Washington State Legislature
You can pick your number.
The state budget is $2.7 billion in the red. Does that mean gloom and probably new taxes for 2013-2015?
The state budget will have $2 billion more than in the previous two-year period. Does that mean the state budget is in peachy-keen shape for 2013-2015 with extra money for K-12 education and higher education — all with no new taxes?
The number that you like probably will reflect whether you agree with the Washington Legislature's Democrats or Republicans.
The Washington Economic and Revenue Forecast Council released its quarterly state economy and revenue predictions Wednesday, providing numbers that the House and Senate budget gurus will plug into their 2013-2015 Washington operating budget proposals to be unveiled in the next one to three weeks.
The key numbers released Wednesday are these.
The 2011-2013 operating budget appears on track to be $30.536 billion — $59 million more than expected three months ago. The predicted operating budget revenue for 2013-2015 appears on track to be $32.5 billion — $19 million less than expected three months ago. That's still $2 billion more than 2013-2015. State leaders view the $59 million and $19 million figures as miniscule changes in $30 billion-plus budgets. And with a still wobbly economy, they believe the new figures are good.
The $2 billion increase between the 2011-2013 and 2013-2015 budgets has been expected for the past two years — with a similar revenue increase predicted for 2015-2017.
"Flat is the new up," said Rep. Ross Hunter, D-Medina and chairman of the House Appropriations Committee, about the revenue predictions being close on target. "We still have a hard problem to resolve. This doesn't make it any worse."
"Those who want to raise taxes really, really bad were disappointed in this budget forecast," said Senate Republican Caucus Leader Mark Schoesler, R-Ritzville. "The $2 billion (increase in revenue between the biennia) is fascinating. It proves we don't need tax increases," said House Minority Leader Richard DeBolt, R-Chehalis. "We get $2 billion more to spend," said Sen. Michael Baumgartner, R-Spokane and vice chairman of the Senate Ways and Means Committee.
The state faces a $1.2 billion to $1.3 billion shortfall between the costs of Washington's obligations and the anticipated 2013-2015 income, according to the Washington Office of Financial Management.
Those shortfall figures cover only the costs of continuing existing programs. Beyond that, there is the need to meet the Washington Supreme Court mandate to upgrade K-12 education. Hunter puts that figure at $1.4 billion, which would create a $2.6 billion to $2.7 billion overall shortfall. The House Republicans believe the Supreme Court school obligations for 2013-2015 can be fixed with $817 million, which would create a $2 billion to $2.1 billion total shortfall.
Senate Republican leaders won't say how much they believe is needed to meet the Supreme Court's education requirements. The only clue is Senate Ways and Means Committee Chairman Andy Hill, R-Redmond, saying: "There is no correlation between increased spending and student outcomes."
Republicans argue that the Supreme Court education fix-it work can be done with no new taxes. Meanwhile on Tuesday, Senate Republican leaders unveiled a proposal to increase higher education money by $300 million, which would lead to a 3 percent reduction in students' tuition. College officials quoted in various news reports said the amount of the actual boost turns out to be much less when they entered the Republican figures into their calculations. On Wednesday, Republican legislative leaders said the $300 million would come from the extra $2 billion in revenue expected between 2011-2013 and 2013-2015.
However, Hunter does not see a neat $2 billion increase in revenue for 2013-2015. Complicating factors to Hunter are inflation; increasing costs that are out of the state's control; the June 30 expiration of beer and hospital beds taxes plus a 0.3 percent business and occupation surcharge; a growing population needing more services; and other variables.
Also, Hunter does not believe a $2.7 billion shortfall can be tackled without enacting some new taxes. "It's hard to do that without additional revenue," he said.
The Republican-dominated Senate expects to unveil its 2013-2015 proposed budget in five to 10 days. The Democrat-controlled House will release its proposal a few days later. At the end of March, Gov. Jay Inslee is expected to announce his spending budgeting priorities and a proposed closing of a few hundred million dollars worth of tax exemptions — but no detailed proposed budget.
Democrats have floated some trial balloons for $200 million to $300 million worth of tax exemptions and tax credits to eliminate. However, Democrats have not unveiled any specifics. Republican leaders said they might discuss closing some tax exemptions, but have always been chilly to the concept.
A couple of hurdles exist to closing tax exemptions. A huge number of exemptions and tax credits amount to a few million dollars each — meaning significant numbers have to be eliminated to have a visible impact on a $2 billion budget problem. Also, Democrats and Republicans in both chambers routinely propose new tax exemptions and tax credits with roughly 30 such bills introduced so far this session.
"If the Democrats can't find $200 million in bad tax loopholes, how can we?" Schoesler said.
Here are some highlight from the Washington Economic and Revenue Forecast Council's Wednesday report:
- No assumptions were made about revenue from taxing the sales of marijuana.
- Growth of Washingtonians' personal incomes is slightly slower than expected.
- Construction permits for new houses are increasing faster than predicted.
- The percentage of mortgage and debt payments -- when compared to personal income - has shrunk from more than 13 percent in 2009 to about 10.5 percent today.
- More cars and light trucks are being bought in Washington.
- Home sales are rising slightly with Island, King, Spokane and Kitsap counties posting the best percentages. King County's typical home prices are the highest in the state, followed by Clark, Whatcom and Snohomish counties.
- New taxes kicked in on Jan.1 -- a payroll tax plus extra taxes for families making more than $450,000. Revenues from sales and B&O taxes are growing.
- Washington's growth in exports is slowing down.
For exclusive coverage of the state Legislature, check out Crosscut's Olympia 2013 page.
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