SJR 8206 fails to address biggest problems in the state's rainy day fund
On the ballot for next week’s election is Senate Joint Resolution 8206, a measure that would amend the state constitution to require higher deposits into our state Budget Stabilization Account or “Rainy Day Fund” (RDF). While Washington should stash away more of its resources during good economic times, SJR 8206 does nothing to address the fundamental deficiencies associated with our current RDF and revenue system.
SJR 8206 would require that revenues resulting from “extraordinary growth” be deposited in the rainy day fund. Under the resolution, revenues from growth exceeding by one-third the average growth in the previous five fiscal biennia (ten years) would automatically be transferred to the RDF. Only under certain circumstances, such as during or directly after a recession would “extraordinary revenue growth” transfers not have to occur.
While the goal of SJR 8206 is to create a more adequate and reliable RDF, it does nothing to address the rainy day fund’s largest and most pressing issues:
- Our revenue system is not capable of supporting a robust RDF. Experts in public finance recommend a rainy day fund balance of approximately 15 percent of annual spending. States with rainy day funds at or near this benchmark have strong revenue systems to support and replenish the fund. An expansion of the sales tax to a wider range of services would do much to bolster our revenue system and, in turn, the adequacy of our rainy day fund.
- In times of need, onerous barriers to withdrawal make it difficult for the state to use RDF funds. Unless the Governor declares an emergency, the withdrawal of funds from the RDF requires a supermajority (3/5ths vote) of the legislature. This creates an almost insurmountable barrier for the state to address budget shortfalls and allows a small minority of legislators to block the funding of vital public structures in times of need.
- Mandatory deposits are counterproductive during tough economic times. Under current constitutional law, 1 percent of total annual revenues must be deposited into the RDF by the end of every fiscal year regardless of the financial or economic issues facing the state. Mandatory transfers defeat the purpose of a rainy day fund and deprive key public investments such as education and public safety of funds when they need them most.
While SJR 8206 would prompt additional saving during good economic times, it does nothing to address the fundamental failures currently associated with our rainy day fund. To create a robust and dependable rainy day fund which can stabilize and support the state in its toughest time, more adjustments, both to the RDF and our revenue system, are needed.
For more information on how we can strengthen our rainy day fund read our policy brief.