2014 Supplemental Budget

coinsThe House and Senate introduced budgets about two weeks ago that were similar in some ways, but radically different in others. We negotiated and came to a bipartisan solution that pleases no one except our families who get us back home again. The votes were lopsided in favor – 85-13 in the House and 48-1 in the Senate.

A budget must meet three constraints:

  1. It must balance in the current biennium.
  2. It must meet the “expenditure limit” introduced in initiative 601.
  3. It must show a positive balance in 2015-17 under the rules established in the 4-year balanced budget bill from several years ago.

Of these, the third constraint is the most difficult. The House and Senate had very different approaches to the problem.

The Senate proposed a number of spending cuts that create more capacity to spend in future years. Many of these made little sense to me. For example, in many agencies worker’s compensation rates changed. When the rate went down the Senate took the savings, but when the rate went up, they didn’t fund the increase. If a business did this they would be in court. When the agencies actually make the legally required payments they have to take cuts somewhere else. We are not excited about the $5m cuts in social services, and the level of cut that would be needed in higher education or corrections. If you are going to propose cutting something you should point at it and be honest about what gets cut.

The Senate also proposed about $83 million in new tax exemptions. These wouldn’t have started until next year, a common budget-writing strategy to hide the true cost of an item. They are paid for in the next biennium with a shift from a different account, resulting in cuts there. This would leave us with a long-term reduction of about $160 million per biennium and no revenue to pay for it. I do not think we should reduce taxes when we have the McCleary problem to deal with in the next biennium. (This is a vast understatement).

The House proposed closing some tax loopholes and extending a fee that is scheduled to sunset at the end of this biennium in order to fund the reinstatement of the Initiative 732 COLA for teachers and other school employees, plus an investment in improving the quality of our early learning system. The Senate didn’t like this. (Also an understatement).

Outside these fundamental differences:

  • Both chambers proposed increases in K-12 spending to comply with the McCleary decision. The Senate put in $38 million, the House $58 million. These are both very small increments in the overall solution.
  • Both budgets funded increases in mental health funding, a critical need in Washington. Again, the House proposal was a little larger than the Senate. The Seattle Times talks about the House proposal here. Another story on the underlying problem here.
  • Both budgets fund the “TR Settlement”, the result of a court case showing that we don’t provide adequate mental health care to children. This is about $8 million, and will grow to $35 million a year over the next five years.
  • Both the Senate and the House propose funding programs for our residents with developmental disabilities to try to reduce the “no state services” waitlist. We’re working through some technical issues about which bill will pass. Again, more reading on this topic here and here.

The biggest potential problem we face with this budget is responding to the Supreme Court on the McCleary decision. To try to clear up confusion about the “plan” for increasing education funding Rep. Pat Sullivan and I introduced HB 2792. The bill lays out the schedule for McCleary funding proposed by the Joint Task Force on Education Funding in 2012, a task force report the court has mentioned several times. As expected, the bill did not pass, but is a reasonable structure for next year.

The final budget drops all the tax increases, all the new tax loophole creation, the teacher COLA and the fee extension the House proposed.

Short sessions (every other year) are 60 days long and are designed to fix problems that have come up between the two longer sessions. This is the first time since the start of the great recession when we do not have major changes in the budget. I described the final product in the press as a “modest” budget. This is perhaps charitable. The final product includes:

  • $58 million investment in K12 books, supplies and technology, part of our McCleary obligation. (A small part.)
  • Significant steps on mental health beds in the community. The Senate didn’t pass the bill allowing families to provide input to the judge in commitment cases over concerns about how much it might cost, but we need the beds anyway.
  • 5000 new slots for services to our developmentally disabled community, taking a big bite out of the “no paid services” waitlist.

I’m OK with it, but it puts off big issues to next year.

The articles referenced above (and included below so those of you who read this in print can find the articles) all list parts of Washington’s budget that are inadequate. We’ve lost in court on children’s mental health, we are 49th in the country in community mental health beds, we are being required by the court to substantially increase funding for K-12, and our higher education system needs significant capacity increases to keep up with today’s economy. What’s up with all this? This didn’t used to be a problem. What happened?

We’ve turned into a low-tax state. A study from the Institute on Taxation and Economic Policy talks about this, and is available here.  A short summary:

Recently released data from the Census Bureau confirms that overall Washington could be considered a “low tax state.” However, families living near or below the poverty line generally do not experience Washington as a low tax state — instead, they pay more than their fair share of state and local taxes.

I wrote about this in 2012 (here) and will try to post some more information about it in the next week or so.


Ross’ blog post on Tax Incidence in Washington: http://s485995026.onlinehome.us/2012/08/tax-incidence-in-washington/

Author: Ross

I am the Director of the Department of Early Learning for Washington State. I formerly represented the 48th Legislative District in the State House of Representatives, chairing the Appropriations committee and spent many a year at Microsoft.