2019 Post-Session Survey

The recently completed legislative session ended on time April 28, with passage of a $52.8 billion state budget. To support an 18.3 percent increase in biennial spending, lawmakers adopted approximately $1 billion in new and increased taxes

The Legislature also lifted the cap on local property taxes adopted last year, making it possible for school districts to seek voter approval of property tax increases to support local schools. The budget includes increased spending for higher education and financial aid (paid for with increased taxes on service businesses), public employee compensation, mental health, and special education. 

We’re interested in your thoughts on the state budget and legislative session. Thank you for taking a few minutes to complete our brief survey.

Economic Outlook Survey

Economic uncertainty – across the globe and in our neighborhoods – has become commonplace early in 2019. Although our state has enjoyed nation-leading job and income growth, the murmurs of concern have mounted in many corners. As often as we hear announcements of new jobs, new stores, manufacturing plants, and restaurants, we hear that consumers and employers are losing confidence. Retail sales were down last December. 

Economists are revising their 2019 forecasts, saying growth is slowing. Nearly half of the nation’s  business economists anticipate a recession by the end of next year.

Expectations drive budgets, for families, businesses, and governments. The mechanics are simple. How much money do we think we’ll have? What are our spending commitments? Our priorities? What can we do without? How much should we hold back for emergencies? 

Over the last ten years, state spending has grown 44 percent. And revenue growth in our state has been among the strongest in the nation. Yet, many lawmakers are now calling for new taxes and higher spending.

Against this backdrop, we want to know your thoughts on the state economy. Do you expect continued growth? Are we headed for a slowdown?

 

Friday Wrap I: No quick budget fix, but glimmers of progress

Despite Monday’s upbeat revenue forecast, lawmakers remain high-centered on the tax questions that divided them from the beginning. Although the governor now says the $1.4 billion in new taxes he proposed in December is no longer necessary, he thinks some increase is required. From the NW News Network:

So how big a tax package is Inslee proposing now?

“I don’t have a clear number for you,” he said.

Senate Republicans have a clear number: zero.

Senate Majority Leader Mark Schoesler, R-Ritzville, had a different take on the revenue forecast…No new taxes are needed, he insisted: “We should spend the increase in revenue prudently and get this session done.”

Crosscut’s John Stang likens the different takes on the same news to the Rashomon effect. He also notes that the governor continues to favor cap-and-trade and a capital gains tax. It’s far from clear that House Democrats have the votes for either, though there may be a slight preference for the latter. Regardless, neither is likely to win favor in the Senate.

Jim Camden sums it up in the Spokesman-Review.

Both sides agreed the Legislature could reach a budget agreement and be done by May 28, the last scheduled day of the special session. But neither side sounded very optimistic that would happen. If it doesn’t Inslee said he would call a second special session to start the day after the first special session ended.

Although the current stalemate seems likely to extend for a while, the increased forecast brings the sides closer together. There should be resolution soon. No one wants a repeat of 2013, when stalled budget talks led to the threat of a state shutdown.

 

Despite increase in state revenues, budget talks likely to go in 2nd special session

Yesterday’s revenue forecasts added more than $400 million to projected funds available to state budget writers. Yet, the two chambers remain far enough apart that most expect negotiations, should they commence soon, will require the governor to call a second special session. 

In the Seattle Times, Joseph O’Sullivan has a good account of where things stand.

The parallel universes Democrats and Republicans have inhabited over the writing of the state’s two-year operating budget don’t seem to be inching closer together.

…Democrats question some of the forecast’s assumptions, including the large amount of marijuana tax money it assumes, and say new revenue is still needed. Meanwhile, a trio of Republican senators argue that the state’s budget situation is so rosy, lawmakers can now cut business taxes.

Handling good news seems to be as difficult as accepting bad news.

But Sen. Andy Hill, R-Redmond and chief GOP budget writer, argued that the new revenue projection weakens Democrats’ case for raising taxes.

“At some point you have to say, ‘Holy cow, we have a lot of money,’ ” said Hill. “We should be able to get this job done very quickly.”

O’Sullivan reports a different reaction from Hill’s House counterpart.

The new revenue forecast “doesn’t completely solve the problem,” said Rep. Ross Hunter, D-Medina, the Democrats’ chief budget writer.

Hunter raised concerns over whether the marijuana tax collections assumed in the forecast will pan out.

The first special session is scheduled to end in nine days, on May 28. The new fiscal year begins July 1. As the Columbian reports,

In Washington, special sessions, although technically meant to be “extraordinary,” are more just, well, ordinary.

Since 2000, lawmakers have held 18 special sessions; some years, there was more than one.

The Spokesman-Review gives the reaction of the state budget director

David Schumacher, director of the Office of Financial Management, said the additional revenue should make it easier for budget negotiators to find a middle ground. If the revenue projections had been this strong last Nov-ember, Gov. Jay Inslee would not have proposed the tax increases for his budget, and House Democrats likely would have had a smaller tax package also, Schumacher said.

The projected revenues from marijuana taxes remain a forecaster’s volatile variable. Nonetheless, in a phrase we don’t like very much, the forecast is what it is – the official number lawmakers rely on to write their budget. The revenue boost should make it easier to get that job done, though probably not by May 28.

Getting closer to 2nd special session; budget stalemate continues

In the Everett Herald, Jerry Cornfield sums up the state budget, er, discussions.

You can call them budget talks or you can call them budget briefings.

Just don’t call them negotiations.

Because no one is negotiating. According to Cornfield, legislators are talking, trying to understand each other’s position, and so on. But not “making decisions,” in House Majority Leader Pat Sullivan’s words.

Once they get around to deal-making, things can move quickly. The revenue forecast next week may help. But, as Cornfield reports,

Given the impasse, there is mounting skepticism lawmakers can reach a deal by May 28, when this extra session will end.

The House budget depends on about $1.5 billion in new taxes. The Senate doesn’t raise taxes, but does rely on fund transfers and other assumptions to balance. The House has yet to pass the required tax bills; the Senate says the House needs to pass the tax measures before there can be serious discussions. Then there are the nontrivial differences in spending to consider

The House tax plans have changed some, at least in theory, since the end of the regular session. The Washington Research Council notes yesterday’s introduction of a revised cap-and-trade bill in the House Appropriations Committee.

A new capital gains tax remains among the options considered by House Democrats, though that, too, has been revised since it was originally introduced. The Tax Foundation recently offered its critique of the tax.

So go the non-negotiations on Day 16 of the first special session.

Taxing carbon: Making an improbable comeback in state budget discussions?

Plenty of recent press coverage suggests that some form of carbon taxation may find its way into an eventual state budget resolution. While it likely still faces heavy sledding in the Senate, House Democrats say they may have the votes

Rep. Joe Fitzgibbon, D-Des Moines and the point man on the carbon legislation, said providing 50 Democratic votes for the new plan will depend on how it eventually fits in with the final budget package that the Democratic-controlled House and Republican-dominated Senate will eventually reach. Right now, the two sides are far apart in the talks on the main state budget.

This isn’t the proposal originally proposed by the governor. But the Washington Research Council’s report on carbon taxation still provides good context for understanding the general issues.

The House Appropriations Committee will hold a hearing on the new bill, SHB 1314, Thursday at 1:00 p.m. The Seattle Times reports on parallel activity in the Senate.

We’re trying to turn this into an economic winner in rural areas, as well as something that is going to deal with our climate-change problem,” said state Sen. Jim Hargrove, D-Hoquiam, chief sponsor of the revised proposal in the Senate.

The Times summarizes key changes in the proposal.

The basic framework of the cap-and-trade system — essentially a new tax on carbon emissions — would remain the same under the revised proposal.

The state would set a cap on carbon emissions and require the biggest emitters, such as refineries and fuel distributors, to buy tradable pollution permits. Over time, the emissions cap would be reduced, forcing industries to cut their emissions or buy increasingly expensive permits.

The Democrats’ new proposal would alter how the estimated $1.2 billion raised annually from carbon fees is divvied up, according to summaries of the bill revisions provided Monday.

 

There’s plenty more in the article…and House Democrats provide this 3-page summary…but those who were skeptical of the original proposal remain skeptics.

“This is still a tax on energy,” said state Sen. Doug Ericksen, R-Ferndale, adding that the effort seems to be more about Democrats’ desire to raise taxes than climate policy…

And Brandon Housekeeper, a lobbyist on environmental issues for the Association of Washington Business, said the various subsidies and rebates in the legislation only prove the cap-and-trade plan will add costs for businesses.

See also Jerry Cornfield’s account in the Everett Herald. 

It’s unclear whether there’s much momentum behind the alternative proposal. That it’s surfacing at this time suggests how divided the Legislature remains on Day 14 of the 30-day special session.

New report examines approaches to college affordability taken by House and Senate

UPDATE: Some comments re the college affordability issue prompt a few more links.

  1. Rep. Drew Hansen, D-Bainbridge Island, offers his critique of the Senate proposal. 
  2. And for the counterpoint, the Senate’s take on its College Affordability Program.

The Washington Research Council today released “College Affordability, Two Ways,” a policy brief contrasting the different approaches taken by the House and Senate to expanding access to higher education. 

Effectively, [the Senate] would take tuition-setting authority out of the hands of both the institutions and future Legislatures [by establishing a formula tying tuition to the state’s average wage] . Without the option of increasing tuition, if the state wants to maintain higher education funding in the future, it would have to continue to maintain its state appropriations—something that can be difficult given its discretionary nature. …

 The House budget proposal offers another way to increase college affordability. Like the Senate, the House would provide significant new funds for higher education … The House would freeze tuition for the biennium and increase state support to institutions by a total of $106 million. The House would additionally provide $53 million to increase the number of students served by the state need grant.

The WRC notes the contrast and asks:

The Legislature faces a philosophical question: To increase affordability, should the state lower tuition or increase access to state-funded financial aid?

This report complements the Council’s earlier brief, Higher Education Policy and the State Budget.

The Seattle Times today reports on another dimension of college affordability, the expansion of online coursework. One problem:

Two years ago, a study of Washington’s community colleges found that completion rates for online courses were 6 to 10 percentage points lower than courses taught face-to-face.

To their credit, the colleges have acted to improve outcomes.

Since that study came out, Washington’s community colleges have done training for faculty members throughout the system to improve the quality of online courses, said Laura McDowell, spokeswoman for the State Board for Community and Technical Colleges (SBCTC).

And SBCTC has adopted a learning management system called Canvas that more effectively delivers online education, McDowell said. 

Online education will likely continue to be an important tool in making higher education more accessible and affordable. These efforts to improve performance are encouraging.

Special session starts today; expectations high and muted

Today begins the (first?) 2015 special legislative session. Few expect a swift resolution of the budget stalemate that has taken lawmakers into OT. Some see the extended session as an opportunity to address items that didn’t make the first cut, many of which tie directly to the fiscal/education priorities that will dominate the special.

The Associated Press offers a rundown of must-do items and an inventory of legislation passed during the general. The must-dos:

Legislators’ to-do list for the coming days is weighty. The Democratic-held House and Republican-led Senate must work out their differences on the state budget, education spending and a transportation package or risk, respectively, a government shutdown, contempt penalties from the state Supreme Court, and still more decay and burdens for state transit and roads systems.

The Seattle Times also offers a similar list of things done and left undone

The Times editorial board weighs in with an appeal to lawmakers to meet in the middle, saying some new revenue will be necessary and encouraging lawmakers to “look at” some kind of “small capital gains tax with restrictions.” 

The frequency of these sessions leads the Columbian editorial board to wonder whether it’s time to amend the state constitution to add days to the regular session, currently capped at 105 days in budget-writing (odd) years. The editorial also notes that the philosophical differences between the House and Senate makes a “meet in the middle” resolution difficult to achieve.

Senate Republicans are insistent upon no new taxes; House Democrats are equally adamant that the Senate budget was formed using smoke and mirrors. That would seem to leave little room for the kind of compromise that will be required.

Meanwhile, as we posted yesterday, the state Supreme Court wants to know how lawmakers satisfy the McCleary mandate.  The Attorney General asked the court to allow the Legislature to finish the job in the special session. The Walla Walla Union-Bulletin seconds the request.

Lawmakers have been serious about the need to boost education funding since lawmakers went into session in January. The plan, as of now, is for the Republican-led Senate and the Democrat-controlled House to make substantial progress during the 30-day session that starts Wednesday. Lawmakers are also expected to address the unconstitutional use of local school district levies.

…The court needs to give the legislative branch and the executive branch the time needed to meet constitutional responsibilities.

And if that goes beyond the special session, the court must wait…

As must we all.