Gregoire pushes rainy-day fund

OLYMPIA — Gov. Christine Gregoire plans to push for a constitutional amendment to set up a "rainy day" budget reserve that would be difficult for state lawmakers to tap except during economic slumps.

She wants to get it started by setting aside a portion of the state's projected $1.9 billion budget surplus.

Gregoire, a Democrat, is scheduled to release the details of her proposal today in Seattle. Her plan — similar to one being pushed by a Senate Republican leader — will be welcomed by fiscal conservatives.

"It's a wise move," said Don Brunell, president of the Association of Washington Business. "We've had strong surpluses before and they've always evaporated."

But support appears mixed among key Democratic lawmakers, who control both the House and Senate. Some fear it will encroach on the Legislature's budget-writing power.

Under Gregoire's proposal, the state would set aside 1 percent of its anticipated general-fund revenues at the start of each two-year budget cycle. Gregoire plans to earmark that amount — about $260 million — for the rainy-day fund next week when she rolls out her proposed 2007-09 budget.

To spend from the fund, legislators would need to get 60 percent approval in both the House and Senate.

But during fiscal crises, the governor could issue an emergency declaration that would enable lawmakers to tap the fund with simple majority votes. Events that could trigger such an emergency include a sharp economic downturn or a natural disaster.

The idea for a constitutionally protected rainy-day fund is not new.

It was one of the recommendations offered four years ago by a blue-ribbon panel headed by Bill Gates Sr. that proposed sweeping changes to the state's tax structure.

Though Gregoire vowed during her 2004 election campaign to push for a constitutional budget reserve, she steered clear of the issue during her first two years in office.

Taking up the issue now, however, could help her in her 2008 re-election bid.

State Sen. Joe Zarelli of Ridgefield, the ranking Republican on the Senate Ways and Means Committee, introduced legislation last year calling for a constitutional budget reserve. He is pushing a new proposal this year.

There are only minor differences between Zarelli's plan and Gregoire's.

Both proposals call for essentially capping the fund once it reaches 10 percent of the state's annual revenue. That figure currently would be more than $1 billion.

"It's time," Zarelli said. "There is a way for us to deal with the roller- coaster rides we take between good and bad cycles."

In recent history, the state has faced severe budget shortfalls at least once a decade.

Just three years ago, lawmakers were grappling with a budget shortfall that topped $2.5 billion. But now, thanks to a robust economy, the state's projected surplus is approaching $2 billion.

Despite the bipartisan support, the rainy-day fund faces long odds.

It takes a two-thirds vote in the House and Senate, as well as voter approval, to pass a constitutional amendment.

Senate Ways and Means Chairwoman Margarita Prentice called it "the responsible thing to do."

"I grew up during the depression," said Prentice, D-Renton. "There's something about socking it away ... and you do not take from it except in an emergency."

Prentice said the proposal has strong support among Senate leaders but might face trouble in the House.

House Appropriations Chairwoman Helen Sommers, D-Seattle, said she likes the idea of setting some of the surplus aside in a rainy-day fund, but she doesn't want to see the Legislature's hands tied by a constitutional amendment.

Information from The Associated Press is included in this report.

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com