State budget office says its deficit projections don’t trigger across-the-board cuts, but the shortfall should trigger action.

Last week we wrote that the Office of Financial Management had released projections of a cash deficit in the state’s main operating budget, which we believed would trigger statutorily-required across-the-board budget cuts to fix the problem. We devoted most of Monday’s newsletter to the issue. Now, OFM reports that its projections do not mean the governor must make the across-the-board cuts. 

Emily Makings, senior analyst with the Washington Research Council, explains. We’ll quote her at length here.

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.]

From that legal analysis:

The spreadsheet is limited to the General Fund-State appropriation category. General Fund-State is not a “fund” or an “account” but an accounting or appropriation designation that depicts a subset of revenues and expenditures in the General Fund. The spreadsheet captures a subset of the General Fund, and as such, it cannot be used to determine whether a cash deficit exists under RCW 43.88.050.

We’re in no position to quibble with the technical arguments. But, we recall a precedent, as Makings does,

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. 

No matter, really, because across-the-board cuts are not a preferred option for addressing what is, in fact, a major budget shortfall. OFM provided the WRC with new projections:

There’s a better way to address the shortfall. The WRC writes,

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.