Washington Research Council releases analysis of governor’s proposed 2018 supplemental budget

The Washington Research Council has released a new policy brief analyzing Gov. Jay Inslee’s proposed supplemental budget. We previously wrote about the plan here and here.

The headline element of the governor’s proposal is his intent to accelerate compliance with the state Supreme Court’s McCleary decision. The WRC points out,

In November, the Court said that the Legislature remains out of com- pliance in the case because the salary increases won’t be fully phased in by the Sept. 1, 2018 deadline.

Gov. Inslee proposes a 2018 supplemental operating budget that includes appropriations to fully fund those salaries for SY 2018–19. Altogether, the proposal would increase near general fund– state plus opportunity pathways (NGFS+) spending by $960.8 million. Revised 2017–19 NGFS+ appropriations would total $44.669 billion.

To accomplish the new spending, the governor would tap reserve funds. Some key observations about transfers from reserves:

Although Gov. Inslee does not propose making new transfers from the BSA [Budget Stabilization Account, or “rainy day fund”] in 2017–19, his proposal would draw down the unrestricted ending fund balance. But, commendably, it abides by the four- year balanced budget requirement (RCW 43.88.055). As Gov. Inslee said in announcing the budget, “It’s smart for us to be prudent and have a reserve in the second two years, and it’s required by the rules and that’s what we’re doing” (TVW 2017).

For 2019–21, Gov. Inslee does propose making a transfer from the BSA. The Washington constitution (Article 7, Section 12) requires the annual transfer of 1 percent of general state revenues to the BSA. The governor’s supplemental proposal would transfer the 1 percent BSA deposit back to the GFS in 2019–21. This is estimated to total $476 million. To withdraw funds from the BSA, three- fifths of the Legislature must approve (unless the governor has declared a state of emergency or employment growth is expected to be less than 1 percent, in which cases a simple majority suffices).

How the withdrawal will be backfilled is as yet unclear.

In January, Gov. Inslee will propose a “carbon pollution tax.” Some of the reve- nues from the tax would provide “a tem- porary infusion of revenue” in 2019–21, “to the extent it is necessary to protect vital services and maintain modest budget reserve levels” (OFM 2017). His comments have been interpreted by some as a signal that the carbon tax proceeds would be used to backfill the withdrawal from the BSA, but details are as yet unavailable.

The proposed supplemental budget bill does include language stating the intent of the Legislature to transfer $1,000,500,000 from a new “carbon pollution reduction account” to the general fund in 2019–21: “To the extent possible, these funds will be used for expenditures related to clean energy, natural re- sources, and the environment.”

So, still more to come. The WRC brief provides a balance sheet and breakdown of other spending changes in the governor’s budget, including this:

Additionally, the proposal would change the school district apportionment sched- ule (RCW 28A.510.250). The state fiscal year is July 1 to June 30, but the school district fiscal year is Sept. 1 to August 31. This difference provides an opportunity for the state to save funds within the budget window without reducing funding for districts.

The session begins in early January and is scheduled for 60 days. We’ll surely see a lot more budget ideas proposed before a deal is struck.