Rep. Joe Schmick: Voter-approved ‘rainy-day fund’ on life support

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Over a decade ago, in November of 2007, Washington voters proved their intelligence, foresight, and practicality by approving the state's constitutional “rainy-day fund.”  Here is an excerpt from the Voters' Guide:

“Every year 1% of state revenues are automatically put into the fund.  Until the fund reaches 10% of state revenues, the money can only be spent when the economy declines seriously, as it did after 9/11, or if there is a catastrophic emergency requiring immediate action.  If other unforeseen circumstances come up, a 60% majority of the legislature can approve releases.”

In an October 14, 2007 editorial supporting the rainy-day fund, The Spokesman-Review said this:

“If voters approve this constitutional amendment, it will enforce the kind of discipline necessary for state lawmakers to say an occasional 'no' to the many constituencies that appeal to them for funding.  Make no mistake, even in the sunniest of economic times there are more valid claims on the state treasury than treasure to accommodate them.  And when the decision-makers are politicians who survive on keeping voters happy, it's easy to see why state governments have trouble holding something back as a contingency against the unforeseeable.”

Simply put, it took the voters to do something that the Legislature was unable or unwilling to do: put some money away for the unforeseen, but inevitable, emergency or downturn in the economy.

In normal times, it takes a two-thirds vote of the Legislature to tap the rainy-day fund, or Budget Stabilization Account (BSA) as it's officially known.  We did it last year for COVID expenses, and the year before for schools as part of the McCleary decision.  Before that, we tapped the fund with a two-thirds vote to respond to the Oso mudslide and the devastating wildfires.

The point is, the idea of the fund has worked.  Legislators have put money away in good times, to prepare for the bad.  We've worked together in emergencies when needed, and taxpayers have the assurance that the state has a financial buffer.

However, with the budgets we're now seeing out of Olympia, it appears the rainy-day concept is on life support.

The operating budget recently released by House Democrats contains a budget maneuver that appears to violate the spirit, if not the rule, of what voters wanted.  It takes $155 million from the state general fund and $1.8 billion from the BSA and transfers it into a newly-created account called the Washington Rescue Plan Transition Account for COVID-related costs.

However, none of these funds are actually spent in the budget.

Wait.  What?  Why would Democrats put nearly $2 billion into a new account and not spend it?

Because they can.

One of the ways a simple majority can take money out of the BSA is when employment growth is low.  Currently, even though the state is literally awash in cash from taxpayers and the federal government stimulus packages, employment growth is low enough to allow a simple legislative majority to take advantage of this exception.

The majority party, without input from legislators that represent constituents around the state, can then take that money and spend it next year, or the year after, when employment growth rebounds and they would normally then need a two-thirds vote.  It looks to me like an end run around the constitutional provisions and protections of the rainy-day fund.

Or, perhaps they know the income tax on capital gains that their current budget proposal relies upon is actually unconstitutional.  So, they're preparing to plug that hole now when the court rules against them in the future.

Unless you're at the table when these decisions are being made – and as a member of the minority party, I'm not – it's impossible to know what budget writers intend with this budget maneuver.

However, unless the public and the media hold them accountable, it's entirely possible that we are witnessing the beginning of the end of the state's rainy-day fund.

(Rep. Joe Schmick, R-Colfax, has served on the House budget-writing committee since he took office in 2007.)

State Representative Joe Schmick, 9th Legislative District
RepresentativeJoeSchmick.com
426B Legislative Building | P.O. Box 40600 | Olympia, WA 98504-0600
joe.schmick@leg.wa.gov
360-786-7844 | Toll-free: (800) 562-6000