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Revenue forecast bump provides little help for budget stalemate

UPDATED: Tue., June 20, 2017

Rep. Timm Ormsby, D-Spokane, Office of Financial Management Director David Schumacher and State Economist Steve Lerch, left to right, look at charts that show slight improvements in the state’s revenue picture on Tuesday in Olympia. (Jim Camden / The Spokesman-Review)
Rep. Timm Ormsby, D-Spokane, Office of Financial Management Director David Schumacher and State Economist Steve Lerch, left to right, look at charts that show slight improvements in the state’s revenue picture on Tuesday in Olympia. (Jim Camden / The Spokesman-Review)

OLYMPIA – Legislators who are trying to beat the clock and get a deal on the 2017-19 budget before the state faces a partial government shutdown got minimal help Tuesday from the strong economy.

Washington can expect to collect an extra $87 million in taxes and fees for that two-year period, and about $200 million overall for the next four years, the state’s Economic and Revenue Forecast Council was told.

People trying to reach a compromise on the budget before the fiscal year ends on June 30 greeted the new estimate with, at best, muted enthusiasm.

“It doesn’t hurt at all, but it doesn’t help much,” said Rep. Timm Ormsby, D-Spokane, the chairman of the House Appropriations Committee.

“It’s certainly not bad news,” said Sen. John Braun, R-Centralia, the chairman of the Senate Ways and Means Committee.

Both Braun and Ormsby, who are in the middle of budget negotiations, are on the council. It voted unanimously to accept the estimate, which can now be plugged into budget calculations. But with the total budget expected to be somewhere above $43 billion, the extra money is about two-tenths of 1 percent and not enough to break the logjam.

Their comments at a news conference after the council meeting suggests negotiators are still far apart on a compromise spending plan. As they’ve said for weeks, a group discussing improvements to the state’s public school system, mandated by the Washington Supreme Court, must finish its work on a compromise education policy plan and that group hasn’t reached agreement.

Education is about 50 percent of the overall state operating budget, and the House Democrats and Senate Republicans have two different strategies to pay for school improvements. Democrats have proposed an array of tax changes depending on how much is needed, and Braun reiterated the long-standing GOP criticism that none have passed so his caucus does not consider them serious proposals.

Senate Republicans have proposed a change in state and local property taxes, which would have to be approved by voters in November. Ormsby reiterated the Democratic criticism that it’s “the job of the Legislature to take care of this problem” not the voters.

They didn’t even agree on where the negotiations sat as of Tuesday morning, which was Day 29 of the second 30-day special session, and 10 days from the end of the fiscal year.

“The House has made a substantive compromise proposal. I think it’s fair to say the ball is in the Senate’s court,” Ormsby said.

Braun said he wasn’t sure that was true: “Both sides have made substantive proposals.”

The Legislature finishes the second special session Wednesday and Gov. Jay Inslee is expected to call a third one to start immediately. If the Legislature doesn’t pass some type of spending plan by June 30, the state will go into a partial government shutdown.

To avoid a shutdown, Braun said Senate Republicans have a “backup plan” which he refused to divulge.

“The MCC will not sit by and let the government shut down,” he said, referring to the Republican-led Majority Coalition Caucus in the Senate.

Ormsby said House Democrats are not discussing possibilities to avoid a shutdown if a full budget compromise is not reached. “Our sole focus it to get the biennial budget done by the end of the fiscal year,” he said, adding that any short-term budget would open the door for future delays.

State Economist Steve Lerch called it a slight improvement over the last forecast in March. Lawmakers working on the state’s two-year general fund budget of at least $43 billion, which must be in place by June 30 to avoid a partial government shutdown, said the extra money doesn’t make much difference. Among the factors driving the slight bump in overall state revenue that Lerch listed were personal income slightly lower than anticipated in March, while the employment figures are about the same and mortgage rates are still expected to rise gradually.

“Housing is going to be a bit more expensive as we move forward,” he said.

But building permits are expected to rise, despite the increase in interest rates, because of the state’s growing population.

The real estate excise tax is collecting about $18 million more than economists expected in March, and some other taxes, including the state sales tax, are up nearly $38 million. Marijuana taxes should bring in an extra $4 million for the biennium that will end on June 30 and an extra $5 million for the 2017-19 biennium.

“Washington’s economy continues to outperform the national economy,” Lerch said.

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