In the decade since the Great Recession, Washington has enjoyed extraordinary prosperity. The state budget clearly reflects that surge. Spending grew 44 percent in a decade, fueled by record-setting growth in tax collections. It continues, even now, in this era of heightened global uncertainty.
The latest state forecast estimates revenues will grow nearly 10 percent from the current biennium through 2019-2021, reaching $50.6 billion. That means lawmakers will have $5.6 billion more in revenues in the next two-year budget than in the one they wrote one year ago.
We’ve seen these boom times before. In the years ahead of the last recession, legislators rapidly ramped up spending, increasing it by almost 18 percent during the 2005-07 biennium and another 12 percent in 2007-09. When the recession hit, they had to cut more than $3 billion from state programs and raise taxes by $774 million just to balance the budget. The roller coaster of boom-bust budgeting made a bad situation worse.
There’s reason to believe we’re again near the top of the roller coaster. Many economists and business leaders expect the economy to dip into recession in the next two years. Even with the relative strength of Washington’s private sector, our state will not be held harmless when the next downturn comes. Even a mild slowdown can affect state revenues. It’s time to pause, protect the commitments lawmakers have made, and prepare for the future.
Based on the recent revenue forecast, state lawmakers have enough money to deliver a balanced budget without new taxes.
They can fund everything to which they had committed previously — including a historically large increase in K-12 spending — as well as salary bumps for public employees and the new consolidated school employee health care program. Available resources in the next biennium, including the predicted revenue growth, will cover those obligations and still provide for healthy reserves as a hedge against the inevitable downturn.
But the appetite for more spending, and more taxes, is bigger than that in some circles. The House passed a $52.9 billion budget for 2019-21, which represents an 18.5 percent increase in state spending. (The largest percentage increase in 25 years.) The Senate passed a $52.2 billion budget, which represents a spending increase of 16.8 percent.
These proposals come with new or expanded taxes, something that most voters don’t support. A recent statewide public survey commissioned by the Association of Washington Business found that most Washingtonians believe the Legislature should be able to write a budget without imposing new taxes. When informed about the growth in the state budget, two-thirds of respondents said they don’t support new and higher taxes.
Sustainable budgeting is about more than just balancing revenues and expenditures.
It also means taking steps to sustain and nurture a growing economy, encouraging job creation, investment and risk-taking. Washington businesses have led the state’s economic expansion, despite facing a challenging tax policy environment. State and local business taxes per employee here are the 7th highest in the nation.
Increasing the cost of doing business — as these tax proposals would do —puts the revenue stream currently flowing from businesses large and small at risk, adding to the budget challenges lawmakers will face when the economy cools.
Negotiating a budget that funds services most needed and beneficial for the entire state is no small task. In recent years lawmakers successfully met the state Supreme Court’s McCleary mandate to fully fund basic education, a remarkable bipartisan accomplishment. A strong economy helped. But so did rigorous attention to fiscal restraint and priority-setting. That discipline is again required.
Lawmakers must ask: Is a historic spending increase —on the heels of 14 and 17 percent increases in the last two state budgets — wise or sustainable?
After careful consideration, the answer is “no.”
Let’s not overplay our hand. It’s time to tap the brakes on spending growth and prepare for the future.
Kris Johnson is president of the Association of Washington Business, the state’s chamber of commerce and manufacturers association.