State revenue remains historically high amid shutdown

State revenue remains historically high amid shutdown

While many Washington businesses struggle to remain financially afloat amid newly imposed restrictions by Governor Jay Inslee, the state is still expected to receive record-high revenue this biennium, though still facing a large operating budget deficit that has not been addressed via a special session of the legislature.

The current situation led to unusually high tension among members of the state Economic and Revenue Forecast Council (ERFC) at its Nov. 18 meeting to discuss the latest economic and revenue forecast update which is used to determine the outlook for the operating budget.

As pressure continues to mount on Inslee – by members of both parties – to lift some of the new restrictions, especially for the restaurant and hospitality sectors, ERFC members reiterated calls for a special session to provide emergency relief for those employers.

“I would say that a special session sooner rather than later is still important to figure out what we can do to protect as many businesses as we can,” Rep. Ed Orcutt (R-20) told colleagues.

Although Inslee has announced $135 million in financial support for some small businesses and workers, ERFC member Sen. John Braun (R-20) said “we are on the wrong path without a special session. I do think it’s very urgent when it comes to the small businesses that are going to be affected by the restrictions by the governor.”

ERFC member and Senate Ways and Means Committee Chair Christine Rolfes (D-23) said that although “I’ve been supportive of the special session all along….at this point it’s a little late.”

Without a special session, legislators will also have to contend with an underlying deficit in the 2019-21 operating budget that has shrunk since earlier this year due to higher-than-anticipated revenues. In fact, state revenues for the current biennium are expected to be 10.7 percent higher than 2017-19, and only expected to climb higher – by 7.2 percent for the 2021-23 biennium.

For Washington Policy Center Government Reform Director Jason Mercier, this demonstrates that the state is neither in a recession nor does it have an unstable tax system. In a recent blog post he said that “though there is no recession proof tax structure, Washington has consistently ranked as having relatively stable tax collections compared to other states.”

Yet Braun observed that although revenues are up “the small businesses are not doing well in our state.”

What remains to be seen is how the legislature will address the operating budget deficit. ERFC member and House Appropriations Committee Chair Timm Ormsby (D-3) told colleagues that closing the deficit by “half of it in cuts and half in (new) revenue is unrealistic.”

However, Orcutt questioned whether there are few areas to reduce spending, noting that the latest operating budget represents an $8.5 billion increase since the 2018 supplemental operating budget. “I believe that there is a way that we can get in and protect the taxpayers, especially in this time when so many are suffering.”

Also dividing the council was whether the state should wait for further federal assistance. Rolfes argued that “the state government doesn’t print money. If we were to do any additional stimulus or any additional assistance to small business in this state, we would be cutting services to other people.”

Some of the remarks drew an unusually strong response from Braun, who pushed back against the idea that the federal government isn’t doing enough to help states like Washington. “They’ve put out six or seven trillion dollars. Unprecedented in our country’s history.” He added that state lawmakers need to “get off their hands and do something about our situation instead of relying on hope.”

Braun also protested the claim made by other ERFC members that COVID-19 hasn’t been taken seriously by enough people in the state and therefore led to new restrictions. “It’s also real (that) we have mental health issues, we have suicide, we have despair, we have frustration around the state.”

ERFC’s next meeting will be next year, but the date has not been scheduled.

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