Revenue Is Projected to Increase, But Not by Enough

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Revenue Is Projected to Increase, But Not by Enough

By - February 20, 2015

Washington state revenues are continuing their recovery from the depths of the Great Recession, growing by $274 million ($134 million in the 2013-15 biennium and $140 million in the 2015-17 biennium) from the previous forecast, according to new data from the State Economic and Revenue Forecast Council. Even still, the increase in revenue falls woefully short of what is needed to meet the state’s funding obligations in the next two years.

In addition to the revised revenue forecast, lawmakers recently passed a 2015 Supplemental Budget, which included revisions that increase the ending fund balance by $200 million. As the graph shows, even with the increase in the fund balance plus an increase in revenue, resources will still fall $2.5 billion short of what is needed just to fund these required costs:

  • Maintaining services ($2.6 billion): Simply maintaining the current level of services the state provides will cost more in the next two years due to inflation, increases in the population, demographic changes, and increased debt and pension costs. 
  • McCleary education investments (at least $1.2 billion):  The state is required by its own constitution to adequately fund K-12 basic education. The State Supreme Court’s McCleary ruling reinforced that obligation, requiring lawmakers to fully fund basic education by 2018. To meet that deadline, at least $1.2 billion is needed in the next budget cycle to pay for school maintenance and curriculum costs as well as to phase in full-day kindergarten and smaller class sizes in kindergarten through third grade. 
  • Voter initiatives ($1.8 billion): In 2000, voters approved Initiative 732 to provide cost-of-living adjustments (COLAs) for teachers. Lawmakers have voted to suspend this initiative in previous years, including during the current 2013-15 biennium. The suspension is set to expire, making I-732 a legal obligation for the 2015-17 budget cycle. Additionally, Initiative 1351, which passed in November 2014, requires lawmakers to fund smaller class sizes in kindergarten through 12th grade. Within the first two years of passage, lawmakers can only amend or suspend an initiative with a two-thirds vote in both chambers.

 Feb forecast2

On top of these required spending obligations, there are other investments that the state needs to make in order to strengthen our economy and support the health and well-being of Washingtonians:

  • Invest in the state’s workforce ($580 million): Lawmakers should approve the collective bargaining agreements that have been reached between workers and the Governor, providing the first general wage increase in seven years for middle-class employees. The Governor has also proposed to align the wage increase for state employees with that of teachers. These are important investments to help retain and attract talented workers who teach our children, protect our safety, and care for seniors and people with disabilities.
  • Invest in mental health services (at least $65 million): In August 2014, the State Supreme Court ruled that our mental health system is failing to appropriately treat people with mental illness. A shortage of space in treatment facilities has led to the warehousing of patients in hospital emergency rooms – a practice that cannot continue, according to the court. Increased investments are needed to provide proper care to people with mental illness.
  • Restore cuts from recent years: Since 2009, lawmakers have enacted over $10 billion in cuts to health care, food access programs, tuition assistance, child care, services for seniors, and other important investments that support our economy and the well-being of all Washingtonians. Now is the time to rebuild investments that help people find work, make college affordable, and strengthen supports that allow people to live in safe homes and put food on the table.

Solutions exist to increase our resources so that we can invest in education and the quality of life in our state. Enacting a capital gains tax, as the Governor has proposed, is one important tool to significantly boost revenues.