House-passed supplemental budget boosts biennial spending a total of 21%. Minority leader warns of economic uncertainty.

In its fresh analysis of the House-passed supplemental budget, the Washington Research Council writes,

The House has passed a 2020 supplemental operating budget that would increase 2019–21 appropriations from funds subject to the outlook plus the workforce education investment account (NGFO+WEIA) by $1.178 billion. If adopted, revised 2019–21 appropriations would increase by 21.0 percent over 2017–19.

The large increase raises sustainability concerns. The WRC points out that the differences between the House- and Senate-passed budgets are relatively minor. Both lift spending by a level not seen in decades.

The House- and Senate-passed operating budgets are very similar. Neither would increase taxes or use the rainy day fund. (That said, since passage of the House and Senate budgets, the House and Senate have each passed legislation that would appropriate $100 million from the rainy day fund for coronavirus response.) Both budgets focus on homelessness and human services. Both barely balance over four years. Revised 2019–21 appropriations in either budget would represent the largest percentage increase in at least 40 years (accounting for inflation).

But the House budget would spend more and set aside less for use in future biennia, making it the less sustainable of the two budgets.

Rep. J.T. Wilcox, House Republican leader, writes in the Seattle Times that the proposed growth in state spending is unsustainable.

House and Senate Democrats in the state Legislature are meeting behind closed doors to work out the details of the supplemental operating budget — with little to no input from Republicans

Due to a strong economy, skyrocketing tax collections and fewer people needing state services, the operating budget has a $2.4 billion surplus — providing budget writers with countless options and enormous flexibility…

He then looks back a little more than a decade ago, to a time when state spending similarly soared during a strong economy, only to be cut back sharply when the economy slid into recession. 

Even though the House and Senate have both passed budget proposals, there is still a great deal of room to negotiate. It is critical to the future of our state — and the health and welfare of our most vulnerable citizens — that we avoid the mistake of spending all the surplus.

He calls for budget negotiators to come up with an agreed-upon compromise spending $1 billion less than the House budget, with the savings added to reserves. It’s an unlikely outcome, but an important discussion. 

Just today the Bureau of Labor Statistics reported that the U.S. economy added 273,000 jobs in February. 

Total nonfarm payroll employment rose by 273,000 in February, and the unemployment
rate was little changed at 3.5 percent, the U.S. Bureau of Labor Statistics
reported today. Notable job gains occurred in health care and social assistance,
food services and drinking places, government, construction, professional and
technical services, and financial activities.

The New York Times report on the jobs numbers emphasizes the uncertainty ahead.

For the second month in a row, the economy churned out a blockbuster number of jobs, the government reported Friday, an impressive performance in an era of slow-and-steady employment growth.

With the coronavirus outbreak shaking economic confidence, the solid showing in February may not be a harbinger of continued strength…

Every jobs report looks backward, but February’s report captures a particularly unusual moment before the market was gripped with anxiety about the global impact of a widening epidemic.

“There is a red line in the calendar,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The value of it is that this report gives us kind of a benchmark of where we were before things began to go wrong.”

It’s far from clear when or how things will go wrong. That’s the thing about uncertainty. But we do know that robust revenue growth will eventually slow and possibly turn down. That fact adds to the prudent counsel that concludes the WRC analysis.

We don’t know when the next recession will occur, and the coronavirus outbreak is increasing economic uncertainty. As we argued in our brief on the Senate budget, the Legislature should moderate its spending in the meantime.

Good advice.