Four-year balanced budget law is doing its job
Washington made history in 2012 when it became the first state in the country to adopt a four-year balanced budget requirement. In short, the law requires lawmakers to pass state budgets that balance based on revenue that’s expected to come into state coffers over the next four years.
The days of spending everything that’s available right now, without regard for future expenses, were over.
Since then, the law has done what it was designed to do: Take the state off of what used to be a roller-coaster ride, with lawmakers spending too much during good times and cutting deeply during downturns in the economy.
It has produced another benefit as well, earning notice from the big bond rating agencies. All of the agencies mentioned the state’s budget stability in reports and Moody’s called out the four-year balanced budget requirement for praise. This can mean lower borrowing costs for state government and savings for taxpayers.
But now, as lawmakers begin the 2018 legislative session, there are indications the law — which came under scrutiny in 2016 — may once again be under threat.
Legislators just approved a new two-year $43.7 billion budget in July that added $7.3 billion for K-12 education, but they are facing pressure to increase spending in the off-year “supplemental” budget to speed up implementation of their education funding plan.
The plan, approved this summer, came in response to the Supreme Court’s McCleary ruling. The high court deemed the plan satisfactory in a fall ruling, but justices said the timeline for implementing it was not fast enough.
So, it will be tempting for some lawmakers to abandon the four-year balanced-budget law to speed up the implementation of the education funding plan — and possibly to pay for other demands.
Already, we have seen Gov. Jay Inslee propose nearly $1 billion in additional spending in his 2018 supplemental budget plan. The money would come from the state’s voter-approved rainy-day fund, with the governor proposing to replenish the reserves — and satisfy the requirements of the balanced-budget law — by implementing a new tax on carbon emissions.
Now is not the time to draw down rainy-day funds. Overall, the state’s economy is growing, and tax revenue is climbing. Rainy-day funds should be left in place to buffer the next serious downturn in the economy, which is why they are called “rainy-day” funds.
And replenishing the reserves with money from a new carbon tax is not the way to help the state’s manufacturers, especially the approximately one-third of them that are located in rural parts of the state where the economy is not as strong as it is in urban areas.
Such a tax would not only make it harder for Washington manufacturers to grow, but it would also drive up the cost of electricity, natural gas and fuel for Washington families.
Exercising fiscal restraint isn’t always convenient, but it can be done. The last five years have shown that lawmakers can make record investments in education and still keep tax rates stable, and do so in a bipartisan fashion.
Backing away from the balanced-budget law now would be a mistake. Before the law was passed with strong bipartisan majorities in the House and Senate and signed into law by Gov. Chris Gregoire, it was too easy for lawmakers to spend money irresponsibly, not caring about the long-term consequences of spending decisions.
Failing to look at those consequences increases the chances that lawmakers will eventually end up making big budget cuts or raising taxes — or both — when the spending catches up to them.