Lawmakers want the state to save more for a rainy day.
The Legislature's Interim Appropriations Committee voted Wednesday to recommend increasing the amount of money transferred annually into the state's budget reserve account.The account, better known as the Rainy Day Fund, was established six years ago to see the state through tough economic times. The fund has grown from $20 million to more than $58 million.
Money for the fund comes out of the state's annual budget surplus, if there is one. It is limited to no more than 6 percent of the general fund budget for the fiscal year just ended.
No money has been transferred into the fund since 1990, when it reached the limit. Under the change recommended by the committee, more than $18 million could be deposited in the fund next year alone.
Once the money is in the fund, it stays there unless the state is hit with a financial emergency. That could be a tax shortfall or a liability that hasn't been budgeted for, such as a legal judgment against the state.
"It really isn't just a paper transfer because you end up with actual funds set aside that can be used only if there's a budget crunch," legislative fiscal analyst Leo Mem-mott said.
With several lawsuits pending, including an attempt by federal retirees to recoup millions in taxes they've paid on their pensions, com-mittee members decided stashing more away makes sense.
"I think this is a wise move with the lawsuits pending," said committee co-chairman Sen. LeRay McAllister, R-Orem. "It's wise for us to set aside more than the $58 million we have."
The committee has endorsed changing the way the fund limit is calculated. Instead of a percentage of the state's unspent general fund budget, the committee wants to be able to put in a percentage of annual expenditures.
That would allow the account balance to be increased to more than $76 million. But the legislative fiscal analyst's office has identified some disadvantages.
A large balance "may be politically difficult to maintain. With a balance of approximately $100 million, there could potentially be public outcry to reduce tax revenues . . . " the office stated in its report on the fund.
Merrill Cook, the Independent Party candidate for governor who managed a second-place finish behind Gov.-elect Mike Leavitt, has long proposed that state surpluses should be used to cut taxes.
Lawmakers could also be pressured to change the law restricting the use of the fund to covering operating deficits so the money could be used for government programs.
Already, the interest earned by the fund has been tapped to help pay back wages owed to state employees subject to federal Fair Labor Standards Act regulations.
"It's a real temptation to have that money sitting there," Mem-mott said.
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(Chart)
Growing assets
1987 $20.0 million
1988 $43.9 million
1989 $47.9 million
1990 $52.6 million
1991 $56.7 million
1992 $58.3 million