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Revenue Forecast Shows it’s Time to Get Real: We Can’t Cut our Way to McCleary

Posted by Kim Justice at Nov 19, 2014 11:20 AM |
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Updated 11/24/2014 to reflect most recent McCleary cost estimates. Costs are down slightly from projected JTFEF estimates due to lower inflation and minor policy changes.

Washington state tax resources will fall $4.5 billion short of the amount needed to adequately fund schools, health care, child care, and other important investments in the next two years, according to new projections from the state Economic and Revenue Forecast Committee.

Some say we can cut non-education investments in order to free-up resources for basic education. In reality, policymakers must find new sources of revenue to make all the investments we need to support a strong economy in Washington state.

Today’s revenue forecast, which Governor Inslee will use to build his upcoming budget proposal, shows available tax resources will be $115 million higher than previously forecasted during the current 2013-15 budget cycle, and $272 million higher in the 2015-17 cycle. 

While the growth in revenues is good news, the new resources are negligible in comparison to the additional spending needs required in the next two years. These include (see graph):

  • Maintaining schools, health care, public safety, and other services ($1.9 billion): The cost to continue providing the same level of services grows year after year due to inflation, rising fuel and energy costs, increases in the number of kids in our schools, and changing demographics such as the aging of baby boomers. 
  • Legal obligations ($1 billion): The state is legally required to pay pensions, debt we owe on bonds that support infrastructure improvements, increases in health care costs for state employees, and cost-of-living increases for teachers (I-732), which were suspended in previous years, but are required by law going forward.
  • Critical policy needs ($1 billion): Some policy decisions, which are at the discretion of the legislature, will be difficult to forego. For example, earlier this year the State Supreme Court ruled that detaining patients with mental illness in hospital emergency rooms is unconstitutional. In order to comply with the order, the legislature will need to increase capacity in treatment facilities. Additionally, collectively bargained agreements between the executive branch and employees will likely be on the table for lawmakers to consider. State employees have gone six years without a pay increase. Delaying any longer will adversely impact retention and the ability to attract workers.
  • McCleary education investments ($1.7 billion): Lawmakers must invest billions more in K-12 education to comply with the State Supreme Court’s ruling in the McCleary v Washington case. According to estimates by the Joint Task Force on Education Funding, lawmakers should invest an additional $1.7 billion in the next two years to remain on-track to meet the 2018 full funding deadline.(1)
  • Initiative 1351 ($1.6 billion): Voters approved Initiative 1351 in November that will ultimately add over 25,000 school staff, including teachers, principals, counselors, librarians, grounds-keepers. There is some overlap with the already-enacted education reforms to lower class sizes in K-3, as part of complying with McCleary. Assuming lawmakers continue to phase-in McCleary investments, an additional $1.6 billion will be needed for I-1351. 

outlook nov 24

All told, the state will fall about $4.5 billion short of the revenue needed to make these investments. While some claim we can cut our way to McCleary compliance, reality says otherwise.

Two-thirds of the budget is protected by either the state Constitution or federal laws and cannot be cut. The remaining third of the budget includes funding for community colleges and universities, public safety, nutritional assistance, help for people with disabilities, childcare, housing, services for foster children, and supports that help people find jobs. Severe cuts to these investments would do great damage to the state economy and would impose devastating costs on struggling families from Sequim to Spokane.

Rather than being distracted by math games that don’t add up, lawmakers should get serious about raising revenue.

 1. Estimates have been updated to include cost-projections for the 2015-17 biennium from the Office of Program Research; https://app.leg.wa.gov/CMD/Handler.ashx?MethodName=getdocumentcontent&documentId=3DHIkeBntMw&att=false

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