The Legislature passed the 2022 supplemental operating budget (as recommended by the conference committee) last night before adjourning.

Yesterday I showed how the Legislature decided to use the $13.8 billion surplus in funds subject to the outlook (NGFO). Of the surplus, 14.1% goes to reserves—the unrestricted NGFO ending balance and the Washington rescue plan transition account (WRPTA, the shadow reserve account created last year). But the Legislature will also make the constitutionally-required transfers to the budget stabilization account (BSA, the rainy day fund), and they already had $1 billion stashed away in the WRPTA.

As proposed by the conference committee, the operating budget will leave an estimated unrestricted NGFO ending balance of $348 million at the end of the outlook period. The BSA ending balance will be an estimated $1.246 billion. The WRPTA ending balance will be $2.6 billion. That means that total reserves (including WRPTA) are an estimated $4.194 billion at the end of the outlook period. The chart below shows total reserves as a share of general state revenues (history and as passed by the Legislature). The blue bars are in terms of the unrestricted NGFO ending balance and the BSA; the green bars add in the WRPTA.

The state’s reserves certainly look better when the WRPTA is included. But the WRPTA is not shown on the official balance sheet, and it’s not clear if the credit rating agencies will consider the WRPTA to be part of the state’s official reserves. The BSA is the best place to keep reserves.

Also, note that the $348 million unrestricted ending balance may be especially tenuous. Under the four-year balanced budget requirement, the Legislature may assume that revenues will grow by at least 4.5% a year in the second biennium. The current revenue forecast grows by less than that (even as it provided legislators with $10.129 billion more than they expected last year). So, the conference report adds $896 million in revenues for 2023–25 (to reach 4.5% growth). If revenues come in as currently forecast, the budget will be out of balance over four years. Meanwhile, there is cause to be concerned about the economy, and the Legislature may lose expected revenues from the capital gains tax.