Could Trump withhold federal funding to Washington state? Treasurer prepares for worst

In the breakroom of the state treasurer’s office in Olympia sits a multi-ton steel door to the state vault. It moves silently on well-oiled hinges. The only sound is the timing mechanism inside.

But inside the vault, there’s little to no money left these days. It’s mostly ledgers, logbooks — some going back to the territorial legislature in the 1880s — and admin supplies like plastic cups, forks, and even a crock pot.

“I promise all the gold bars and money were gone when I showed up,” said state Treasurer Mike Pellicciotti, who was elected in 2020, shortly after the pandemic hit and in-person banking services were suspended.

But even though they’re not physically here, the state’s reserves and daily balances — the actual money in the bank — are something Pellicciotti is thinking about a lot right now.

As Washington state officials prep for a second Trump presidency, perhaps no state official has been more explicit than Pellicciotti about preparing for what he sees as the worst possible outcome: Donald Trump and his administration cutting federal funding to liberal states. In the last fiscal year, the federal government provided Washington state more than $27 billion: health care, law enforcement, education funding.

“State Treasury preparing to insulate Washington from Federal Turmoil,” a press release from Pellicciotti's office read two days after the election.

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Pellicciotti points to Trump’s last administration as an example of what could happen. In September 2020, Gov. Jay Inslee asked the Trump administration for FEMA aid for wildfire destruction, and was reportedly ignored. Earlier that year, Trump had called Inslee a “snake.”

But it’s not just states. That same month, the Trump administration instructed federal agencies to look at restricting grants to so-called “anarchist jurisdictions,” e.g. cities such as Seattle.

“I have every reason to believe we will see that again,” Pellicciotti said. “We would be foolish to not prepare.”

In November, Pellicciotti talked with White House officials about potentially changing the terms of federal contracts. Currently contracts can be altered with only 30 days notice. Pellicciotti would like to extend that.

“I don't want to be in a situation where the Trump administration, with 30 days notice, can change the contracts related to transfer of federal funds,” Pellicciotti said.

Pellicciotti has also been speaking to other Democratic treasurers or comptrollers around the country trying to get ready for similar things.

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Pellicciotti’s predecessor Duane Davidson is a Republican who was treasurer during Trump’s last term (he lost reelection in 2020 to Pellicciotti). Davidson says negotiating better contracts is smart, but politicians shouldn’t publicly jump to conclusions.

“There's lots of campaign rhetoric on both sides,” Davidson said. “Sometimes statements are made and I think we have to actually see, you know, what transpires.”

Totally slashing funding to Washington state or Seattle because of protests, or because they won’t cooperate on mass deportations, isn’t legal, according to Erwin Chemerinsky, dean of the law school at UC Berkeley.

“Congress can put conditions on federal funds under certain circumstances, but the president can't add additional conditions to that. The president could cut off funds if the conditions aren't met, but the president can't create new conditions,” Chemerinsky said.

But Pellicciotti, and many Democrats, worry Trump’s staff won’t be concerned with what’s legal. Last time around there were bureaucrats who at times refused to act on his administration’s directions and renege on contracts.

“I don't have that same confidence that the Trump appointees are going to have that same reverence for their legal duties,” Pellicciotti said.

Which is why Pellicciotti is also thinking about the money in the bank — not the vault, but the money to actually keep the lights on and the checks from bouncing —$17 billion in what is essentially the state’s checking account on an average day, and an estimated $4 billion this biennium in savings, or reserves.

Enough for a rainy day, but not indefinitely.