County establishes "Rainy Day Fund" to protect against economic downturns
The establishment of a Rainy-Day Fund by the Thurston County Board of County Commissioners (BoCC) is one of the most important financial developments we’ve made in recent years.
Also called a “Budget Stabilization Fund,” Rainy Day Funds set aside surplus revenue for use during unexpected deficits. Every state government and many local governments already have Rainy Day Funds. But the rules for depositing and withdrawing from the fund vary for each jurisdiction.
I sent a letter to the Board of County Commissioners on behalf of the county’s Financial Management Committee recommending they create the Rainy-Day Fund. Part of the letter reads:
In 2009, Thurston County experienced massive revenue losses. With no stabilization fund to fall back on, the county was forced to make drastic cuts to staff and services. The county underwent a major reorganization and cut expenditures. Due to a decrease of $6 million of revenue in one year, almost 100 positions were held vacant or eliminated.
As the economy improved in recent years, we faced a huge task to fill in the budget hole and service levels. A budget stabilization fund could have held off the most painful cuts.
The current pandemic hasn’t been a repeat of the 2009 recession. A red-hot housing market, unemployment and small business assistance, economic stimulus, increased consumer spending has resulted in an increase in revenue.
Depositing a small portion of county revenue in a Budget Stabilization Fund will help prevent drastic cuts during future economic downturns, times of uncertainly or natural disasters.
I chair the Financial Management Committee and serve with County Treasurer Jeff Gadman and County Manager Ramiro Chavez.
The Rainy-Day fund will create a two-month fund balance in the General Fund. The BoCC made an initial deposit to the fund of $2 million. The deposit in each year thereafter is not to exceed $1 million. In any year the fund balance in this fund is $5 million no deposit will be made. Deposits for the Budget Stabilization Fund will come from windfalls in the general fund:
- Sales tax in excess of 5% growth from the prior year,
- Timber sale revenue in excess of $600,000 per year, and
- Investment interest in excess of $2 million per year.
The BoCC also clearly defined when transfers could be made out of the Rainy-Day Fund. The fund can drop below the minimum fund balance for unexpected events or disasters, with a plan to restore fund balance within three years of the extraordinary event. Transfers from the fund may be made by unanimous vote:
- To cover the costs of non-debatable emergencies as determined by the state,
- Legislative actions that result in county costs not covered by the legislature, and
- To increase the fund balance in the General Fund in the event it falls below $10 million due to revenue shortfalls.
Thurston County has a strong culture of financial responsibility. This is a huge financial accomplishment for the county, we should all be proud.