Washblog

Gregoire Pushes for Rainy Day Fund

Washington State Budget and Policy Center released its brief of the Governor's plan to set aside a portion of the State revenue for a "rainy day fund." The Seattle Times reports that "the state would set aside 1 percent of its anticipated general-fund revenues at the start of each two-year budget cycle." The fund will be capped at 10% of the State's annual revenue, approximately $1 billion. The fund will provide relief in an economic downturn or a State emergency.

The adoption of a rainy day reserve fund is a good idea in principle, however the Budget and Policy Center (B&PC) key in on some very important subtleties of the Governor's plan.
[A rainy day fund] can protect from cyclical deficits, which are temporary shortages of revenue due to downturns in the business and labor market. A rainy day fund cannot fix a structural deficit, which is a situation where the revenue structure does not allow the state to raise adequate funding whether in good times or bad.

Furthermore, B&PC argues that the forecasted cap of 10%, roughly $1 billion, will be "depleted in the first year of the biennium."

It was projected that the cost of continuing current services for the 2003-05 biennium would be $25.1 billion, but revenues were expected to be $22.4 billion, a deficit of $2.7 billion.

These are important issues to consider when budgeting the next few years. To me, it seems that this seemingly reasonable request of the Governor, with all the right intentions, runs into the similar barrier as many large funding issues in this state: Officials are afraid to explain the complicated nuances to the public in fear that too much information may make it wary and halt the planning. We saw this with the monorail (among other things) and we're seeing it now with the viaduct.

In order to effectively manage our money, and in turn, our economic and social growth, we must have leaders that are not afraid to express the entire scenario. We run into problems when we are told the partial story and expected to make significant decisions. Coupled with the other challenges of public representation, it becomes clear to me that an issue such as the rainy day fund deserves proper attention and explanation because it has the potential to educate people on a very positive opportunity.

I encourage you to check out the full brief presented by the Budget and Policy Center.

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