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Dear Friends and Neighbors,
We may be just hours away from an operating budget agreement. Do I know that for sure? No. But all indicators suggest that may be the case.
Here's what I do know.
More revenue without tax increases
On Tuesday, June 18, we received good news on two fronts.
The Economic and Revenue Forecast Council, of which I serve as a member, released its quarterly revenue forecast, which showed revenue is up over the previous March forecast by $110 million for the 2011-13 budget cycle which ends on June 30, and $121 million for 2013-15.
In a news release, I cautioned that the uptick in revenue should not give the Legislature an excuse to spend more money.
“Let's also be clear: Just because the revenue projection is up doesn't mean the Legislature should be trying to find more ways to spend it on new programs,” Nealey said. “Let's take care of funding education first and then make sure we have a responsible reserve to be prepared for any further downturns in the state's fragile economy.”
In an editorial on June 20, the Walla Walla Union-Bulletin agreed with my statement, saying: “That's sound advice. The state is still a long way from financial security. The budget gap is still in the hundreds of millions and another $1 billion is needed to fund basic education as is required by the constitution and ordered by the Supreme Court's recent McCleary Decision. The state needs to stash as much cash as possible as the economy grows.” Read the Union-Bulletin editorial.
The Caseload Forecast Council also released its analysis of reliance on services for such things as enrollment in public schools, correctional facilities, public assistance and other social services. The caseload forecast revealed our state expects a reduction in enrollments for a $90 million savings.
Those two reports show that the state has $321 million that was not previously expected. When you look at the total picture, it means there's more than $2 billion in additional revenue available to the state in the coming 2013-15 budget cycle above the previous cycle.
Forecasts assist budget negotiations
Much of the impasse during budget negotiations has centered on Democrats' insistence to “increase revenue.” That's a politically-correct way of saying “increase taxes.” Both House and Senate budget proposals would put at least $1 billion in additional money toward education, thus meeting the state Supreme Court's McCleary decision requirements. The Senate proposal has shown that can be accomplished without tax increases. The revenue and caseload forecasts have bolstered that position. So my Republican colleagues and I believe this should put to rest the argument that tax increases are needed to balance the state operating budget.
Throughout last week, budget negotiators met late into the nights and announced they were much closer to an agreement. Lawmakers in the House were called to return to Olympia on Sunday. We had hoped an agreement would have been reached to vote on a budget on Sunday, because legally-required reduction-in-force notices were scheduled to be sent to non-essential state workers on Monday (exactly one week before the July 1 new fiscal cycle). However, negotiators still did not have a budget agreement on Sunday and the notices went out as scheduled Monday.
State government shutdown unlikely
No one wants a government shutdown and I am fully confident an operating budget will be passed in time to avert one. Unfortunately, some are using this threat as a political sword in an attempt to frighten people and then place blame. The Union-Bulletin editorialized about this strategy in the newspaper yesterday, saying the threat to shut down state government isn't working. See the editorial.
For the first time during the six months the Legislature has been in session (and two special sessions), I am hearing optimism from all sides and the governor's office that an operating budget agreement is very close. Democrats have backed away from their insistence on tax increases. With the exception of an estate tax passed and signed into law earlier this month, I'm pleased we have successfully averted the proposal of more than a billion dollars of tax increases House Democrats originally proposed. Now it comes down to policy reforms (such as workers' compensation reforms that are needed to keep that system whole – see this Washington State Wire article) and negotiating the final dollars.
A lot of frustration
I share much of your frustration that the Legislature has come down to nearly the last minute to act on a budget. We should have had an operating budget agreement completed in April during the regular session. However, had we accepted the first offer, many of the Main Street businesses across the state would now be saddled with additional business and occupation taxes that would steal their opportunity to hire more people. Education funding would have been no higher than the offers currently being discussed. And we would be paying for larger, unsustainable government while watching the progress of the state's economic recovery go down the drain. As my 16th District seatmates and I lamented in this May 2 article, some things are worth fighting for, even if it means a special session. Because we have stood firm, it's my hope we will have a much more fiscally-responsible budget.
Thank you for your letters, your support and your patience as we try to get this wrapped up, once and for all.
Sincerely,
Terry Nealey
