Another observation regarding the state’s improved fiscal outlook following the September revenue forecast. This from the Washington Research Council:
The 2021–23 operating budget, as enacted, balanced over four years. The unrestricted ending balance for funds subject to the outlook (NGFO) in 2023–25 was $83 million, according to the official budget outlook in June (which was based on the March revenue forecast). With the September revenue forecast, I estimate that the enacted budget now leaves an unrestricted NGFO ending balance of about $5.5 billion in 2023–25. Total reserves, including the budget stabilization account (BSA, or the rainy day fund), are about $6.7 billion.
WRC senior analyst Emily Makings highlights the Legislature raised taxes and increased spending at a rapid clip (our characterization).
The $6.7 billion growth in the revenue forecast from the March to September includes $1.2 billion in legislative changes. These were the tax changes made by the Legislature earlier this year, including mainly the capital gains tax.
As we noted in June, the state did not have a budget shortfall to address this year—the March 2021 revenue forecast was essentially back to the pre-pandemic forecast. Even so, the Legislature enacted a capital gains tax and increased spending. With the new appropriations, NGFO spending increased by 17.6% in 2019–21 and by 12.4% in 2021–23. (Including appropriations of federal relief dollars, spending increased by 35.2% in 2019–21 and by 10.8% in 2021–23.) Additionally, the Legislature needlessly drained the BSA and transferred its $1.820 billion to the general fund–state and a new shadow reserve account. Enacting new taxes and draining the rainy day fund were unnecessary when the budget was adopted and are substantially less necessary now.