Why have a Rainy Day Fund if state leaders don’t even grasp its purpose?

We will suffer another economic downturn at some point – that’s a given.

The “when” is unpredictable, as ample history should make obvious. As much as some like to search after-the-fact for those “voices in the wilderness,” such as those issuing warnings in 2007 of impending problems, those cases may have more to do with that old truism that it’s better to be lucky than good. The reality is, we don’t know when an economic setback will snowball into a downturn.

That is precisely why state government has a Rainy Day Fund of budget reserves – because we don’t know when we’ll need it. The Rainy Day Fund helps smooth out the bumps in tough times and supports important state programs when budgets are tight.

Saving money in the Rainy Day Fund is supposed to be automatic. Voters approved a system where a portion of state revenues during good times are automatically deposited in budget reserves. They did this because the temptation for legislators is always to spend rather than save.

Spend now, save later
Unfortunately, too many state leaders don’t see the wisdom in this approach. Gov. Inslee’s supplemental budget in December proposed spending budget reserves now, and Senate budget writers followed that approach.

To them, the Rainy Day funds were just sitting there, doing nothing, so we might as well use them. But isn’t that the point of budget reserves? We don’t know when we’ll need them, and they can’t be used in a pinch if legislators already spent them.

The Senate’s budget is the one that ultimately prevailed. Legislators swiped the Rainy Day Fund because wise saving isn’t as fun as immediate spending.

Dubious, to say the least
Spending from the Rainy Day Fund, which is constitutionally protected, is supposed to require a three-fifths vote in each house, but Democrats employed a clever trick. Under their theory, if legislators allocate the funds before they’re actually deposited in the Rainy Day Fund, they can spend that money with a simple majority.

Legal? Maybe. Cynical? Certainly. This bit of gamesmanship is under a legal challenge, and it deserves to be. A court examination of this practice is appropriate.

State Treasurer Duane Davidson opposed the raid on reserves and warned lawmakers of the perils. “Our biggest concerns are our ability to handle an upcoming recession,” Davidson told Lens. “That’s the whole purpose of the budget stabilization account.”

Legislators are sending a different signal: We don’t want an automatic savings program to save us from ourselves.

It’s disheartening to see the Legislature abuse a voter-approved process that is all about prudence, but perhaps it isn’t surprising. In approving the Rainy Day Fund, voters were saying they value saving and spending wisely; too many legislators value more their flexibility to spend.
-Rob McKenna

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Rob McKenna
Rob served two terms as Washington’s Attorney General, from 2005 to 2013. He successfully argued three cases before the U.S. Supreme Court and negotiated three of the largest consumer financial protection settlements in national history, all involving mortgage lending and servicing. He is a recognized leader in the development of consumer protections on the internet, in data protection and privacy regulation.