Washington Research Council examines forecast council’s budget outlook for Governor’s proposed supplemental

 A new Washington Research Council policy brief examines the budget outlook adopted by the Economic and Revenue Forecast Council earlier this week. The WRC writes that the outlook confirms that the governor’s proposal supplemental budget would satisfy the four-year balanced budget requirement, with the inclusion of the carbon pollution tax, a departure from methodological precedent.

The Economic and Revenue Forecast Council (ERFC) has adopted an outlook based on Gov. Inslee’s 2018 supplemental operating budget proposal. The supplemental would increase 2017–19 NGFS+ spending by $960.8 million and it would leave $2.151 billion in total reserves in 2017–19. According to the outlook, the proposal would leave an unrestricted ending fund balance in 2019–21 of $249 million; combined with $1.473 billion in the rainy day fund, total reserves would be $1.722 billion.

Gov. Inslee chose to comply with the four-year balanced budget requirement. Compliance depends on enactment of his proposed carbon pollution tax, which under the guidelines used to calculate the outlook would ordinarily not be included in the estimate. While not adopting a new rule to govern preparation of the outlook, the ERFC elected to acknowledge the governor’s intent and include $1.5 billion in projected carbon pollution tax revenue.

The WRC points out,

Gov. Inslee’s budget proposal depends on using $1.5 billion from his proposed carbon pollution tax to balance over four years. But, the budget outlook technical workgroup initially did not include these funds in the outlook because it determined that the transfer does not meet the criteria for inclusion.

Although the proposed budget includes language that it is the intent of the Legis- lature to transfer carbon pollution tax revenues to the GFS in 2019–21, the tax represents new policy in the second biennium—so it does not meet the consistent policy criteria…

In agreeing to include the $1.5 billion transfer, Sen. John Braun said,

Fundamentally this is about representing the governor’s intent to balance over four years. We have what I would classify as an administrative or rule error. We don’t want to change the rules but we do want to accurately represent his intent.

That makes sense to us. And we agree with the Research Council that the statutory four-year balanced budget requirement is an important tool for crafting sustainable budgets. In concert with the constitutional budget stabilization account (rainy day fund) and the constitutional provision requiring that a share “extraordinary revenue growth” be deposited in the BSA, the discipline making sure the adopted budget balances over four years helps keep the state on a sustainable fiscal trajectory.

The WRC writes,

As we wrote in 2012, “by requiring lawmakers to consider the four-year perspective, the adopted reform forces consideration of the long-term effects of legislation.”

That Gov. Inslee intends his 2018 supplemental to balance over four years is en- couraging recognition of the requirement’s importance.

Yes. 

The Council’s analysis of the biennial budget adopted June 30 is here. The supplemental budget that will be adopted this session makes adjustments to that biennial budget.