The WA Legislature plans to empty its Rainy Day fund. Here’s what it means if disaster strikes
House and Senate Democrats in the Washington state Legislature have negotiated a state spending plan that includes taking all the money out of the state’s “rainy day fund” reserve account, which lawmakers can tap with a majority vote in some emergencies and economic downturns.
The plan takes the $1.8 billion out of that account in its revision of the current budget — called the “supplemental” budget — and deposits it instead into the state’s general fund.
But that doesn’t mean the state will be without reserves if the plan passes through the Legislature and is signed into law.
First, the rainy day fund won’t stay empty — it automatically replenishes. By mid-2022, it’s projected to hold $268 million, then $543 million by mid-2023. By mid-2025, it’s projected to have built up to $1.1 billion.
There are other sources of reserves, too, lead House budget writer Rep. Timm Ormsby said in a phone interview, one of which is unspent federal COVID-19 stimulus money that’s tied to specific timeframes and guidelines.
The Democrats’ plan also takes $1 billion out of the general fund and deposits it into a new reserve account, called the Washington Rescue Plan Transition Account, as essentially an “unrestricted savings account,” Ormsby said.
In a hypothetical situation where there’s an emergency — say a really bad wildfire season — and there’s no longer money in the rainy day fund to address it, the Legislature could tap that new fund for relief, lawmakers confirmed.
On the whole, the new account makes the money easier to access for Democrats in the majority. But not everyone likes that idea.
What the rainy day fund is
Voters approved the creation of the rainy day fund, technically called the Budget Stabilization Account, within the state’s constitution in 2007. Each year, the State Treasurer transfers into it the equivalent of 1 percent of general state revenues for the past year.
The idea was to automatically set money aside every year so there’s something in savings when there’s a dramatic downturn, said David Schumacher, director of the Office of Financial Management. That’s why there are two ways to get money out of the account.
It takes a three-fifths, super-majority vote of the Legislature to tap the account, except in two cases: It takes just a majority if state employment is forecast to grow less than 1 percent in a fiscal year, or if the governor “declares an emergency resulting from a catastrophic event that requires government action to protect life or public safety.”
Before this account existed, a rainy day fund existed in other iterations. Dating back to 1987, the fund has held an average of what amounts to 3.6 percent of the state’s spending, according to Office of Financial Management data. As of mid-2019, it amounted to the equivalent of 6 percent of the state’s budget. The savings account is currently as large as it’s ever been.
Why make a new reserve account?
Allowable uses for the new Washington Rescue Plan Transition Account, the plan reads, include “responding to the impacts of the COVID-19 pandemic including those related to education, human services, health care, and the economy. In addition, the legislature may appropriate from the account to continue activities begun with, or augmented with, COVID-19 related federal funding.”
Having the funds set aside, said Senate lead budget writer Christine Rolfes, was strategic — in part to make sure there’s a back-up plan for efforts where it’s uncertain if federal funding can be allotted.
“It’s allowing us to be more flexible because the pandemic situation that we’re all in,” she said.
For example, the state is funding unemployment rate relief out of federal funds, but they don’t have rules in place yet to know for certain they can buy unemployment insurance rates down with those funds.
But the uses included in the bill language aren’t the fund’s limits, Ormsby confirmed. Lawmakers can tap that money and appropriate it without the “encumberments of the budget stabilization account statute,” he said. It’s an unrestricted reserve that the Legislature can appropriate with the governor’s approval.
The maneuver is one lead House Republican budget writer Rep. Drew Stokesbary called “clever,” but asserted “flies in the face of the spirit of the constitution.” All that’s being accomplished, he said in a phone interview, is permanently allowing the money to be spent with a simple majority vote.
It doesn’t violate the law, he said, but he thinks it creates a troubling precedent, where the majority can “sweep the money” from the rainy day fund when there’s less than 1 percent employment growth and put it in an account that doesn’t require the minority party’s buy-in to spend.
But Ormsby said it’s “no coy move” and pointed to Republican proposals to tap the rainy day fund earlier in the session. However, Stokesbary pointed out those plans were proposed before the influx of federal money and a rosier revenue projection were known.
If he were in the minority party, Ormsby said he’d also probably like to see the majority couldn’t do anything without his consent, he said. But this was a “very appropriate legislative move that was well within not only the spirit, but the letter, of the statute.”
This story was originally published April 25, 2021 at 5:00 AM.
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