OFM: The statutory requirement for across-the-board spending cuts “has not been triggered”

By: Emily Makings
11:04 am
August 13, 2020


As I wrote last week, the Office of Financial Management (OFM) had produced an estimate of the monthly cash balances of the general fund–state (GFS), including the federal coronavirus relief fund (CRF). OFM estimated that the GFS cash balance would be negative $277 million this month. Meanwhile, RCW 43.88.110(7) states: “If at any time during the fiscal period the governor projects a cash deficit in a particular fund or account as defined by RCW 43.88.050, the governor shall make across-the-board reductions in allotments for that particular fund or account so as to prevent a cash deficit.”

In a letter to the legislative fiscal committees this week, David Schumacher, the director of OFM, writes,

based on our legal analysis of the application of the statute to the projected cash balance, the across-the-board requirement has not been triggered. The spreadsheet OFM prepared is not a projection of a deficit in a particular fund or account, as required by statute.

Rather, it is a preliminary estimate based on partial information. It does not take into account all the possible fiscal activities that may or will occur, such as any of the actions the governor, OFM and agencies have already taken to reduce spending or the possibility that the state will receive additional relief funds from the federal government.

Legal issues aside, I want to stress that we do not see across-the-board cuts as a viable or wise solution, and we are not considering them.

Thus, OFM interprets the statute differently than the the plain language of the statute seems to suggest. OFM’s legal analysis (which has not been provided) appears to interpret the statute as more of a tool for the governor in managing the state’s fiscal situation. [Update: Here is OFM’s legal analysis.] It’s worth noting that then-Gov. Gregoire ordered across-the-board cuts in 2010 after projecting a cash deficit in the GFS, as we’ve written. 

Schumacher adds,

the state occasionally has to manage projected cash deficits in various funds to best serve the public interest. That is what we are doing with the situation we currently face in the General Fund-State appropriations. And, I want to stress, the state does not have a cash flow problem. We have sufficient funds in the state treasury to pay our bills.

Similarly, the state treasurer told Lens, “The State Treasury as a whole is adequately funded and in the black.” But, interfund loans are being used to cover the substantial imbalances in the GFS. The governor has also taken several actions to save money, but (as I noted last week), those are not enough to make the GFS cash balance positive. OFM is also hoping the state will be able to use federal funds to address the shortfall, but so far there is no sign of a deal in Congress.

Ultimately, even if the governor is not legally required to make cuts now to reduce the GFS cash deficit, the Legislature should go into special session sooner than later to prioritize spending and use the rainy day fund, rather than leaving what will certainly be difficult choices for later—when they will be more costly.

OFM has also provided an updated estimate of the GFS+CRF monthly cash balance. It differs from the original by including transfers to and from the GFS. (This includes the constitutionally-required 1 percent annual transfer from the GFS to the rainy day fund.) Below is the new estimate from OFM. With the FY 2021 transfer to the rainy day fund, the rainy day fund balance is expected to be $1.917 billion.

Categories: Budget.