Governor’s supplemental budget proposes no new taxes, dips into rainy day fund

Gov. Inslee has proposed his supplemental budget for 2020. (Highlights, economic & revenue outlook.) After a biennial budget that saw record-setting spending growth and a bevy of new taxes, the mid-biennium budget adjustments should be modest. And, for the most part, they are.

Inslee is proposing mostly modest changes with his supplemental operating and capital budgets. After making necessary adjustments to account for enrollment, caseload and other rising costs, the governor’s proposal will increase Near General Fund spending by just 0.6% in the current biennium…

The governor proposes dramatically ramping up state and local efforts to provide more shelter and other actions to combat chronic homelessness. His plan adds 2,100 local shelter beds across the state while giving rental and other housing assistance to more than 3,000 additional homeless individuals.

These and other actions will cost $146 million in the current budget and more than $300 million over the next three years. To cover those costs, the governor proposes tapping into the state’s emergency reserve, which is projected to contain about $2.5 billion at the end of the next biennium.

Beyond that, much of the new General Fund spending the governor proposes is for several new or expanded strategic initiatives that he will present to the Legislature in January.

The list identifies early learning and career-connected learning programs, safety initiatives at Western State Hospital, and environmental and energy programs. Overall, though, the spending increases amount to just over $1 billion.

Significantly, no new taxes are required. The economic and revenue outlook explains why: Economic growth provides the money.

General Fund-State revenues grew 10.0% in fiscal year 2018 and 3.3% in fiscal year 2019. General Fund-State revenues are forecasted to increase 9.9% in fiscal year 2020, 4.1% in fiscal year 2021 and 3.1% in fiscal year 2022. The expanding economy, continued gains in hiring and sound housing markets have had a positive effect on revenue growth and should keep revenues growing at a sound pace.

The effect of I-976 on transportation is apparent.

The governor’s supplemental transportation budget lays out a plan to address Initiative 976, which lowers state car-tab fees, repeals Sound Transit car- tab taxes and eliminates a .3% sales tax on vehiclepurchases and the authority for cities to charge car-tab fees. The measure, which voters approvedin November, is projected to reduce state and local transportation funding by more than $450 million in the current biennium and by more than $4 billion over six years.

The measure is now on hold due to a court injunction stemming from a legal challenge brought by several local governments and transit agencies. However, the governor believes the budget must reflect the impact of the initiative.

Writing in Crosscut, Melissa Santos reports

In a text message, state Rep. Timm Ormsby, the House budget writer, seemed somewhat receptive to the governor’s idea of pulling money from the rainy day fund. The Spokane Democrat called it a “creative approach to ease the scourge of homelessness.”

Republicans, however, are less likely to embrace Inslee’s proposal. Using the emergency fund as Inslee suggests would require a 60% majority vote, meaning some Republicans would have to support the move for it to take effect.

“We haven’t done very well just throwing more government money at this problem,” said state Sen. John Braun, the top Republican on the Senate budget-writing committee. 

Additionally, “I have deep concerns about taking money out of the state’s saving account,” said Braun, who is from Centralia.

He said he thinks the state needs to build up a healthy reserve to prepare for any future recession.

Partly because of those concerns, “I don’t think he has the votes to do it,” Braun said of Inslee’s plan to tap the emergency fund.

Inslee, too, spoke of the need to be ready for an economic downturn. But he said his plan would leave a healthy balance in the rainy day fund — close to $1.9 billion by mid-2021 — that would enable the state to weather a slowdown.

In the Spokesman-Review,  Jim Camden reports,

House Appropriations Committee Chairman Timm Ormsby, D-Spokane, agreed the 2020 budget should be a simple update that focused on increases or decreases in demands for state programs and called Inslee’s plan to fight homelessness “creative thinking.”

“We might move some pieces around differently from the governor’s plan, but I suspect the bottom line will be very similar,” he said in a news release.

A simple update would be a relief.

More coverage in The Lens.