Gov. Inslee has allocated $122.2 million from the state’s share of the federal Coronavirus Relief Fund (CRF) to replace funds that the state Legislature appropriated from the rainy day fund in March. If the state funds are returned to the rainy day fund, the 2019–21 budget is back in balance over four years.

In March, the Legislature passed EHB 2965, which appropriated $200 million from the budget stabilization account (BSA, or the rainy day fund). Of that, $175 million was appropriated to the disaster response account (DRA) to be used for response to the novel coronavirus. Most of the $175 million was allocated by this summer. Now, the governor is reducing $97.2 million in DRA allocations and providing the funding from the CRF instead.

The allocation memos (here is an example) don’t say that the unused DRA funding will be returned to the BSA, but EHB 2965 specified,

By July 1, 2021, the office of financial management must certify to the state treasurer the amount of any unobligated moneys in the disaster response account that are attributable to the budget stabilization account appropriation in section 1 of this act, and the treasurer must transfer those moneys back to the budget stabilization account.

Additionally, the $200 million from the BSA included $25 million for the new “COVID-19 unemployment account” and was to be used to reimburse the unemployment trust fund for approved unemployment benefits paid. Gov. Inslee has allocated $25 million from the CRF to the COVID-19 unemployment account.

The allocation memo specifies that the Employment Security Department (ESD) must use these CRF dollars to implement the EHB 2965 program that reimburses unemployment benefits from the COVID-19 unemployment account rather than charging them to the employer’s experience rating account. As with the unused DRA funding, EHB 2965 specifies that unused COVID-19 unemployment account funds attributable to the BSA must be transferred back to the BSA. (The allocation memo itself also requires the unused state funds to be returned.)

Assuming this $122.2 million will be returned to the BSA at the end of the 2019–21 biennium, the BSA will be sufficient to put the 2019–21 budget back in balance over four years. After the revenue forecast last week, I showed how the increased revenues and higher actual and expected reversions meant that total reserves were expected to be negative $12 million in 2021–23. In Table 1 below, I’ve added the $122.2 million back to the BSA. With that funding returned, total reserves are $110 million in 2021–23.

But we don’t believe Table 1 fully accounts for various savings measures the state has undertaken, including savings from the November caseload forecast and from the enhanced federal Medicaid match. Table 2 adjusts the outlook to account for these items. Under this scenario, total reserves in 2021–23 improve to $1.271 billion.

As I noted earlier today, the state has about $110.7 million left of its share of the CRF.