Will an extra $320 million patch things up around Olympia?

A new state revenue forecast gives the Legislature and Gov. Jay Inslee more money for the upcoming budget. But are they any nearer a deal?
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A new state revenue forecast gives the Legislature and Gov. Jay Inslee more money for the upcoming budget. But are they any nearer a deal?

Washington apparently has $320 million more entering its coffers than expected.

That's what the figures said Tuesday when they were unveiled by the Washington Economic and Revenue Forecast Council, a bipartisan committee of legislative and executive branch budget leaders.

But what does that extra money means to the deadlocked 2013-2015 budget negotiations between the House Democrats and the 23-Republican-two-Democrat alliance that controls the Senate? That's hard to say — other than the extra revenue will help.

The Senate's Majority Coalition Caucus says that's obviously "make-a-deal-and-go-home" money. In fact the majority coalition points to last Thursday's approval of sealing up a $160 million tax loophole, contending that means $480 million in new cash has materialized in the past few days.  "With a half billion dollars on the table, there's no reason not to wrap it up," said coalition leader Sen. Rodney Tom, D-Medina.

Democrats were more hesitant Tuesday about the new revenue predictions actually solving Olympia's budget impasse, but declined to go into detail on their thoughts. "It probably closes the gap a little bit," said Rep. Ross Hunter, D-Medina and one of the Democrats' budget negotiators.

Another Democrat budget writer, Rep Reuven Carlyle, D-Seattle, said: "There's no question it is helpful for the short term, and it's possible to reach an agreement. But the need for a long-term strategy (for the 2013-2015 budget) is in no way reduced by the short-term gains." 

Here is how the new numbers fit into the budget talks:

  • $110 million in extra revenue is expected for the current biennium 2011-2013, which ends June 30. That means the state expects to bring in $30.6 billion in revenue, while spending somewhere in the neighborhood of $30.5 billion in the current biennium. The final spending figures will tell how much of the extra $110 million will carry over into 2013-2015.
  • $121 million in extra revenue for 2013-2015, bumping the expected income figure to $32.6 billion. Another $90 million is expected to materialize because somewhat less in government services is expected to be used in 2013-2015.
  • The Senate is counting an extra $160 million due to counting closing an estate tax loophole. The majority coalition views that as an extra tax. The Democratic-controlled House views that as fixing a glitch to prevent the loss of $160 million.

Consequently, the majority coalition sees roughly $480 million in new revenue. The Democrats' -- including Gov. Jay Inslee's -- view is undecided on that interpretation.

Prior to these new numbers being released Tuesday, the Senate's last public 2013-2015 operating budget proposal called for spending $33.2 billion, while the House's last public proposal called for $33.5 billion. In closed-door talks across the past six weeks, the House Democrats have made at least 75 percent of the concessions when solely considering the dollars involved. Both sides have had their policy bills blocked, with the Senate managing to get one bill on rerouting ecology department money approved by the House in return for conceding on the estate tax matter.

Looming in the background is the fact that Washington faces a partial government shutdown of unknown proportions if a 2013-2015 operating budget is not in place by July 1. Executive branch leaders have begun mapping out the specifics of such a shutdown, But David Schumacher, director of Washington's Office of Financial Management said: "I think it is unlikely that we will have a state shutdown on July 1."

Meanwhile, the majority coalition leaders said Tuesday that they would drop all of their sought-after policy bills from the budget talks if the House Democrats stop seeking $208 million in 2013-2015 closures of six tax exemptions. Those policy bills include increasing the amounts and interests allowed to be charged in payday loans, putting a cap on non-education funding increases, requiring teachers and principals to both agree whenever a teacher is assigned to a new school, and lowering the eligible age from 55 to 40 on potential lump settlements on workers compensation claims.

Stances on another proposed tax exemption closure bill are fuzzier. The House wants to repeal a landline phone tax exemption as a preventative measure to head off cellular companies and other telecommunications firms from filing lawsuits seeking the same exemptions. Verizon has already filed such litigation earlier this year. A successful lawsuit in 2014 could lead to a refund of about $430 million in fiscal 2015, plus further losses later.

Hunter and Senate Republican Caucus Leader Mark Schoesler, R-Ritzville, both indicated Tuesday that resolving this matter — which the House passed twice with bipartisan support — could be postponed beyond this session. However, Hunter and Carlyle said the risk of the state losing a lawsuit on this matter before a fix-it bill is in place increases as time passes. Inslee wants feedback from lawmakers before deciding whether to pursue the telecom bill this session, said governor's spokesman David Postman.

Even if the Democrats and Republicans close in on the basic size of the 2013-2015 budget, they are still significantly apart on how that money should be spent. "This debate could move from revenue ... to spending," Postman said.

The majority coalition wants to significantly cut health and social services to funnel the extra money to education while keeping tax increases and exemption closures to a minimum. Democrats contend the Republicans' non-education cuts are too drastic, and extra revenue is needed so education can be improved without crippling other programs. Also, each side questions how the other put together its budget, focusing on the various accounting moves.

The 2012 Washington Supreme Court ruling ordered student-teacher ratios be improved, all-day kindergartens be installed and many support measures be implemented. It is estimated that it will take $4 billion to $4.5 billion in extra money spread across 2013-25-15, 2015-2017, and 2017 -2019 to meet the Supreme Court's requirements. But the House Democrats and the Senate majority coalition are taking radically different paths to meet those mandates — making their education-improvement proposals almost impossible to compare. But the Legislature will probably not spend more than $1 billion on the Supreme Court's improvements in 2013-2015, meaning the 2015-2017 and 2017-2019 allocations will have to be significantly bigger than $1 billion.

Sen. Andy Hill, R-Redmond and the majority coalition's chief budget writer, pointed to a stalled Senate bill that would limit growth in non-educational spending as a way to send extra money to the Supreme Court's education measures. However, House Democrats have blocked that bill, saying it would kill flexibility in dealing with social services, health and corrections budget matters. This is one of the bills that the majority coalition is saying it is willing to take away if the House drops closure of more tax exemptions.

Schoesler pointed to Boeing being recently noncommittal on whether it will manufacture of its latest line of 787s in Everett, saying South Carolina looms to take that work. He argued that Washington's workers compensation laws  — which one stalled Republican bill wants to change — are one factor in Boeing thinking. "South Carolina puts out the welcome mat, and we pull it back in," Schoesler said. Postman said that Boeing has said it wants reform in workers compensation, but has not said anything about moving more manufacturing elsewhere if it does not get that reform this session. The economic forecast council predicted a drop of 3,500 Washington aerospace jobs this year, considerably worse than a March prediction of 1,300 lost aerospace jobs.


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About the Authors & Contributors

John Stang

John Stang

John Stang is a freelance writer who often covers state government and the environment. He can be reached on email at johnstang_8@hotmail.com and on Twitter at @johnstang_8