If you count everything lawmakers are supposed to do, every requirement imposed by law, every policy set by previous Legislatures, Washington state next year will face a shortfall of $1.043 billion when it comes time to write a budget for 2013-15. But wait, there’s more. The projection doesn’t include the cost of the McCleary decision, this year’s Supreme Court ruling that held the state isn’t doing enough to fund basic education. That adds some $1.2 billion. It doesn’t allow for a general salary increase for teachers and state employees. It doesn’t leave anything in reserve.
Even if you back out a few things lawmakers have been putting on hold for years, and you spend the half-billion dollars the state will have in its rainy-day account, you get a budget problem for 2013-15 that could be in the realm of $2 billion.
Not that it comes as a surprise to anyone. State Rep. Gary Alexander, the House Republican budget lead, says legislative staff has been coming up with similar numbers in recent weeks. “All in all, we know we have got our work cut out for us next session if we’re going to handle this budget without any new kind of tax package,” he said.
Might Make You Gulp
The new four-year projection from the state Office of Financial Management assumes state tax revenue will grow by about $1.5 billion in the next biennium, from $31.2 billion to $32.7 billion. It incorporates the spending-cut decisions made by lawmakers this year – those became final when the governor signed the budget May 2. It assumes restoration of temporary measures, like the 3 percent salary cut for state workers.
It also incorporates policies that are set in statute, but which the Legislature regularly suspends when money is tight. They include Initiative 732, the 2000 ballot measure that requires annual cost-of-living adjustments for K-12 employees and community college teachers and staff. That will cost $292 million in 2013-15. There’s the never-implemented state family leave program, which will cost $14 million in its first biennium, if lawmakers ever get around to it.
Among other policy changes, the projection includes $366 million for increased pension contributions recommended by the state actuary’s office. Take those items off the table, spend the $551 million in the state rainy day account, and the state might wind up roughly even.
But the state still will face big new costs for K-12 education and for whatever agreement is reached with state employee unions at the bargaining table during current contract talks. No doubt there also will be calls that it leave a prudent amount in reserve, just in case it faces another downturn.
‘Sobering and Realistic’
Richard Davis, president of the Washington Research Council, said the new projection offers a dismaying look into the near future. “It’s a sobering and realistic view of the continuing budget problem facing the governor and Legislature,” he said. “A down payment on McCleary will be a top priority for many, and there’s no place to go for the money without hitting other services and programs. While we may call those cuts ‘reductions from projected increases,’ when you’re addressing entitlements like Medicaid, those reductions have real consequences.
“Collective bargaining, particularly after the Western Washington University agreement, will be challenging; no increases are included in the outlook. In addition, preserving – if not increasing – higher education funding is a priority for business leaders and many legislators of both parties.
“Then there’s the cost of Medicaid expansion, should lawmakers decide to take the feds up on the ‘zero down’ offer from the feds. Add in a minimal budget reserve and I think it’s safe to assume the real shortfall for 2013-15 is in the $1.5 – $2.0 billion range. Again, the shortfall is a problem to be solved. The numbers will change as policies change. And, let’s not forget, the economy remains soft and a downward revision in the revenue forecast in September or November is not out of the question, increasing the gap between spending and revenues.”
The projection also looks ahead to the 2015-2017 biennium, when tax revenue is expected to reach $36 billion. At that point the state will face a $1.3 billion shortfall, again not counting salary increases, reserves or McCleary spending, or any dipping into the rainy-day fund. OFM notes that the figures are not the ones required by a bill this year that requires budgets to be balanced over a four-year period. Those will be released in fall.