On the surface, Washington appears to be in good economic shape.
In only eight months, the state’s Economic and Revenue Forecast Council (ERFC) has added a whopping $1.3 billion in anticipated revenue over the next four years. The state’s seasonally adjusted unemployment rate is also at record lows. Yet beyond the clear skies, many state lawmakers sense the storm clouds of economic recession forming on the horizon and say Washington should prepare accordingly.
Those apprehensions were the theme of many lawmakers’ testimony on the House floor Feb. 26 prior to the passage of the chamber’s proposed supplemental operating budget. The legislation includes a capital gains income tax to offset state property tax reductions and, like its counterpart in the Senate, dips into the state’s budget stabilization account. Both budgets leave less than $2 billion in reserves for a two-year operating budget of more than $45 billion.
“That’s not sustainable,” Rep. David Taylor (R-15) told colleagues. “We can say the economy’s booming and looking great when the reality of it is many of our families are living paycheck to paycheck. We are due for a recession. It’s just a matter of time. We’re living high right now, but instead of saving some of that money and leaving it in the rainy-day fund and looking to the future and not have a repeat of 2009, we’re spending that money.”
The House operating budget was originally articulated in HB 2299, but legislators ultimately cut, copied and pasted their final proposal in the form of a striking amendment onto the Senate budget via SB 6032, after making 19 amendments to their initial proposal.
In addition to fully funding the new K-12 salary schedule, the budget also fully funds the State Need Grant for income-eligible students to help pay for higher education. It also expands Guided Pathways and career and technical grants.
House Appropriations Chair Timm Ormsby (D-3) described the budget as “a contract between and across generations from those that are members of our Washington state families, from their first days to their last.”
Assistant Majority Whip Mike Chapman (D-24) remarked “this budget is about moving rural Washington forward.”
House Appropriations Ranking Minority Member Bruce Chandler (R-15) acknowledged that “there are a lot of good things in this budget,” but added that “this budget almost represents a 15-percent increase in state spending in the four-year outlook.”
At that rate, something will have to give, he added, especially if there is a recession. “I don’t know if your memory is better than mine, but I can’t recall when the House was willing to make the kinds of reductions we could be facing in the next few years since the last recession. We don’t want to go backwards. We want to go forward, and we can’t go forward if the people we work for don’t get a chance to share in the prosperity of the moment.”
He added: “Real estate prices in certain part of the state have largely driven the growing tax receipts in the last few years and those receipts aren’t going to go on forever. You’re not always going to be able to buy a 100-year-old house for $750,000. That’s like being a one-company town, and in some ways we still are a company town; we just change the company every four years.”
With $1 billion in surplus revenue, Assistant Minority Whip Vicki Kraft (R-17) asked “Why do we need a capital gains tax? That 1.3 billion should be given back to their rightful owners, who are the taxpayers. We should be using that money to offset and ease any property taxes for all Washington citizens.”
SB 6032 will now be referred back to Senate Ways and Means. Both Ways and Means and Appropriations will have to agree on the budget’s final version before sending it to Governor Jay Inslee for signing.