This is not the great recession – WA revenues still growing every year
Good news from today’s state revenue forecast: “The forecast of funds subject to the budget outlook is increased by $634 million for the 2019-21 biennium and $328 million for 2021-23 biennium.” In fact, “Total state revenues are now expected to grow 10.7% between the 2017-19 and 2019-21 biennia and 7.2% between the 2019-21 and 2021-23 biennia." This means revenues are projected to continue to grow every year as shown by this slide:
During the great recession, however, state revenues actually decreased budget over budget as shown by this slide (dollars in millions):
Though there is no recession proof tax structure, Washington has consistently ranked as having relatively stable tax collections compared to other states. The reason for this is Washington’s three major tax sources (sales, gross receipts, and property) are among the least volatile taxes. Progressive income taxes, however, are the most volatile taxes.
As noted by Standard & Poor’s 2020 Bond Rating for the State:
“Washington's revenues have historically exhibited less cyclicality than others (due in part to the lack of a personal income tax) . . . we have observed that capital gains-related tax revenues are among the most cyclical and difficult to forecast revenues in numerous other states."
Today’s revenue forecast demonstrates the continued resiliency of our tax structure, even during a pandemic.
Washington’s current 2019-21 budget is $53.3 billion. This level of spending is $8.6 billion, or 19% higher, than the 2017-19 budget. A combination of this spending increase and the new revenue forecast means there still is a budget shortfall. As noted on page 60 of today’s revenue forecast, the updated 2019-21 Enacted Budget Balance Sheet is still showing a total ending fund balance of negative $152 million.
While the budget outlook is now on better footing, employers and citizens now dealing with the Governor’s new COVID-19 economic restrictions are not. This is why other states are calling for special sessions to provide relief.
From Colorado’s democratic Governor this week:
"Colorado Gov. Jared Polis announced Tuesday an upcoming special session focusing on a $220 million stimulus package that would aid bars, restaurants, tenants, landlords and students."
“The COVID-19 pandemic is raging like never before in Oregon. Our economic recovery is fully dependent on getting this virus under control. As the state’s budget situation has stabilized and since Congress is unlikely to pass another relief package this year, I urge the Governor to declare a catastrophic disaster so the legislature can convene a remote special session in December. We need to utilize some portion of the state’s reserves as soon as possible to help struggling Oregonians and small businesses through the winter months.”
Both Oregon and Colorado are members of the Governor’s Western States COVID-19 pact. With the flexibility provided by today’s revenue forecast, hopefully Washington will soon be following their lead to provide employers and citizens relief from government imposed economic restrictions.
One thing today's revenue forecast should make crystal clear; tax increases should be taken completely off the table. Imposing new taxes would just add insult to the injury of the current economic restrictions.