Voters should approve state Rainy Day Fund
June 11, 2008 · Updated 6:24 PM
When I was in sixth grade, my brother and I got a newspaper route. When we collected our first paycheck and paid our paper bill, my mom took us to the bank and opened a college savings account with part of the extra money. Each month, we put $5 in savings before we spent big bucks on movies, tennis shoes or baseball mitts.
My folks grew up during the Great Depression and worked hard just to help their parents pay the bills and put food on the table. They knew what it was like to gaze into an empty piggy bank.
My parents were part of the pay with cash and save for the extras generation. By todays standards, they would be very unusual because they bought their cars with cash, didnt have a credit card, and never had a home loan.
Today, many people struggle just to make the minimum payments on their credit cards. They have too many loans and lack the discipline to save. In fact, the U.S. Department of Commerce reports that, for the first time since the Great Depression, the personal savings rate in America is in negative territory, meaning that we are spending more than we earn. Compare that to China, where workers save 30 percent of their income.
In many ways, government has the same problem. Lawmakers often increase spending during flush times, with little thought of the consequences when the economy slows. The result is a roller coaster of big spending and drastic budget cuts or the dreaded alternative, higher taxes.
In November, voters will have an opportunity to change that trend and put some money away in savings.
Senate Joint Resolution 8206 would mandate that the state create a rainy day fund to smooth out the cycle of binge and bust. The measure is strongly supported by the Legislature and Gov. Gregoire, but because it requires a constitutional amendment, voters will have the last say. If approved, Washington will join 45 other states that have rainy day funds.
You may remember that Washington voters approved a reserve fund in 1993 as part of Initiative 601. But because I-601 was established by statute rather than as a constitutional amendment, lawmakers were later able to change it to give them access to the money.
SJR 8206 would force lawmakers to save money, and it provides stronger protections for those funds. The measure would require the state to put away 1 percent of the General Fund each biennium. If approved by voters, the states current $295 million reserve will be transferred to a new account and augmented by $135 million over the next two years. Thereafter, the reserve account is projected to grow by $150 million per year.
Under SJR 8206, legislators could tap the fund if job growth falls below 1 percent, if the governor declares an emergency and immediate action is required to preserve public health, protect life, or protect public property, or by a 60-percent vote in both the House and Senate. If the fund grows to more than 10 percent of the General Fund revenue, lawmakers could appropriate the excess for school construction.
SJR 8206 deserves voters support, but a rainy day fund is only part of the solution. For voters to get their moneys worth, they must demand fiscal restraint. In other words, be like my mom and take us to the bank to put some extra money away for the day we need it.
Don C. Brunell is the president of the
Association of Washington Business.