Preserve West Virginia’s ‘rainy day’ fund
Part of West Virginia’s laudable record of handling state finances for the past several years has been the buildup of an impressive “rainy day fund.” But now, some are suggesting the cash ought to be tapped for purposes such as building new schools.
Doing that would be unwise for various reasons.
Legislation establishing the rainy day fund (actually two separate accounts) was enacted years ago to ensure that if some sort of calamity strikes the state, a reserve of money will be there to cope with it. That could include a natural disaster or an unforeseen economic downturn. The law stipulates that when end-of-year budget surpluses occur, portions of the money are to be placed in the rainy day fund.
Nearly $920 million has been built up in the fund – and that has tempted a few people who believe it does not make sense to, in effect, sit on that much money while some areas of the state need funds for new schools, infrastructure improvements, etc.
Yet as state legislators and budget officials note, the rainy day fund is no more than a small cushion against financial trouble. Should a catastrophic event affecting state revenue occur, the fund would cover less than two months of government spending.
And drawing down the fund would have an adverse effect. It would signal lenders that the state has shifted from its ultra-prudent fiscal policy – and that could affect the interest West Virginia government entities pay on bonds they issue for purposes such as school construction. In other words, we could find ourselves paying more when we borrow money.
Except in rare situations following natural disasters, state officials have kept their hands off the rainy day fund. That has been the only rational strategy.
Especially now, as years of surpluses are coming to an end and state officials find themselves having to cut spending to balance the budget, it makes sense to preserve the rainy day fund.