Legislative Commentary

A year ago at this time the Legislature’s regular session was over, because it is limited to 60 days in even-numbered years. However, we already had been called into a “special” session to iron out disagreements related to changes proposed to the state budget, and it ran to the end of March.

There is no reason for the Legislature to go into overtime this year – no good reason, that is. But last week the governor’s budget director effectively scoffed at the idea of adjourning on time, and Thursday the House Democrats’ budget leader spoke openly about wanting additional revenue, meaning more taxes.

Add those statements to the fact that we’re still waiting for the House to put a complete education-funding proposal on the negotiating table, with nearly two-thirds of the 105-day session already behind us, and it isn’t encouraging – even for an eternal optimist like me.

‘Very positive’ revenue forecast
sets stage for budget proposal

A smart first step when budgeting, whether it’s a household budget or a farm budget or a state budget, is to know what’s on the “income” side of the ledger.

At the state level, the job of looking at economic indicators and tax collections and other factors and using them to forecast the state’s level of income (or revenue) belongs to the state’s non-partisan chief economist. Every quarter the economist submits a forecast to a bipartisan council representing the legislative and executive branches.

The first forecast of each year gives budget writers the most up-to-date numbers available, and the first forecast for 2017 was released and adopted yesterday.

It anticipates a $256 million increase in revenue for the 2017-19 biennium, meaning the teams of Senate and House budget writers have a quarter-billion dollars more to work with than they would have a few months ago. Our Senate budget-committee chair described the forecast as “very positive.”

Other conclusions that come from the new forecast include:

Historic revenue growth in current budget – The 2015-17 fiscal biennium, which ends June 30, is expected to see $39 billion in revenue, compared to $34.3 billion in the previous two-year budget cycle. That equals 13.6 percent revenue growth, the highest in more than a decade.

Largest projected reserves in state history – State government’s balance sheet now projects $2.4 billion in reserves by July 1, when a new budget takes effect. Some of that is due to the strong revenue growth of late, because it triggered a provision in the state constitution that means over $500 million must be deposited in the constitutional “rainy-day” fund.

Reason to be cautious going forward: It’s good for taxpayers that state government has built up a healthy reserve, because the level of revenue growth we’ve been seeing is expected to drop by about half for the next budget cycle.

While the anticipated 6.8 percent growth for 2017-19 is still above average, it would be smart to keep spending in check and remain prepared for the inevitable economic slowdown.

Not one state budget, but three – with specific purposes

When most folks refer to the state budget, they mean the operating budget that covers most of state government’s core services, including education and public safety. But there are two other budgets.

One is the capital budget, which pays for construction projects and other things related to physical assets, such as public buildings, parks, land acquisition and more. The third budget is for transportation projects and also pays for the Washington State Patrol.

We adopt new budgets in odd-numbered years, when the regular legislative session is 105 days long. The budgets typically are the most important responsibility we have, although the need to reform the funding of K-12 education is just as important this year.

The budgets cover two years, or a “biennium,” and we adjust them midway through to account for spending we couldn’t anticipate. Changing school enrollments are an example, as are wildfire-fighting costs.

It’s supposed to take less time to adjust an existing budget than to create a budget from scratch, so in even-numbered years our regular sessions are limited to 60 days.

I say “supposed to,” because 2016 is an example of how we were called into a “special” session to iron out disagreements related to the operating-budget update.

It took 20 days, which is a relatively short overtime, but it still didn’t have to be that way. Unfortunately, it sounds like others in Olympia are already planning for overtime this year.

Democrat budget officials say
new revenue needed, and to expect overtime

Speaking to the Association of Washington Business last week, the head of the governor’s budget office said that “even if everything went perfectly, I cannot imagine the Legislature getting out of session on time.” I can’t imagine he would say that unless his boss is thinking that way too.

At yesterday’s meeting of the revenue forecast council, where we learned the amount of expected revenue for the next state budget is up another quarter-billion dollars, the Democrat chair of the House budget committee said it’s still not enough. He added that the House has a “lot of options” for raising new revenue.

Contrast that with the perspective of our Senate budget leader, who told the media that he remains confident the next state budget can be balanced without new revenue – meaning no new taxes.

Our Senate majority has held the line on big new taxes since control of the Senate changed in 2013. It’s no coincidence that Washington’s economy has been producing double-digit revenue as of late even though the tax code has remained stable.

Unfortunately, taxpayers should be ready to see House Democrats propose new taxes on small business, personal income, and energy, all to offset whatever spending proposal they put out.

In recent years, Democrats’ insistence on higher taxes have pushed the Legislature into overtime sessions, only to have the final budget agreement follow the Senate’s tax-controlling approach. In that sense the comments coming from the governor’s office and House budget leader are even more disappointing.

Federal healthcare policy proposal draws state-level reactions

Some around Olympia will tell you that Washington’s former state-subsidized health insurance program, called the Basic Health Plan, which dated to the late 1980s, served as a model for the federal Affordable Care Act better known as “Obamacare.”

Since President Trump was elected, having promised to replace Obamacare, a popular question from reporters has gone something like this: What will the Legislature do if the federal government really does replace the ACA?

Our majority’s answer has been that we’ll need to wait and see, and that there is no real cause for alarm because it would take years for any federal changes to be fully implemented.

Now that a “repeal-and-replace” proposal has emerged from Washington, D.C., the governor and insurance commissioner went out of their way this week to take swings at it. However, having served in Congress, both know better than to suggest that any major healthcare policy bill, Democrat or Republican, would become law without undergoing many revisions first.

No matter what may come out of Washington, D.C., it’s a good bet that our state’s legislators will have an additional two years to address any changes that affect Washingtonians. This state has been out front on healthcare policy and healthcare coverage for a long time, and that will continue – there is more common ground and less political division in our Legislature than people may think.

No one can say how many people bought health coverage through the state exchange to avoid the Obamacare tax penalty, and how many of those would be affected by a new federal healthcare policy that doesn’t carry such a mandate.

Also, no one knows what lies ahead at the federal level concerning the women, children and disabled for whom Medicaid is intended – but we at the state level have no intention of leaving our residents high and dry.