A close look at what an 18.3 percent boost in state spending buys. And a call to veto the bank tax.

Analysis of the state budget continues. Given the late night rollout, most of the review necessarily takes place after lawmakers adopted the spending play with minimal public discussion.

The Washington Research Council takes a close look at the spending plan in a new policy brief. (The WRC’s initial overview is here.) In the latest policy brief, the WRC writes,

Operating appropriations for 2019–21, as passed by the Legislature, are $52.852 billion—an 18.3 percent increase over 2017–19 appropriations. This is the largest increase in at least 25 years, and it comes after significant increases of 13.6 percent in 2015–17 and 16.9 percent in 2017–19.

The brief breaks down maintenance level and new policy spending. Regarding the former,

The maintenance level is the cost of con-tinuing current services (adjusted for caseload, inflation, and enrollment changes) into the next biennium. For 2019–21, the maintenance level is $50.485 billion from funds subject to the outlook (NGFO). This $5.824 billion increase over 2017–19 includes the costs of the state’s response to the McCleary decision on school funding. Indeed, maintenance level changes for public schools make up 67.8 percent of total maintenance level changes.

And with respect to new policy spending,

Major areas of new spending include employee compensation, public schools, and higher education. Collective bargaining agreements and K–12 health benefits are funded. Appropriations for special education, financial aid, and behavioral health are boosted.

Regarding one of our major concerns, the sustainability of the spending plan, the Council’s conclusion sums it up.

The state’s spending high point prior tothe Great Recession occurred in 2007–09, when the 2008 supplemental appropriated $33.7 billion for the biennium (spending cuts began with the 2009 supplemental). As passed by the Legislature, 2019–21 appropriations are 57.0 percent higher than appropriations in the 2008 supplemental, fueled by revenue growth from a long economic expansion.

For 2019–21, the Legislature significantly increased appropriations for employee compensation, K–12 health benefits, higher education, and behavioral health.

The high level of spending in this budget, on top of substantial spending increases in the previous two biennia, leaves its sustainability in doubt.

To fund this budget of questionable sustainability, lawmakers passed a last minute tax on major banks. We’ve noted previous criticism of the tax and how it was passed. Now a group of legislators is calling on the governor to veto it.

The Lens reports,

In a May 14 letter to Inslee, the bipartisan group noted that the bill, which raised the business and occupation (B&O) tax on banks from 1.5 to 2.7 percent, went from title-only to clearing the legislature within 50 hours. The tax is expected to raise $133 million during this biennium and $557 million through 2025.

“This was bad policy to start with,” Sen. John Braun (R-20) said in a statement. Braun is the ranking member of the Senate Ways and Means Committee. He was also one of the cosigners of the May 14 letter, along with House Minority Leader JT Wilcox (R-2), Senate Republican Leader Mark Schoesler (R-9), House Appropriations Ranking Minority Member Drew Stokesbary (R-31) and Senate Financial Institutions, Economic Development & Trade Committee Chair Mark Mullet (D-5).

Another criticism of the bill is that it violates the Commerce Clause because of how the bill taxes in-state and out-of-state banks. During the April 28 Senate floor vote, Mullet said “you cannot introduce an idea like this on the 103rd day of the session. It needs to go through more of a committee process.

“We can’t even get our own AG to give a valid opinion of this thing,” he added. “Our own committee staff is saying this would take one or two weeks to do a thorough analysis.”

Jason Mercier with the Washington Policy Center emphasizes another argument made by the critics.

The letter concludes by reminding the Governor that in 2017 he partially vetoed a tax cut in-part due to concerns the bill was rushed through without adequate public input or transparency.

In 2017 the Governor vetoed the B&O manufacturing tax cut from SB 5977 saying in-part:

“…these tax reductions should be considered in a thoughtful, transparent process that incorporates public input and business accountability.”

At the 2017 bill signing when issuing the partial veto of SB 5977 the Governor also complained about the tax cut passing in the “dead of night.”

Sounds familiar.