Zarelli proposes constitutional amendment to require savings of exceptional revenue
SJR 8209 leads a trio of measures aimed at improving state budget situation

January 21, 2009

OLYMPIA… Sen. Joseph Zarelli today proposed an amendment to the state constitution that would route more money into the state’s rainy-day fund when revenue collections are exceptionally large, as they were from 2005 to 2007. 

“State government is better prepared now to handle ‘rainy days,’ thanks to the voters, but there’s more we can do to bring stability to the budgeting process. This amendment would treat an exceptional revenue collection as one-time money and put it out of easy reach of the Legislature,” said Zarelli, R-Ridgefield. 

Senate Joint Resolution 8209 already has gained bipartisan support, with Sen. Lisa Brown, Senate Democrat leader, at the top of the list of co-sponsors. She worked with Zarelli in 2007 to get the rainy-day fund amendment put on that year’s ballot, where it passed overwhelmingly. 

Last week Zarelli suggested the projected gap lawmakers must close when writing the 2009-11 state operating budget could reach $7.5 billion. Had the change represented by SJR 8209 been made prior to 2005, Zarelli estimates that difference would be nearly $5 billion smaller. 

“The extraordinary amount of revenue taken in during the 2005-07 biennium, when revenues grew by 21.4 percent, is already gone. There was nothing to force the Legislature to save that money, so it was spent,” Zarelli said. “My goal is to make sure, should that kind of growth resume, some of the revenue is automatically set aside. It can only help spare future legislatures from the kinds of decisions we will have to make in the coming months.”  

SJR 8209 would automatically move, into the rainy-day fund, revenue collected in excess of 133 percent of the state’s 10-year revenue growth average. Had the formula in Zarelli’s proposal been applied to the revenue collected in 2005-07, $2.4 billion would have been termed “exceptional” and deposited into the rainy day fund. 

Because that $2.4 billion also would have been unavailable for legislators to spend – as they did to launch and expand state services – the combined net benefit would be $4.8 billion today. 

“Sending this proposal to the ballot will show that Olympia has learned one of the important lessons resulting from the state’s budget situation,” said Zarelli, who thoroughly explained the concept in a budget brief last week. “If we see more of those exceptionally sunny days, when revenue collections really take off, state government will be in a position to make the most of it.” 

SJR 8209 is one of three measures Zarelli has proposed, in what will be a budget-oriented 2009 legislative session, to help bring stability, transparency and efficiency to state spending practices. 

Another measure introduced today, Senate Bill 5409, would create a competition council within the Office of Financial Management. A group comprising lawmakers, executive-branch experts and private-sector representatives would examine "commercial activities" being performed by state employees to ensure they are performed in the most cost-efficient and effective manner.

“We know competitive contracting is a great way to save money, but it has yet to receive the emphasis that should have come as part of the 2002 collective bargaining law,” said Zarelli. 

When the council proposed in SB 5409 determines that outsourcing a commercial activity may result in reduced costs, the governor will direct the appropriate agency to pursue a contract using the competitive bidding process. 

“This shouldn’t be met with alarm by state employees, because their work units will be able to compete for contracts as well,” Zarelli said.  

His third budget-related bill, introduced on the session’s opening day, is Senate Bill 5073. This measure would fold the separate accounts that have proliferated in recent years into the state’s general fund. 

“The operating budget is the general fund and a set of other funds which, for reasons that aren’t completely clear, were created outside but ‘near’ the general fund. That makes it unnecessarily difficult for taxpayers to follow how their dollars are being spent. We need to go back to having just one fund, the general fund, from which money is spent,” Zarelli said. 

“Considering how some major spending reductions will be needed to produce a balanced operating budget for 2009-11, it’s important for that budget to be transparent,” Zarelli said. “This will help taxpayers to see how spending and revenue relate.” 

The accounts which are apart from the general fund are designated for public safety education; health services; violence reduction and drug enforcement; K-12 education (the student achievement fund and education legacy account); pension funding stabilization; and water quality, plus an equal justice sub-account. 

The education legacy trust account and the pension funding stabilization account have not been counted against the state’s spending limit; Zarelli’s legislation would change that. And because the general fund would be larger, the deposit to the rainy-day fund would grow, and the state’s bonding capacity would increase.  

“This bill doesn’t take away revenue sources, so people who supported certain state programs don’t have to worry that it will jeopardize funding. My legislation simply takes the position that all dollars are green, and so all of the dollars the state spends on programs and services should be in the general fund, not scattered around,” Zarelli said. 

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For more information contact Eric Campbell
at (360) 786-7503 or campbell.eric@leg.wa.gov