Rep. Stokesbary, the ranking minority member of the House Appropriations Committee, has introduced HB 1163. The bill would require the governor to determine whether there is a cash deficit in the state general fund or in the near general fund–outlook.

Last August, following a very ugly June revenue forecast, the Office of Financial Management (OFM) estimated that there would be a cash deficit in the general fund–state (GFS) in FY 2021. RCW 43.88.110(7) requires the governor to make across-the-board cuts to spending allotments (agencies’ plans for spending appropriations) if a cash deficit is projected in a particular fund.

However, OFM argued that its estimate of monthly cash balances did not constitute “a projection of a deficit in a particular fund or account.” Instead, it was “a preliminary estimate based on partial information.” Additionally, OFM argued that for purposes of the statute, “particular fund” refers to the general fund (including federal, state, and local dollars), not the GFS.

The governor did not make the across-the-board cuts, and the September and November revenue forecasts greatly improved the budget outlook—we got lucky. Gov. Inslee acknowledged this at the AP Legislative Preview earlier this month:

“[Republicans] wanted to do some things that would have been very harmful to Washingtonians and turned out not to be necessary. They were making an assumption that we would have had a lot less revenues than we’ve ended up having. So had I yielded to those forces and allowed them to cut services to Washingtonians when we didn’t have to do that, that would have been a mistake and the events have proven that. My decisions have been vindicated in that regard. Now, you’re not always right, things don’t always turn out, history can show you’ve made a decision that didn’t work out, but in this case, my position has been, I believe, fully vindicated by events where we now have had additional revenues and the cuts they were insisting on, you know, would have been unnecessary.”

(As an aside, the “assumption” that the state would have lower revenues was based on the official revenue forecast. If you’re not going to make budget decisions based on the latest official forecast, I’m not sure what the point of having a forecast is.)

As the governor said, “things don’t always turn out.” HB 1163 would address OFM’s arguments from August and specify the process to follow in the future.

HB 1163 would require the governor to determine whether there’s a cash deficit in the GFS (specifically not to include the general fund–federal or general fund–local) or the near general fund–outlook (NGFO, also called the “funds subject to the outlook”). This determination would have to be made within 15 days of a revenue forecast. The bill also sets up a process by which a new Joint Legislative Fiscal Oversight Committee would hold a public hearing on the governor’s proposed response to any deficit. The governor would be required to initiate across-the-board reductions unless the committee recommends otherwise.

If the revenue forecast hadn’t improved in September, the spending cuts required would have been deeper than if they had been made earlier. Across-the-board cuts are a blunt instrument to be sure, but they are a bridge between the discovery of a fiscal emergency and the next legislative session, when the Legislature can re-prioritize appropriations (and/or tap the rainy day fund). Washington’s experience in the 1980s showed how bad it can get when luck isn’t on our side.