Will Washington schools get $1.75 billion more in 2018? Panel split.

OLYMPIA – Almost everyone agrees public schools are going to get billions more from Washington taxpayers in the coming years.

But lawmakers disagreed Wednesday on exactly how much and how to account for those future expenses as the state projects its budgets over the next four years.

In what could foreshadow a contentious legislative session, the Economic and Revenue Forecast Council split over how state budgets through 2021 should reflect the extra money that will be spent on public schools to satisfy a Supreme Court mandate commonly known as McCleary, the last name of the lead plaintiffs in the landmark case.

Every few months, the council receives a forecast of how the state and federal economies will do for the next several years. It’s more than an educated guess, but subject to a wide range of constantly changing conditions like employment, home sales and foreign trade. When the Legislature passes a budget, it has to match what the state expects to spend over the next four years to what the forecast says it can expect to bring in over that period, with statutes that define how that all should work.

The biggest problem for making revenue and expenses match in the coming years likely will be the cost of McCleary, which is just an estimate, albeit a big one – $1.75 billion per year, or $3.5 billion for the two-year state budget cycle. That estimate could go up or down, depending on what the Legislature approves next year.

Republicans on the council argued the estimate should be left out of the budget estimate completely at this point. Rep. Terry Nealey, of Dayton, said state law requires the budget outlooks to include only policy items that have been approved by the Legislature.

“We have a wide range of estimates,” said Sen. John Braun, R-Centralia. “The Supreme Court has agreed with us that we don’t know the number. To put in a number … seems a little bit premature.”

A special legislative task force still is struggling with how much teacher salaries will cost the state because of the court order, said Braun, the Senate Ways and Means Committee chairman. The latest estimate discussed Tuesday is less than predicted, he added.

Rep. Timm Ormsby, D-Spokane, said it makes no sense to leave out what likely will be the state’s biggest budget liability because the value of the outlook is to quantify costs. Adding such a significant amount in the middle of a session would lead some lawmakers to ask, “Where’d that come from?” he said.

Although lawmakers don’t know the exact number, “it certainly isn’t zero,” said Ormsby, the House Appropriations Committee chairman. The entire outlook is speculative until the budget is approved, he said, and “every one of these numbers is not going to be the same” at the end of the process.

In the end, the two Democratic lawmakers, the head of the state Office of Financial Management and state Treasurer James McIntire held firm in keeping about $1.75 billion per year in the budget outlook starting in fiscal year 2019, which covers most of the 2018-19 school year. That’s when McCleary improvements must be in place, based on the court ruling. They took that amount out of the fiscal year 2018 budget outlook – a recognition that the Legislature is unlikely to make such a significant expenditure before it absolutely has to – and put an asterisk in the budget that notes the number is just an assumption, which is subject to change.

The two Republican lawmakers voted no, with Braun saying later he was “disappointed” the council was violating the statute on how the budget outlook should be put together.

On a positive note, Steve Lerch, the state’s chief economist, said the state should bring in about $352 million more in taxes and fees through June 30, 2019, than previously thought because of bright spots in the economy. Gasoline prices are rising slightly but still well below 2011-15, personal income also is up slightly and taxes from property sales, particularly in King County, are up. Retail sales also are expected to be stronger this holiday season than last year, which helps a state like Washington that depends heavily on sales tax.

But hirings are down slightly and there is uncertainty about what effect the Trump administration will have on federal fiscal policies and foreign trade, Lerch said.

Marijuana revenue also was down slightly in October, only the second year since recreational marijuana sales became legal in Washington that it has declined. Economists aren’t sure why.