"This particular revenue forecast takes a hard problem, and doesn't make it worse," deadpanned state Representative Ross Hunter (D-Medina) just minutes after the release of a March quarterly revenue forecast that is largely unchanged from November. It was an apt summation of the yet-another-budget-battle looming in Olympia.
State revenues are now projected to be up $59 million through the June end of the 2011-2013 budget, but down $19 million from the previous forecast for the 2013-2015 biennium. That gives lawmakers an extra $40 million to play with. Pretty much a rounding error within the context of a $32.5 billion two-year budget, and hardly enough to make a dent in the projected $1.3 billion shortfall (give or take a few billion dollars).
The good news is that the March forecast wasn't as bleak as a lot of lawmakers anticipated; nobody would have been surprised had these numbers come in a few hundred million dollars lower. The better news is that these not-quite-so-bad numbers are buoyed by growing strength in the housing market, auto sales, and employment. These are all indicators that our economic recovery will continue.
The bad news is that this post-Great Recession recovery continues to be atypically sloooooow:
For all the constant Republican chatter about this being a spending problem, state revenue collections aren't projected to return to their 2008 peak until 2014. And that doesn't even account for inflation. Or population growth.
And this revenue shortfall isn't just due to a crappy economy. "We're actually paying the lowest tax rate that we've paid in my lifetime," explains Hunter, who, trust me, could easily afford a substantially higher rate.
So where does that leave the budget? Pretty much where it's always been: Billions of dollars short. Think last year's budget, but with some minor tweaks and a couple of different accounting tricks.
First, let's start with the low-hanging fruit. The last couple budgets have been balanced on the backs of school teachers by suspending the voter-approved cost-of-living increases. This budget will inevitably do the same. So chalk up $360 million in savings there. Second, the new revenue forecast accounts for a Supreme Court decision that invalidated (on a technicality) the estate tax on married couples, while leaving it in place on singles. It's a distinction that Representative Reuven Carlyle (D-Seattle), the House Finance Committee chair, describes as "silly."
"If we can't fix that as part of our normal day to day fiduciary responsibilities of running the state, we might as well just put a fork in it," says Carlyle. He doesn't expect to have to wield that fork, so figure on another $160 million in revenue there.
Then there's the temporary 50 cent a gallon beer tax that's set to expire at the end of June. Extending it would raise another $105 million. That's likely, if at a lower rate. So let's say another $80 million in revenue. So teachers COLAs, the estate tax, and the beer tax comes to $600 million in revenue and savings. We're almost halfway there. Yay!
Finally, Governor Inslee campaigned on raising revenue by closing unproductive tax loopholes. Expect his initial proposal to be in the $500 million range. If Senate Republicans can stomach that, the final $200 million or so will be taken out of the hides of state employees and poor people. As it always is. Expect the usual wailing an gnashing of teeth, but budget gap closed.
Of course we haven't even started to address the "$200 million to $8 billion" in additional K-12 spending (Senator Andy Hill's bizarrely broad estimate) that is mandated under the McCleary decision. And my guess is, neither will the Legislature. "There is no correlation between increased spending and improved outcome," Hill told reporters today when asked about McCleary.
"No correlation." Like, if we spent zero dollars on K-12 education, we would still get the same results. Or something. That doesn't sound to me like a lawmaker who is truly dedicated to amply funding our public schools.
"It's hard to do without additional revenues," insisted Hunter. And with anti-tax Republicans like Hill controlling the Senate, it's hard to see how we raise these revenues.
So yeah, I hate to ruin the drama and all that, but when the dust settles, expect to see a budget that looks very much like the past couple budgets, but with some sort of promise to get around to funding McCleary sometime soon, like, we mean it this time, guys. Really.