Gov. Ferguson wants to tap the rainy day fund. What does that mean?

Gov. Bob Ferguson rolled out his budget proposal Tuesday with some ideas to tackle the state’s financial shortfall. One of them was tapping the state’s rainy day fund for roughly $1 billion.

The Budget Stabilization Account, colloquially known as the rainy day fund, is an account designated to cushion the state during emergencies, recessions and natural disasters. Every state has one, and Washington's reserves are estimated to be around $2 billion.

The governor resisted a similar move in the last legislative session, so what's behind his shift in thinking? And what does it mean when the state uses its rainy day fund?

Ferguson told reporters Tuesday he's glad he resisted using reserve dollars earlier because “now we need that fund.” He estimated the current deficit is $2.3 billion, and that's after leaders plugged an even bigger budget hole earlier this year. He said the recent impacts from flood damage, reductions in federal funding and a budget deficit mean state leaders need to find ways to balance the budget.

“It's raining,” he said.

Democratic budget leaders in the House and Senate did not say Tuesday if they approved of Ferguson’s proposal to tap into the funds. But Republicans don't.

Rep. Travis Couture, R-Allyn, the ranking member on the House Appropriations Committee, said he believed using the funds now would leave the “state exposed when the next downturn hits,” adding that reserves are not meant to be used to plug normal budget deficits. He thinks Democrats should cut spending more than they plan to. He also noted Washington has some of the smallest reserves in the country.

According to a recent report by the Pew Research Center, Washington ranks as one of the lowest in terms of how much money is available in reserve coffers. While some states grew their balances in the 2024 fiscal year, overall growth slowed nationally, and Washington was one of eight states that saw declines recently. According to those estimates, the state's reserves could only cover about 12 days of operating costs.

Washington law states that funds equal to 1% of general state revenues must be transferred to the rainy day fund yearly, meaning the fund does eventually get replenished.

Former Gov. Jay Inslee called to use the rainy day fund as part of his final budget proposal last year, and during the 2025 legislative session, Democratic lawmakers also considered the idea, but ultimately held off in part because of Ferguson's and others' objections.

Sen. June Robinson, D-Everett, had proposed using more than $1.6 billion from the rainy day account to shore up the budget. The bill then directed a transfer of $816.25 million in June 2028 and 2029 from the general fund back to reserves.

During hearings on the bill, state Treasurer Mike Pellicciotti testified against the proposal, noting the reserves were a “key tool” for the state to shield itself against the loss of federal funding.

Ferguson pointed out Tuesday the state is facing financial hits as a result of cuts by the Trump administration.

Although Pellicciotti has yet to directly comment on the governor’s new proposal, a statement provided by his office said the rainy day fund “insulates” Washington “from federal budget attacks, natural disasters, and helped secure Washington’s top 'AAA' credit rating.” He also noted Washington’s reserve level is one of the lowest in the nation.

“If the final budget reduces reserves without a clear plan to replenish that fund, we will be unable to shield ourselves from future risks,” Pellicciotti said.

It isn't always easy for state lawmakers to access these funds. It normally takes a three-fifths vote of the Legislature. It can take a simple majority if state employment growth is forecast to be less than 1% in a fiscal year, which is currently the case, or if the governor declares an emergency due to a catastrophic event that requires government action.

The last time state leaders used the rainy day fund was in 2021 in response to the COVID-19 pandemic, ultimately tapping nearly all of the $1.8 billion fund with $36 million left in reserves.

In 2009, the fund was also tapped by $400 million in response to the fallout of the Great Recession, leaving $21.4 million in reserves.

The fund has also been used in cases of natural disasters, such as in 2015 after a particularly bad wildfire season. The Legislature then tapped the fund for $190.6 million.

Lawmakers will consider Ferguson’s proposal when they meet for the session, which begins Jan. 12.

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