Latest state revenue forecast tees up budget debate in Olympia

By FRANZ GREGORY  | 
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Mar 17, 2017

State lawmakers shifted their focus back to committee action this week, following last week’s cutoff deadline for bills to pass their house of origin. Floor action was limited to passing one bill in the House on Wednesday. HB 1616, which would abolish the state department of early learning and transfer its powers, duties, and functions to a newly created department of children, youth, and families passed by a 77-19 vote.

The state Economic and Revenue Forecast Council met on Thursday to adopt its latest revenue forecast, projecting that the state’s revenue collections through June of 2019 would increase by about $571 million, $313 million more than originally forecast for the upcoming 2017-2019 budget and $258 million more for the current two-year budget through the end of this June.

The forecast projects that revenues available for the current 2015-17 state budget would grow to about $39 billion and increase in the 2017-19 to $41.6 billion, a $2.16 billion (6.8 percent) increase over current collections.

With the latest tax revenue forecast in hand, lawmakers are expected to take up deliberations on a two-year state spending plan in earnest, beginning next week, when Senate Republicans are set to release their budget proposal. House Democrats plan to release their version the following week. Additional spending for the current 2015-17 budget will also likely be considered in the form of a supplemental budget measure this session.

Governor Inslee signed SB 5023 this week, to delay the so-called “levy cliff” by a year, giving local school districts some breathing room in their budgeting for the 2017-18 school year. Under the bill, school districts would continue to be able to raise an additional $500 million statewide through local property tax levies until 2019. They would, however, not be allowed to spend levy monies on teacher salaries and other items that fall under the state basic education funding mandate imposed by the state Supreme Court.

This means lawmakers will continue to be under pressure to come up with an education funding plan this session.  The state Supreme Court has given the legislature until September 1, 2018 to comply with its 2012 ruling in the McCleary case, but it has ordered that a plan must be in place before the legislature adjourns this year to show sufficient progress in resolving the issue.

Democrats and Republicans differ sharply on their approach to the education funding issue. Senate Republican leaders said that new taxes are not needed and that the latest revenue projections could give lawmakers additional opportunities for investments in education, or possible tax reductions.

House Democrats disagree, citing the state’s obligations not only on education funding, but in other areas like mental health. They said they would be looking at a number of options for additional revenues, including Governor Inslee’s proposals for taxing capital gains, imposing a carbon fuel tax, and increasing a number of business taxes.

The House Committee on the Environment held a public hearing Tuesday on HB 1646, which would impose an escalating tax on greenhouse gas emissions from fossil fuels, beginning July 1, 2018, but the committee has not taken action on the bill so far.

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