Washington Research Council assesses 2018 supplemental budget: much accomplished but a “dangerous precedent” set

The Washington Research Council today released its analysis of the recently-passed 2018 supplemental budget. The policy brief cites a number of expenditure changes, most notably:

Last year, the Legislature partially funded the increase in school staff salaries that is required under the McCleary decision in SY 2018–19 and fully funded it in SY 2019–20. Subse- quently, the state Supreme Court or- dered the Legislature to fully fund the increase in SY 2018–19. The supple- mental does so; this increases spending by a total of $970.4 million…

By fully funding the increase in school salaries in SY 2018–19, the Legislature has likely avoided additional sanctions in the McCleary case.

The Council’s brief also looks at the property tax relief adopted this session.

…the substantial boost in anticipated revenues allowed legislators to fund their priorities, including property tax relief, without new taxes.

The property tax reduction stemmed from action taken last year to comply with the state Supreme Court’s school funding mandate. In 2017, to increase state education funding, the Legislature added a new state property tax and in- creased the combined state property tax rate by $0.81 per $1,000 of assessed value, to $2.70/$1,000 beginning in CY 2018.

This session, the Legislature opted to reduce the state property tax rate by $0.30/$1,000 in CY 2019, to $2.40/$1,000 (ESSB 6614). This is estimated to reduce revenues by $390.2 million, of which $206.2 million will occur in 2017–19 and $184.0 million will occur in 2019–21.

To get the job done, however, lawmakers established a controversial precedent (which we noted here). The WRC summarizes,

Under the state constitution (article VII, section 12), 1 percent of general state revenues must be deposited in the BSA each year. Additionally, three-quarters of any extraordinary revenue growth (EORG) must be deposited in the BSA each biennium. General state revenues, as defined in article VIII, section 1 of the state constitution, are essentially general fund revenues—they don’t include dedicated funds.

State property tax collections are dedicated to the support of common schools (RCW 84.52.065), and collections must be paid into the GFS (RCW 84.52.067). Last year, as noted above, the Legislature enacted an additional state property tax that is also dedicated to the support of common schools. The collections from this additional tax were also directed to the GFS.

With a striking amendment offered by the Senate Ways and Means chair in the closing days of the session, ESSB 6614 specifies that $935 million of the additional property tax must be deposited in the education legacy trust account (ELTA) in FY 2019. The diversion of this revenue allowed lawmakers to spend the money without having to muster the supermajority vote required to tap the BSA.

The WRC evaluates the maneuver, writing,

…this year’s redirection of funds establishes a precedent that seriously weakens the constitutional provisions.

The Walla Walla Union-Bulletin editorial board agrees.

The Seattle Times reported that in order to skirt the 60 percent threshold for dipping into the state’s reserve or rainy-day fund, Democrats transferred to a separate account money bound for the state’s reserve fund. This effectively cut Republicans out of the process. The GOP then questioned the constitutionality of the approach.

“It’s a mechanism only Bernie Madoff could love,” said Rep. Jim Walsh, R-Aberdeen, in a speech opposing the one-time tax-cut plan.

Sen. Michael Baumgartner, R-Spokane, said it had “not been a great year for process and procedure” at the Legislature.

It’s hard to disagree.

As the U-B writes, in the closing days of legislative sessions, there’s a rush to reach a deal. That rush relegates transparency and public participation to the back seat. The editorial concludes:

Specifically, the budget process needs to be done in a more open process so the public and all lawmakers have ample time to offer thoughtful comments.

As they say, it’s hard to disagree.