OLYMPIA -- Here's the budget outlook for next year's Legislature, and the state as a whole: Washington will take in a bit more tax money than lawmakers were told to expect before they passed a budget and left town in July. But the programs in that budget are costing more than expected.
That means there's a gap of about $455 million between what the state expects to collect in taxes and fees, and what it is scheduled to pay out in programs and wages.
Wednesday’s economic and revenue forecast from State Economist Steve Lerch was the standard good news/bad news of those quarterly projections.
On the plus side, more people are working and wages are rising slightly; car sales are up; housing starts and home sales also up; revenue from legal marijuana sales are continuing up. All of that should add more to state revenue than earlier projects.
But state manufacturing orders are down; the global economy is slowing; a strong dollar means exports are dropping and the Federal Reserve is expected to raise interest rates. That's going to keep revenue from growing as fast as recent months.
Adding all of that together, the state should take in $37.2 billion in taxes and fees for its 2015-17 budget cycle. It's scheduled to spend $37.5 billion, and could cover that difference from reserves. But the costs don't include the $100,000 per day fine the state Supreme Court has levied because the Legislature has not come up with a plan for improving some aspects of public school funding, or some $155 million in costs for fighting last summer’s wildfires.
Revenue isn't growing fast enough to cover costs, David Schumacher, director of the Office of Financial Management, said. “What this means, of course, is that there will be very little room for new spending in this year's supplemental budget.”
That's even before the Legislature confronts what could be a budget hit of about $1 billion to revenue from a ballot measure voters approved earlier this month. Initiative 1366 says the state sales tax will be reduced 1 cent on the dollar starting April 15 if the Legislature doesn't approve a constitutional amendment that requires future tax increases to be approved by a two-thirds majority.
Many Republicans support such an amendment, but many Democrats don't, and a constitutional amendment requires that same two-thirds majority in both chambers to go to the ballot. The initiative's constitutionality will be challenged in the courts, but no one can predict when, or how, that will come out.
Schumacher said Gov. Jay Inslee's supplemental budget, to be released in mid-December, won't assume that sales tax cut is going to happen.
Sen. Andy Hill, chairman of the Senate Ways and Means Committee, said the cut in the sales tax would create a big hole, but whether it becomes part of legislative budget proposals will depend on what happens after lawmakers return in January.
"There's a way out of that," Hill, R-Redmond, added, by passing the supermajority for taxes.