Washington state can expect another $108 million in revenue in the current budget cycle, and $241 million in extra dollars in the two years that follow, the Economic and Revenue Forecast Council said in its quarterly revenue forecast Wednesday.

That means the state should end the current cycle up $408 million, according to the budget outlook supplied during Wednesday’s hearing.

But costs mount rapidly in the years to come, fueled by basic education funding needs, a recently approved voter initiative on lowering student-teacher ratios, and spending increases on salary hikes for teachers and state employees, among other expenses.

As a result, the outlook says the state’s looking at an almost $1 billion revenue shortfall in fiscal year 2016, and that gap will widen to $2.1 billion over the biennium. The shortfall would be $4.7 billion by 2019 unless the Legislature takes action.

If the Legislature taps reserve accounts it could shrink the shortfalls to $1.2 billion in 2015-17, and $2.95 billion in 2017-19, according to the outlook.

The outlook forecasts total state revenues to grow to $37 billion in the 2015-17 biennium, but only see an uptick to $37.5 billion in 2017-19. Spending obligations, meanwhile grow to $39 billion in 2015-17, and to $42.2 billion in 2017-19, with Initiative 1351 accounting for $2.7 billion in added costs in the upcoming cycle, which increases to $3.6 billion in the two years after that.

Another $583 million in spending could be added on top of this for the 2015-17 budget for meeting salary and healthcare benefit increases for state employees, higher education workers, and unionized non-state employees such as home care workers or nurses.

These were negotiated in collective bargaining agreements, but the Office of Financial Management still needs to make a decision on the financial feasibility of funding them, said OFM Director David Schumacher. Schumacher said this decision is expected in the next week, as OFM was waiting on the most recent revenue forecast.

Under a voter-approved initiative, state teachers are due $321 million in cost-of-living pay bumps, which has been delayed for the last six years.

The budget writers in the House and Senate, Rep. Ross Hunter, D-Medina, and Sen. Andy Hill, R-Redmond, said it was too early to say if the Legislature would move to suspend I-1351’s spending requirements, just as lawmakers did to a similar class size initiative voters passed a decade ago.

Hunter said legislators will have to debate this in the weeks and months to come, but it will take a two-thirds majority to do. “It’s hard to get two-thirds of the Legislature to agree on when to take a lunch break,” Hunter said.

“I didn’t support (I-1351) at the ballot box,” he added. “I think we have a significant problem. We have some work to do.”

Hill said the Legislature’s focus shouldn’t be to assume raising taxes is the only way to solve the budget problems. He noted the progress the state’s making in adding $1 billion in education funding toward the state Supreme Court’s McCleary decision, although justices, who’ve held the Legislature in contempt of court, expect more.

“We’ve got a budget that’s halfway to McCleary,” Hill said. “1351 creates a problem.”

Overall, the revenue forecast wasn’t a big shift from the prior iteration released in September, reflecting small increases in the economic activity that pads state tax coffers. Third quarter saw strong sales tax receipts driven by auto sales and construction activity, said Steve Lerch, executive director of the Forecast Council.

Lower fuel prices were one factor in the rosier picture, although Lerch said it wasn’t playing a big role in increasing sale tax revenues.

“Obviously lower gas prices is a good thing, but it all doesn’t necessarily translate to…sales tax,” Lerch said.

Liquor sales’ forecast were reverting back to historic norms before voters privatized them several years ago, Lerch said. Revenue from an excise tax on legal marijuana sales ticked up another $4 million beyond the September projection for the current budget cycle, based on an increase in retailers entering the market. Total revenue is predicted to be $31.8 million in the current cycle, $168.4 million in the 2015-17 biennium, and $293.5 million in the 2017-19 biennium.

Your support matters.

Public service journalism is important today as ever. If you get something from our coverage, please consider making a donation to support our work. Thanks for reading our stuff.