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The Advent of Spend and Save Budgeting
February 22, 2008
Author: CFM Staff
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There is a new 800-pound gorilla stalking state legislatures - rainy day funds that demand replenishing so they have enough cash to sustain critical spending during economic recessions.
Oregon legislative leaders saw an anticipated $139 million addition to the state's newly created reserve fund vanish in the "stroke of a revenue forecast" earlier this month.
At the same time, Washington lawmakers are quarreling with Governor Christine Gregoire over whether to set aside $750 million or $1 billion in that state's reserve fund.
Most everybody agrees Oregon's rainy day fund balance is too small at present to fend off the adverse effects of a serious recession. House Majority Leader Dave Hunt, D-Gladstone, says he would like to see the fund double in size. House Revenue Chair Phil Barnhart, D-Eugene, said it should be even larger.
But with shrinking state revenues as a recession looms, adding to the rainy day fund isn't possible.
Washington, like Oregon, is just beginning to feel the pinch of a national economic downturn. Evergreen State lawmakers meeting in Olympia want to trim back the contribution to the reserve fund to $750 million. Gregoire is insisting on the full $1 billion contribution.
Going forward, lawmakers will face increasing pressure to set aside revenue in good economic times. That is especially true in Oregon, with its volatile income tax system that rises sharply when the economy is booming, but also can fall precipitously when a downturn occurs.
Not spending all the money in the cash register is a challenge for lawmakers, who face intense pressure from a wide range of interest groups pushing for spending for schools, social services, public safety and a host of other causes.
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