March 20, 2019

Lawmakers have $5.6 billion more than when the last budget was written, but disagree over need for new taxes

By: Clay Hill   Comments: 0
State revenue is forecast to continue growing at a healthy pace, adding hundreds of millions of extra tax dollars to state coffers. (Source: Washington State Economic and Revenue Forecast Council)

The state Economic and Revenue Forecast Council released a new forecast today and it shows continued strong growth in tax collections.

Revenue Forecast

2017-2019 Projected Revenue in millions of dollars

2019-2021 Projected Revenue in millions of dollars

February 2018

$44,990

$49,076

November  2018

$45,799

$50,002

March 2019

$46,106

$50.555

As policymakers absorb the news, here are some numbers to consider. There is the revenue growth for the next biennium that is more than November's forecast, which is $553 million.

There is also the revenue total projected to be collected for 2019-21 as compared to collections for 2017-19. The state economist projects we will have $4.5 billion more than the 2017-19 revenue collections for the upcoming biennium.

But this doesn't tell the whole story. Based on what the state's budget writers thought they would have when wrote the 2018 supplemental budget, the state actually has $5.6 billion in additional revenue for 2019-21 thanks to a growing economy. Last March, based on the February 2018 Revenue Forecast, lawmakers were able to write a budget that balanced over four years, through 2019-21, when they anticipated only $49 billion in revenue.

As you can see in the table above, revenue has come in well above what was forecast in February 2018, so that now the projected revenue for 2019-21 is $50.6 billion. What leaves many scratching their heads is that Democrat budget leaders have been saying the 2019-21 budget cannot be built without new revenue - even though it balanced last March and the forecasted revenue for the next biennium is now $1.6 billion greater than it was last March.

Returning to the good news in today's revenue forecast, Washington lawmakers will have an additional $1 billion plus overall to work with over the next four years than what had been forecast in November, including an additional $553 million for the upcoming 2019-21 budget and $564 million for the 2021-23 biennium, according to Steve Lerch, Washington’s chief economist.

That means lawmakers will stop talking about raising taxes this session in order to balance the next state budget, right?

Not exactly. During the question-and-answer period, two distinct views emerged regarding the state’s financial health.

Rep. Timm Ormsby, the Democrat Chair of House Appropriations, said the forecast was good news that certainly helps “the problem statement” of how to fund the state’s “commitments.” However, he said the good news would not be enough to write a budget that relies on no new taxes.

Rep. Ormsby took the position that all new revenue would be needed for K-12 obligations. Sen. Christine Rolfes, the Democrat Chair of the Senate Ways & Means Committee, indicated that much of the new revenue would be needed for health insurance benefit commitments made to school employees in the 2017 session and increases in special education funding.

Sen. John Braun, the ranking Republican on the Senate Ways & Means Committee, took a more optimistic view. He said that this revenue report, with more than 8 percent year-over-year revenue growth for the state, put budget writers in the best position the state has seen in 10 years.

Braun argued that all the education spending required by the McCleary case has been assumed in the maintenance level and can be paid for with plenty left over. He said there is enough money to fund all current services of government plus $3-$4 billion available to be spent in new policy items without raising any taxes. Rep. Ed Orcutt reminded everyone that it’s the taxpayers who really pay the bills, and increased taxes may be the tipping point that keeps employers from hiring the next employee.

At least one reporter in the room was left incredulous that lawmakers could be disagreeing over basic facts like whether revenue collections cover Washington's bills or not. Some of the confusion likely comes from a lack of specifics about whether $2.1 billion in unspent ending fund balance is being added together with projected new revenue of $50.6 billion to describe the resources available to spend on our state's bills.

However it’s regarded, the news makes it clear that revenue collections growth has been strong, improving on the forecast of last November, and lawmakers will have more money available. Increased assessed value in real property played a big role in that stronger performance.


Big Picture Context:

  • 2015-17 revenues: $39 billion
  • 2017-19 revenues: $46.1 billion ($7.1 billion growth, or 18.1%!)
  • 2019-21 forecast: $50.6 billion ($4.5 billion growth, or 9.6%)
  • 2021-23 forecast: $54.4 billion ($3.8 billion growth, or 7.5%)

Looking to the future there is some increasing caution—forecasts for state GDP growth, personal income growth, and employment were all revised slightly lower.

The Washington State Economic and Revenue Forecast Council has detailed information in the slides that accompanied today's presentation, online here.

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