Washington Research Council reports that the state’s cash deficit could result in double-digit budget cuts.

As lawmakers continue to resist going into a special session to address the state’s multi-billion dollar budget shortfall, the state budget will experience a cash deficit this month. The Washington Research Council explains

The Office of Financial Management (OFM) estimates that the general fund–state (GFS) will be in cash deficit this month. Jason Mercier of the Washington Policy Center first posted OFM’s calculations earlier this week.

According to OFM, the cash balance of the GFS will be negative $277.1 million this month and the deficit will continue to grow through the end of FY 2021. Whether or not the GFS is in a cash deficit matters because state law (RCW 43.88.110(7)) requires the governor to make across-the-board cuts to spending allotments if a cash deficit is projected in a particular fund. (Terms are defined here.)

In July, the WRC released a policy brief showing that delayed budget action limits the options availability to lawmakers, increasing the pain of deep budget cuts or sharp tax increases. The cash deficit, the WRC now points out, also places the governor and Legislature in a very difficult position. The magnitude of across-the-board cuts varies, depending on a couple of choices, but all of them are unpalatable.

WRC analyst Emily Makings notes that in September 2010, Gov. Gregoire made across-the-board cuts as the Great Recession put the state in a cash deficit position. She writes,

It appears that any across-the-board cuts this year will have to be deeper than those made in 2010. In ordering the 2010 across-the-board cuts, Gov. Gregoire protected basic education, debt service, and contributions to retirement (citing constitutional obligations for these programs).

If these areas are protected, I estimate that the cuts to the rest of the budget would need to be 33.5 percent given OFM’s calculation of the deficit (including the CRF, which, as noted above, has a number of issues), assuming the cuts would be effective in September. Using the deficit calculation that includes the CRF and our other adjustments, the cuts would need to be 24.2 percent.

She concludes,

At this point, Gov. Inslee has not indicated that he will order across-the-board cuts in response to the cash deficits projected by OFM. Moreover, there are no plans for a special legislative session to deal with the budget shortfall. By waiting, any necessary spending cuts will have to be even deeper. Additionally, the governor cannot unilaterally use the rainy day funds to soften the blow of the spending cuts. To access those funds (currently $1.693 billion, according to OFM), the Legislature will have to go into session and appropriate them.

A special session made sense in June. It makes much more sense now.