Declining Revenue Projections Show It’s Time for Policymakers to Get Serious about Meeting Washington’s Needs
The new forecast of Washington state tax collections makes it clear that lawmakers can no longer assume the growing economy will automatically generate the resources needed to fund court-mandated improvements to schools, mental health, and other important priorities for our state.
The Washington State Economic and Revenue Forecast Council’s projection that state tax resources will be more than $500 million lower than previously forecasted over the next four years means policymakers must get serious about generating new revenue to invest in the progress and well-being of our state and its people.
The diminished tax resources ($78.2 million lower for the current 2015-17 budget cycle; $435.6 million lower in the 2017-19 budget cycle) present a significant challenge to House and Senate budget writers. Their budgets must remain balanced for the remainder of the current budget cycle and in the following two-year cycle.(1)
They should be cautious about tapping budget reserves to make up for the reduction in revenues. Doing so would only be a temporary fix. And depleting savings now could jeopardize the state’s ability to maintain core public investment in schools, public health, parks, and other vital services that serve us all if the economy were to enter a downturn.
Nor should budget writers enact more damaging cuts to the investments that strengthen our communities and our state economy. Cuts to programs that help seniors, families that work hard for low pay, and college students in need of financial aid have already made it harder for too many Washingtonians to make ends meet.
A better approach is to preserve the things we rely on by raising additional resources. The Legislature can do this by ending wasteful tax breaks and enacting the new tax on capital gains as proposed by Gov. Jay Inslee in late 2014. It wouldn’t be right to continue giving tax breaks to large profitable corporations and wealthy investors while cutting back on financial aid, making K-12 class sizes bigger, or eroding the independence of seniors.
Given the forecasted shortfall in resources, these new sources of added revenue are key to ensuring that all Washingtonians have the opportunity to live in healthy, thriving communities.
(1). The four-year balanced budget law allows policymakers to assume annual revenue growth of at least 4.5 percent, even during years in which growth is projected to be lower than that amount. This provision allows lawmakers to call their budget balanced even when sizable shortfalls are projected.