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Reality Bites: Revenue Forecast Shows Economic Growth Won’t Fund Basic Education Reforms

Posted by Andy Nicholas at Feb 19, 2014 11:05 PM |
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This morning’s revenue forecast for Washington state shows that economic growth will not generate the additional tax resources needed to fund basic education improvements mandated by the State Supreme Court under the McCleary decision.

In order to meet the full funding obligation by 2018, lawmakers need to invest an additional $2.3 billion to schools in the next two year budget cycle. Yet, the latest forecast from the state Economic and Revenue Forecast Council (ERFC) projects revenues will increase by a mere $80 million in the coming 2015-17 budget cycle, compared to the previous forecast.

At the current rate of growth, state revenues are barely keeping pace with the costs of maintaining existing levels of education, health care, public safety, and other important investments. Lukewarm growth in the economy will not produce the billions of additional dollars required for basic education reforms.

The graph below shows that in the current fiscal year, state tax revenues are projected to be nearly $1 billion below 2009 levels, after adjustment for rising fuel and energy prices and other factors of inflation. Revenues are not projected to reach pre-recession levels until July 2017.

Feb-2014_Rev_CPI

 

The bottom line is that policymakers need to look at reforming Washington state’s flawed, 1930’s era revenue system in order to build the kind of education system our children will need to compete in the global economy of the 21st century.

Closing tax breaks, as Gov. Inslee has called for, would be a good first step. Beyond that, enacting a new tax on capital gains, which are profits from the sale of corporate stocks and other high-end financial assets, would build a more robust and adequate revenue system in the long run.

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2015-17 Legislative Agenda

Our 2015-17 Legislative Agenda calls for an equitable and sustainable revenue system in addition to state investments that will promote a world-class education system, sustain a strong, inclusive middle class, produce high quality, living wage jobs, and ensure equal opportunity to live healthy and productive lives.  Take a closer look here.

Budget Matters 2014

Thank you to those who made Budget Matters 2014 a success! Stay tuned for pictures, video clips and PowerPoints from this year's conference.

Legislative Testimony

Senior Budget Analyst Kim Justice recently testified before Senate Ways and Means against a bill that would fund education at the expense of other budget investments. Watch it here. 

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