OLYMPIA — Washington officials are exploring a permanent change to a state accounting process that would allow lawmakers to balance the current two-year budget by briefly claiming control of local sales taxes that get redistributed to jurisdictions across the state.
In a memo to county treasurers on Thursday, the state treasurer said officials were looking to hold local sales and use taxes in the state’s general fund for an extra month — something that would provide a $238 million boost to the state balance sheet. That money is usually sent right into a dedicated account and later distributed back to local governments.
Local jurisdictions would still get their money at the same time. They would only lose a small bit of interest that the special account usually accrues — some $250,000 a year.
“This proposal — if adopted by the Legislature — is yet another way for the state to modernize and improve the way we handle cash,” said State Treasurer Jim McIntire in a statement. “A permanent change to this process will help the state better manage its liquidity.”
Under the current payment system, the state’s current practice of making daily deposits into the account for local governments results in the account accruing nearly two months of payments, said Karina Shagren, a spokeswoman for Gov. Chris Gregoire.
By holding off making the deposit into the account until the distributions are made to the local governments at the end of the month, “you don’t need that cushion anymore,” she said, which results in freeing up the $238 million in general fund dollars.
That extra money is a one-time thing that won’t be repeated in future budgets, Shagren said.
Scott Merriman, deputy director of the Washington state Association of Counties said that his organization is OK with the proposal.
“We’ve looked at it, and it works for us,” he said. “We don’t have any problems with it.”
He said that while his understanding was that statewide, local governments face a “nominal” interest loss, “there would be a remedy to recover the lost interest.” He said he wasn’t sure what exactly that remedy entailed but that it was “a math solution to make us whole.”
Merriman said more important is a quick solution to the budget that could affect counties more.
“If the budget is not solved soon, there are program reductions that could occur that we will have to respond to,” he said.
Lawmakers have been struggling to find a budget compromise. Republicans had proposed skipping a pension payment while Democrats wanted to delay a payment to schools.
Top budget writers either declined comment or did not return calls seeking comment Thursday. They have vowed not to discuss internal deliberations until a budget deal is complete.
Gregoire said the idea came from trying “to solve this dilemma between what the Senate Republicans wanted and what the Democrats wanted.”
She said that while negotiations are still ongoing, “I consider it significant that nobody has said no” to the new idea.
Gregoire is set to meet again with budget writers on Friday morning.
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