Just when I thought it was safe to go back in the water I saw the balance sheet for the compromise budget [1]:
- $319 million total reserves for $31.121 billion of spending or 1% of spending (includes $265 million of restricted constitutional reserve)
- Unrestricted ending fund balance of $54 million (0.2% of spending)
- Unrestricted ending fund balance minus new accounting change is negative $184 million
While the February revenue forecast [2] didn’t capture the potential revenue from the federal unemployment insurance and payroll tax cut extensions, gas prices have continued to increase and Spain is doing its best Greece impersonation [3]. This is why the February forecast had a 40% probability of the pessimistic outlook. Based on these economic realities, it is surprising to see such a low ending fund balance be agreed to for the budget.
Looks like the budget provides some options however [4]:
- Section 912: “For purposes of RCW 43.88.110(7), any cash deficit in existence at the close of fiscal year 2012 shall be liquidated over the remainder of the 2011-2013 fiscal biennium.”
- Section 919 also provides the governor some increased flexibility on any required across-the-board cuts.
Raise of hands of those that think the new budget will survive the June Revenue Forecast?
Here is what the Governor said last November about the need for a healthy budget reserve:
Had the Legislature used the same 2% of savings as the Governor's proposal, total budget reserves would have been more than $600 million versus the actual $319 million. For sustainability, reserves of at least 5% of spending are recommended.