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After three special sessions and with one day to spare before a government shutdown, lawmakers finally approved a budget today. It increases funding for schools, early learning, worker pay and benefits, mental health services, support for struggling families, and other much-needed services. While it’s certainly laudable that the investments are robust, it’s nevertheless essential to note that lawmakers are relying on inadequate long-term revenue sources to sustain them. In so doing, they are missing a timely opportunity to make our tax system more sturdy and equitable.
Over the next two years, nearly $4.5 billion more will be injected into our economy, compared to the previous two budget years. The increased funding helps keep up with increases in our population and inflation, while also meeting the needs of vulnerable Washingtonians and making required investments in K-12 basic education, among other things. The resources to make these investments come largely from projected increases in revenue, a funding surplus from the previous budget cycle, fund transfers, and new revenue from closing or narrowing tax breaks.
Amid the emphasis on tuition decreases, an important story is being overlooked: The fact that lawmakers neglected to address the backlog of students who qualify for the State Need Grant but can’t access it due to a lack of funding. This puts higher education out of reach for many students with low incomes who can only afford college with the help of financial aid. In addition, although it’s great that there is a partial restoration of cash assistance to parents receiving Temporary Assistance for Needy Families, lawmakers also cut $50 million from the program. This will make it harder for many families to get the support they need to get back on their feet and into stable employment during times of hardship.
Ultimately, the folly in the final budget agreement is that it doesn’t focus on the long term. It fails to enact enough new, sustainable revenue to protect its investments – thereby protecting our state’s economic security – in the years to come. In education, where the bulk of new investments are made, new spending vastly outweighs new revenue. In fact, only $1 of new revenue is raised for every $17 dollars spent on education (see graph).
While $162 million in new revenue is added through the closure of four wasteful tax breaks, an additional ten breaks were created or extended, costing $36 million.
Lawmakers missed a major opportunity to fix our broken revenue system and level the playing field for those with lower incomes who currently pay the most in state taxes. The Governor and House budget-writers proposed a capital gains tax that would have generated significant resources to protect the future stability of our investments. It would have impacted only the wealthiest Washingtonians – fewer than 35,000 – while taking a big step toward making our revenue system more equitable.
Instead, lawmakers decided to gamble on short-term fixes and to bank on the notion that the economy will continue to boom. This is the antithesis of wise, responsible investment, and it is setting us up to be woefully ill-prepared to weather any dips in the economy.
Again, while it is good news that the budget increases its investments, the reality is that those investments can’t actually come to fruition without a reliable, sustained source of revenue to pay for them. In 2017, it is likely that lawmakers will again be faced with the same issue that they faced this time. They won’t have enough revenue to fund the important programs that benefit all Washingtonians – from education to public safety to health services. The budget should be a tool that can secure the economic strength and progress of our state and its residents for generations to come. Right now, the budget is mainly a utilitarian tool to get us through the next two years. And even then, it’s shaky.