The latest report from the state Economic and Revenue Forecast Council (ERFC) shows that the Washington state legislature has $50 billion to spend for the 2019-21 operating budget – nearly $6 billion more than what it spent during the previous two year budget cycle. However, some key ranking lawmakers believe new taxes or tax increases are needed to cover spending, while other legislators say they should tread lightly in the event of a recession.
At ERFC’s Mar. 20 meeting, House Appropriations Chair Timm Ormsby (D-3) said of the new revenue “it doesn’t take away the arithmetic problem that we came here with. This reduces our problem…but doesn’t eliminate it.”
However, Rep. Ed Orcutt (R-20) observed that “if we can’t balance within that without adding taxes, we’re going to have some serious problems down the road. I think it actually could have a chilling effect, and I think it could worsen any potential recession that we might have if we raise taxes.”
The council publishes quarterly revenue forecasts used by the legislature as part of a four-year balanced budget mandate. Its new report shows enormous tax growth for the state both now and in the future. Revenue for the Near General Fund-State (NGF-S), the primary account for funding the operating budget, is expected to be $46.1 billion for the 2017-2019 biennium, an 18 percent increase from the 2015-17 biennium.
For the 2019-21 biennium, ERFC projects a 9.6 percent increase – to the tune of $50.5 billion. That’s expected to increase by 7.5 percent, or $54.4 billion, for the 2021-23 biennium. If that projection hold up, it would represent a $25.4 billion increase in revenue from the 2011-13 biennium, when NGF-S revenue was only $29 billion.
Although the possibility of an economic recession has been contemplated during recent ERFC meetings, the scenario was not included in the baseline forecast. However, State Treasurer Duane Davidson speculated as to how well the state would cope if it experienced an equitable loss of revenue as it did during the Great Recession.
Yet, Ormsby argued the new revenue will be spent entirely on increased basic education spending as part of the McCleary compromise to satisfy a state Supreme Court ruling mandate.
“In order to make good on our commitments, we would need additional revenue,” he added. “This is about paying the bills.”
However, Sen. John Braun (R-20) disagreed. He is a ranking member and former chair of the Senate Ways and Means Committee.
“It’s not about whether we can pay for the existing budget,” he said. “We’re in the best shape we’ve been in the last decade. I see no reason…why we would need new taxes to both maintain current services and make hopefully smart investments in the future of the state of Washington. I think that’s more than enough money to cover policy investments that we would want to make for the state.”
That was also the conclusion of the nonpartisan Washington Research Council.
Several new taxes have been proposed this session, including a capital gains income tax via SB 5129 and restructuring the real estate excise tax (REET) to a graduated rate (SB 5130). SB 5129 failed to clear its original committee before the cutoff date, while SB 5130 advanced from Ways and Means to Transportation on Feb. 6 but did not clear the chamber before the Mar. 13 cutoff date.
The House Appropriations and Senate Ways and Means Committees are expected to release their proposed operating budgets next week.