OLYMPIA — Washington residents know plenty about preparing for rainy days, but political leaders in Olympia acknowledge that they have trouble saving for the budgetary rainy days that roll around with regularity.
Gov. Chris Gregoire and key lawmakers from both parties say that puts the state on an endless roller coaster, expanding the government during good times and chopping back or raising taxes when those hard times inevitably come.
“We’ve got to have a savings account,” shielded from easy spending by lawmakers or vulnerable to the initiative process, the governor said at a news conference this week.
Democrat Gregoire and large majorities of the state House and Senate propose a mandatory fix that will be on the November ballot: a “rainy day” fund that would build up to $1 billion or more during good times. During a recession or in the case of an earthquake, terrorist attack or other disaster, the money could be tapped by simple-majority vote in Olympia. Lawmakers also could access it with 60 percent supermajorities.
The Legislature has attempted to build up reserves, and voters approved a “budget stabilization account” as part of spending limits in Initiative 601 in 1993.
But as a practical matter, lawmakers from both parties have dipped into the cash by simple-majority votes as they labor under relentless spending pressures. They drained the reserves in 2003, for instance, to balance the budget during the recession.
Big surpluses and reserve accounts also have seemed to invite citizen initiatives to expand spending, such as for automatic annual pay raises for teachers, or to cut taxes, such as car-tab license fees.
Gregoire said it’s human nature for lawmakers to throw up their hands and take the easy option of spending the money in good times, and deal with the crash-and-burn later.
The new plan is essentially enforced discipline, to smooth out peaks and valleys. Contributions would be automatic and the cash would be pretty much off-limits.
The whole system would be set in concrete in the state Constitution, with fairly tight restrictions on withdrawals. To backtrack would require another constitutional amendment, which takes a two-thirds vote in both chambers and voter approval.
The “rainy day” measure, Senate Joint Resolution 8206, would automatically set aside 1 percent of state government revenue each year, roughly $150 million.
Once it topped 10 percent, the excess would be available by simple majority vote for school and college construction projects.
It would take a 60 percent supermajority to tap, unless the governor declares an emergency or job growth has slumped to less than 1 percent, when a simple majority would suffice.
The emergency would have to be an actual catastrophe, like an earthquake, and not simply a budget shortfall.
The employment trigger tracks with recession. According to a study to be published by the Washington Policy Center this week, that has happened only 10 times since 1960, most recently in the deep and lingering post-Sept. 11, 2001, recession of 2002-04.
After withdrawals, the automatic annual deposits would resume.
The rainy day fund would start with about $430 million, including last year’s surplus and a $135 million deposit by the 2007 Legislature.
The state Revenue Forecast Council also projects that the state’s robust economy will produce about $1.1 billion in unrestricted reserves between now and summer of 2009. The Legislature, however, still has supplemental state budgets to write in 2008 and 2009 and will erode that number.
The idea of a constitutionally protected, hard-to-tap reserve account has kicked around for years, initially championed by business groups and Republicans, including Sen. Joe Zarelli of Ridgefield, the Senate GOP budget leader, who thought it would restrain spending and ward off tax hikes.
It gained new cachet when a state tax reform panel headed by Bill Gates Sr. recommended it as a way to stabilize state finances.
The main opposition came from House Appropriations Chairwoman Helen Sommers, D-Seattle, who called it a solution in search of a problem, asserting that lawmakers have shown they can restrain spending and shouldn’t have their constitutional budget writing duties undercut.
“I think it is foolish, thoughtless, highly political and a huge mistake,” Sommers said.
There has been little campaigning, although Gregoire said she’s promoting the measure whenever she can, while Sommers still is laying out the opposition arguments. Pollster Stuart Elway said voters for years have supported substantial reserves, and that he expects the measure to pass handily.
‘Rainy day’ plan at a glance
Got an umbrella? Voters are asked to create a “rainy day” fund that forces state government to set aside 1 percent of its income every year, to tap during times of recession or disaster.
Put it on auto pilot: The proposed constitutional amendment, SJR 8206, would automatically transfer money into the forced savings account every year without further vote by lawmakers — roughly $150 million a year.
Fingers in the cookie jar? Money would be largely off limits until needed during an economic downturn or a natural disaster or terrorist attack, when it could be withdrawn by simple majority vote in Olympia. Once the fund topped 10 percent, the excess could be shifted to school and college construction. Otherwise, it would take a 60 percent supermajority for lawmakers to tap the money.
More information: www.secstate.wa.gov/elections/2007votersguide.aspx.
Associated Press
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