Washington’s improving economy a budget brightener

OLYMPIA – Good news for state budget writers: Thanks to a strong real estate market, continued job growth and expected boosts in legal marijuana sales, the money coming into state coffers will be about $400 million more over the next two years than they were told just three months ago.

With the Legislature some two-thirds of the way through a special session without any sign a budget deal is near, the announcement of extra money was greeted with enthusiasm by Andy Hill, the Republican chairman of the Ways and Means Committee. 

“Hopefully, this will likely break the logjam,” Hill said after he and other members of the Economic and Revenue Forecast Council voted to accept the new projections.

Rep. Ross Hunter, his Democratic counterpart as chairman of the House Appropriations Committee who also sits on the council, was a bit less optimistic: “We have a lot of work to do.”

The House and Senate each passed an operating budget that would cover many of the state’s programs and salaries, as well as the state’s portion of public school educations and public colleges. But the two budgets are more than $1 billion different, with Senate Republicans saying the House proposal relies on unacceptable tax increases and House Democrats saying the GOP plan has unacceptable cuts and unsustainable accounting gimmicks. Little discernible movement between the two sides has occurred since the 30-day special session started on April 28.

Hill said he has insisted since before the Legislature convened in January that increases in state revenue, which will be more than $3 billion above the current two-year budget cycle, should be enough to foreclose any need for a tax increase.

“Our job is even easier than it was in January,” he said Monday. “At some point you have to say, ‘Holy cow! We’ve got a lot of money.’ ”

The state will collect about $100 million more for this budget cycle, which ends on June 30, than previous forecasts estimated, said Steve Lerch, executive director of the council, and about $300 million more in the 2015-17 budget cycle than earlier projections. It’s due in large part to a booming commercial real estate market in the Puget Sound, and to a lesser extent a stronger housing market. Unemployment also is down, although some parts of the state are much slower recovering from the recession than King County, he said.

Hunter said the boost projected for the next two years, plus a projected $400 million extra in the following two-year budget cycle, won’t cover the expected increases of $1.5 billion in each cycle for public school funding necessary to meet a state Supreme Court order. The state also needs to shore up some pension programs and is facing other increases in costs. “It doesn’t completely solve the problem,” he said. 

They’ll reach an agreement eventually, Hunter said, but whether they will do it by next Thursday, the 30th and last day of the session, is uncertain.

Hunter said he was leery of projections for rapid growth in revenue from legal marijuana sales. The total amount projected for 2017-19 would rival the tax money collected from cigarettes, and marijuana will be far less available because the state controls the number of licensed stores and some counties have bans on legal marijuana businesses.

David Schumacher, director of the Office of Financial Management, said the additional revenue should make it easier for budget negotiators to find a middle ground. If the revenue projections had been this strong last Nov-ember, Gov. Jay Inslee would not have proposed the tax increases for his budget, and House Democrats likely would have had a smaller tax package also, Schumacher said.

But three Senate Republicans, including Mike Baumgartner from Spokane and Mike Padden from Spokane Valley, said the Legislature shouldn’t spend all of the projected increase. Half of it should be refunded in the form of lower business and occupation taxes, they said.