The 2009 Washington Legislature probably will dip into the state’s emergency “rainy day” savings account to balance the budget because, economically speaking, it’s raining.
Although the state has a budget surplus today, that amount is expected to shrink as Washington’s economy catches up to the rest of the nation and follows a downward economic spiral, due in large part to a sudden drop in home sales and a worsening crisis in the national financial markets.
“It’s pretty clear that things are not going to get better soon,” said state Sen. Margarita Prentice, D-Renton, chairwoman of the budget-writing Senate Ways and Means Committee. “It looks as if we will (tap the rainy day fund). We can’t commit to a figure, but I think it’s pretty clear for now that everything has to be on the table.”
Members of the state Economic and Revenue Forecast Council will meet Thursday to find out how much money Washington can expect to collect in taxes in the second half of the current two-year budget cycle, as well as in the following two years, 2009-2011.
As of June, the state was expecting a surplus of $801 million in mid-2009. But at the current rate of spending, plus the projected enrollment growth in public schools and other state programs, the governor and Legislature could be facing a shortfall of nearly $2.7 billion by mid-2011.
However, the actual shortfall could be less than $2 billion. That’s because the Budget Stabilization Account, informally known as the rainy day fund, will have an estimated $728 million available to tap.
Voters created the fund in November 2007 by amending the state constitution. The amendment makes the state put 1 percent of its general tax collections into the savings account every year.
Ordinarily, money can be withdrawn and spent only if the governor declares an emergency in the wake of a catastrophic event or if both the state House and the state Senate approve spending by a supermajority – a 60 percent vote in each chamber.
But recent economic news will make it easy to tap into the fund.
If the growth in new jobs is less than 1 percent a year, it takes only a simple majority vote in the Legislature to tap the rainy day fund. Lawmakers learned earlier this month than nonfarm payroll jobs are expected to grow by only 0.6 percent this fiscal year, from July 1, 2008, through June 30, 2009.
If job growth stays below 1 percent through the next two forecasts in November and March, the Legislature can take money from the rainy day fund. Democrats are expected to be calling the shots once again after the November election, as they outnumber Republicans 63-35 in the House and 32-17 in the Senate.
“I don’t think (voters) would want us to slash $600 million from our education and social services, right?” said Rep. Hans Dunshee, D-Snohomish, vice chairman of the House Appropriations Committee.
“I can’t speak for the caucus, but I would personally do it,” said Dunshee, who is likely to succeed retiring Rep. Helen Sommers, D-Seattle, as the House Democrats’ chief budget writer.
Dunshee said he was using the $600 million only as an example, to illustrate that he wouldn’t want to deplete the entire fund.
Sen. Joe Zarelli, R-Ridgefield, and Rep. Gary Alexander, R-Olympia, top Republicans on the budget-writing committees in the Senate and the House, say it would be foolish for the Legislature to start spending the savings account that was set up less than a year ago.
“Some of us are going to have a little heartburn about that,” Alexander said. “I don’t think the rainy day fund needs to be tapped into without looking into reducing the budget as much as possible. With the right prioritization, you can develop a budget without dipping into the rainy day fund and without raising taxes.”
Democrats helped create a budget emergency by spending so much more money than the state was collecting in taxes, Zarelli said. They used up some of the state’s previous budget savings to pay for expanded programs and more spending, he said.
“Our budget should be based on tax collections, not on what we have in the bank,” Zarelli said. “If you use your savings, you’re just compounding your problem. If you spend a half a billion dollars more than you’re collecting, your problem will be worse down the road. That’s how we got where we are now.”
“We are just heading into our share of an economic downturn,” he added. “We’re just starting to feel it. The full impact won’t be known until after we put together our budget” in the spring.
Victor Moore, Gov. Chris Gregoire’s budget director, said it’s too soon to tell whether the rainy day fund will be tapped.
“That’s a choice that is yet to be made,” Moore said. “Thankfully, we have a rainy day fund as one of our options.”
His staff is writing a 2009-11 budget for the governor to submit to the Legislature in mid-December.
Joseph Turner: 253-597-8436
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