Balance the WA state budget responsibly. Don’t drain the rainy day fund | Editorial

Budget writers in Olympia face a yawning chasm between forecast state revenue and planned state spending.

Gov. Bob Ferguson’s proposal to force most state employees to take one day off per month unpaid is a difficult but pragmatic response to save some money. Less attractive is a legislative proposal to drain the state’s rainy day fund.

Ferguson’s furloughs would save about $300 million over two years. That alone will not close the budget gap, but as part of his broader proposal to cut $4 billion while preserving essential public services, it will create some breathing room. He also has suggested eliminating 1,000 full-time government positions through attrition, reducing spending on travel, and eliminating waste fraud and abuse.

That last category is the sort of thing that elected officials cite whenever there is a shortfall — and often when there isn’t one. If it were easy to identify waste, fraud and abuse, though, officials would have done it already. Taxpayers should not expect much help there.

Furloughs, however, are feasible, even if public employee unions are pushing back. State workers understandably do not want to take what amounts to a pay cut.

Whether Ferguson can convince lawmakers to buck against the unions remains to be seen. He at least has fiscal reality on his side. Balancing the budget will require sacrifices across the board.

Meanwhile, Democratic lawmakers have introduced Senate Bill 5392, which would drain the entire state rainy day fund to help pay for spending. The fund – technically called the Budget Stabilization Account – has about $1.6 billion in it. SB 5392 says that the state would pay back the money in a couple of years.

Such a drastic move is fraught with long-term risk.

State Treasurer Mike Pellicciotti has warned lawmakers that tapping state reserves could undermine Washington’s AAA bond rating. That sterling credit rating saves the state money when it borrows to pay for capital projects like constructing roads, bridges and state buildings.

If the rating declines, the state would have to pay more interest. That, in turn, would divert future operational revenue to debt service. Recovering the state’s reputation as a top-tier borrower could take years.

The rainy day fund was designed as a financial safety net for unforeseen emergencies. It was not meant to shore up systemic spending imbalances. Washington got here through the accumulation of spending decisions in Olympia made over years. The last time the state emptied it was during the unprecedented challenges of the COVID-19 pandemic in 2021.

It might be drizzling now, but a torrent could hit in the next few years.

The Trump administration is slashing federal support to states and causing widespread financial upheaval with recently implemented tariffs. Washington is particularly vulnerable to the latter as a hub for international trade with Canada and Asia. If things go south, the state will need reserves to draw on.

Taxpayers also should look skeptically on SB 5392’s promise to pay back the money.

There is no reason to believe that there will be a $1.6 billion surplus in a couple of years to restore the rainy day fund. In fact, using that money now would allow the state to skirt by without rectifying the underlying budget shortfall.

Lawmakers might be able to make a case that a partial drawdown could serve as a bridge to a sustainable plan. At least that would leave some money in reserve. Before getting there, though, they need to develop that plan, which could even include modest tax increases as a last resort.

Uncertain economic times demand careful stewardship of our state’s resources. While difficult choices like furloughs are inevitable, the state must safeguard its financial reserves.

Maintain a robust emergency fund while pursuing fiscal discipline through responsible cost-cutting measures and incremental reforms.