Dems vote to raid Rainy Day Fund, set state up for financial disaster, Ericksen says

 

  • Tactic is end-run around voter-approved constitutional amendment
  • Returns state to days of unsustainable budgeting, major shortfalls
  • Puts state bond rating at risk, could raise borrowing costs
  • State has plenty of money for property tax relief, no raid required

 

OLYMPIA – During one of the sunniest moments ever for the state budget, Senate Democrats voted Wednesday to raid the state Rainy Day Fund, dodging rules established by the state constitution and setting up the state for financial disaster, says Sen. Doug Ericksen, R-Ferndale.

“Those who fail to learn from the past are doomed to repeat it,” Ericksen warned. “We should have learned our lesson during the last recession. Irresponsible budgeting left us without the money to weather the storm. Now that Democrats have regained the majority in the Senate, they are getting set to do it all over again.

“We are awash in money. We don’t need to raid the Rainy Day Fund to provide property tax relief. This end-run around the state constitution poses terrible consequences for our bond rating, our taxpayers, and the entire state.”

The Democrats’ budget maneuver allows them to spend down the state Rainy Day Fund without a 60 percent vote of the House and Senate, as required by the constitution. By moving money around in the state budget, they avoid having to make about $700 million in deposits to the fund through June 30, 2019. The maneuver is contained a school financing bill, SB 6614, approved 25-23, which now moves to the House for consideration as the Legislature prepares for final adjournment.

The Democrats’ tactic comes at a time when the state budget is enjoying one of its best years ever. The Washington economy is booming and so are tax collections. Since the Legislature adjourned last year, state economists have projected an additional $2.3 billion in tax money.

The Rainy Day Fund, designed for financial emergencies, requires the Legislature to set aside 1 percent of its tax collections, and more than that in good years like this one. The fund currently holds $1.1 billion, and required deposits through 2019 would increase that to nearly $1.9 billion. Washington voters deliberately made the money hard to spend when they created the fund with a constitutional amendment in 2007. The 60 percent supermajority requirement means both parties must agree that a financial emergency requires its use.

If the Legislature stops playing by the rules, the state treasurer has warned the state’s bond rating will fall, costing taxpayers millions in additional borrowing costs. Even today, the fund is inadequate to cover a shortfall of the size the state encountered in 2009. $1.1 billion is just 2.5 percent of the state’s operating budget. Meanwhile, the Governor’s Council of Economic Advisers calculates an 88 percent chance of a downturn by 2023.

During debate on the bill, members of the Senate Democratic Caucus voted down an Ericksen amendment that would have provided $1 billion in property tax relief this year, without raiding the fund. It was the third time Democrats have rejected the Ericksen proposal.

“The Rainy Day Fund is designed for emergencies,” Ericksen said. “If we don’t have enough the next time the economy tanks, the Legislature will find itself under pressure to raise taxes at the worst possible moment. This is exactly what it did in 2010.

“The Rainy Day Fund is more than just an insurance policy. It prevents lawmakers from spending every last dime available to them, and creating financial obligations in good years that cannot be sustained when times are bad. This is what got us into trouble just 10 years ago.

“Unfortunately, Democrats are determined to spend every penny they can, and they are throwing caution to the wind. Just like they did before.”