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Reality Check: Revenue Growth Won't Keep Pace with Future Investments

Posted by Tara Lee at Jul 09, 2013 05:55 PM |

By Michael Mitchell -- Economic growth alone will not be enough to provide the resources necessary for Washington state to invest in important public priorities while also meeting court-ordered requirements to fully fund education.

As our obligation to invest more in K-12 education grows, policymakers must look for ways to bolster revenue and generate additional resources. Otherwise they will have to make significant cuts to health care, public safety, environmental protection and other important public priorities that support Washington state’s middle class and help to create a stronger economy.

The state Supreme Court’s McCleary decision requires a $4.5 billion investment in K-12 education by 2018. To reach that goal, resources dedicated to McCleary will have to grow by an average of 112 percent per two-year budget cycle over the next five years (1). But average biennial revenue growth since 2011 has been approximately 7.6 percent, so without additional resources, putting more dollars toward the McCleary mandate will crowd out critical investments for just about everything else in the budget.

 

 McCleary

As shown in the figure above, fully meeting our McCleary obligation would consume nearly 12 percent of Near General Fund-State revenues by 2018. As the investment in K-12 education expands, fixing the problems with our revenue system will be critical to ensuring that we are capable of adequately investing in other services Washingtonians rely on every day.

Lawmakers could end ineffective and outdated tax breaks, or expand the sales tax to a wider range of services.Enacting an excise tax on the sale of stocks, artwork and other high-end capital gains would generate significant resources while helping our revenue flow recover more quickly from economic downturns. These changes and others are critical to ensuring that Washington state has the resources on hand to invest in the range of priorities that families and children depend on.

For more information on the June 2013 revenue forecast and what it means for our state’s tax system check out the second edition of our quarterly analysis “Revenue Trends.”

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[1] For the 2013-15 biennium, the legislature invested roughly $1 billion in new resources into investments dedicated towards reaching our obligation of funding McCleary. For more information on what these investments are and how far we still have to go, read our policy brief “Paramount Duty: Funding Education for McCleary and Beyond

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