recipient list.

The cuts didn’t end there.

“Probably the worst year was 2005,” Carol Biedrzycki, the Director of Texas Ratepayers Organization to Save Energy, a ratepayer advocacy group told StateImpact Texas.

That year, the legislature decided that it wasn’t funding any of the low-income programs. “And there were 400,000 families that immediately got dropped at the end of the fiscal year,” recalls Biedrzycki.

The next legislative session some of that money was returned to low income assistance. But the discount now only applies for five months out of the year, instead of year-round.

“It’s a cycle where somebody takes something away from you completely, and you’re grateful to get part of it back again,” Biedrzycki told StateImpact Texas. “And this is a cycle that keeps going on and on.”

‘It’s Bigger Than Me….’

Biedrzycki might be forgiven for being a little tired of talking about the fund. Each legislative session she goes to lawmakers asking them to fully fund rate payer assistance programs. And each session she is rebuffed.

Mose Buchele for StateImpact Texas

Butting Heads: Carol Biedrzycki has long advocated reform of the SBF. So far, she says, those efforts have failed.

“Sometimes I think that its bigger than me and that I cant really do anything to change this,” she said.

But the reason lawmakers are hesitant to distribute more of the money and spend down the $850 million balance is largely agreed on by legislators of all political stripes. Instead of going to low-income assistance, the fund balance is needed to certify the state budget.

Here’s how:

As the flow of money leaving the fund has slowed to a trickle, the fees paid into it by ratepayers has not slowed down. That means that with each passing year, the amount of money keeps growing. And while it’s not being spent outright, it’s not just gathering dust either. Lawmakers can point to it to certify the budget at the end of each legislative session. (The Texas Constitution says that there must be enough revenue to cover spending passed by the legislators, so each passed bill is sent to the state comptroller for “certification.”)

And the bigger the System Benefit Fund gets, the more dependent lawmakers become on it to balance the books.

“The state is now like an addict on this money,” said Representative Turner.

Fingers Pointed in All Directions

If recognizing an addiction is the first step to recovery, many lawmakers and state officials appear at least to be on the right path. Everyone from PUC representatives, to retail electric providers, to lawmakers from both major political parties say the fund should be somehow brought under control.

It’s when you ask them who’s responsible that things get murky.

Representative Turner has long accused the Public Utility Commission for being complicit in the growth of the fund. But the PUC points back to lawmakers, saying that it is simply following budget cutting directives from political leaders when it reduces appropriations.

“It’s been several years now that the legislature has redirected a very good portion of the System Benefit Fund to general revenues,” Terry Hadley, PUC spokesperson told StateImpact Texas. “That is a legislative function.”

Carole Biedrzycki, of Texas Ratepayers Organization to Save Energy, doesn’t buy that argument.

“We have met with different commissioners at the PUC over the years, and asked that they submit a legislative appropriate request for the System Benefit Fund that spends all of the funds that they expect to collect,” she said. “And we have never had that request complied with in the last ten years.”

Biedrzycki points out that the PUC’s current Legislative Appropriations Request outlines further cuts to low income assistance programs. Though it also includes options to cease paying into the fund until the balance is spent down.

What Might be Done

Ultimately, it’s the state’s political leadership that will or won’t find a solution.

Biedrzyck’s group advocates putting the fund outside of the reach of lawmakers altogether, and into a private trust overseen by the PUC.

“There is a model for this,” she said. “Because the telephone Universal Service Fund is not under the jurisdiction of the legislature. It is not dependent on the appropriations process in order to get the money to the people who are intended to benefit by it.”

Representative Turner holds out little hope for a major overhaul like that in the next legislative session.  But he thinks some incremental changes could break what he describes as the pattern of dependence. Simply put: he wants more money to be paid out from the fund so it stops growing.

“I think we can start providing more of those dollars to seniors and low income persons to seniors with the System Benefit Fund. I think its going to be more difficult to address that 850 Million dollars that’s already in the bank,” he said.

Finally, the PUC provides some options as well. Those include stopping all fee payments into the fund until the balance is spent down (as mentioned earlier), or tying the fee paid into the fund to the amount paid out. That would effectively freeze growth of the fund by not taking in any more than goes out.

Back in Round Rock, Edith Williams said she wasn’t aware of the policy debate surrounding the fund. Though she believes it should be spent in the manner for which it was originally intended.

She says there are a lot of people going through lean times at her church right now. She’s always happy to tell about the fund’s low income assistance program, because it might help them too.

“It’s a little hard for us to ask for assistance,” she said. “But we do need assistance, because we are people who have worked. We have worked all our lives.”