The latest quarterly state revenue forecast released yesterday continues a recent trend of slightly more positive projections. Revenue collections for the recently started 2013-2015 biennial budget are now projected to come in $345 million higher than the June forecast, an increase equivalent to about one percent of the total state budget.
For years, heading into the Great Recession and out through the anemic recovery, we'd seen a string of quarterly revenue forecasts each revised lower than the last. That resulted not only in bitter biennial budget writing sessions, but also in contentious supplemental budget battles during the intervening sessions, as lawmakers scraped to trim mid-budget spending in the face of lower than expected revenue. But barring some sort of congressional-induced economic collapse, the 2014 legislative session should break that pattern. The only budget debate this coming session will likely be over how to spend the extra money, and dollars to donuts the bulk of that new revenue will go toward court-mandated K-12 spending and padding our dangerously thin budget reserves. So don't expect budgetary fireworks this coming session.
Not that there should be any. For despite this vaguely positive revenue forecast, tax collections continue to come in far below the level necessary to maintain current services at constant levels, let alone spend the billions a year more on K-12 education that the Supreme Court's McCleary decision has demanded. Yes, state revenues are projected to come in at a record high, but not when you adjust for inflation. Indeed, according to an analysis from the Washington State Budget & Policy Center, inflation-adjusted state revenue isn't projected to surpass the 2008 peak until 2017:
Washington State Budget & Policy Center
Nearly a decade after the economic collapse, inflation-adjusted state revenue will have barely crept up above pre-recession levels—and that's after nearly a decade of population and economic growth. That's unsustainable. And there's no projected jump in revenue after that. Without tax structure reform—finding the will and the way to tax income and extend the sales tax to growing segments of our service economy—state revenue simply cannot keep up with growth in demand for state services.
Or to put the crisis in more immediate terms, without new taxes, the legislature simply cannot meet the court-ordered K-12 funding requirements demanded under McCleary. To be clear, Washington State is facing a constitutional crisis. The court has ordered billions of dollars a year more for public education, an order with which the legislature will not comply. Yet the court lacks the authority to levy taxes. So how does the court enforce its will?
That's the crisis legislators better get a head start on this session. Without a supplemental budget battle to take up their time, they need to start laying the political groundwork for the substantial tax increases that will be necessary to both avoid a default on McCleary, and to sustain the public services and investments necessary to assure Washington's future economic growth.