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Odds of on-time session improve
For the first time since lawmakers adjourned the "budget balancing" special session last December without actually balancing the budget, there is a glimmer of hope that they'll be able to get the job done during the remaining 21 days of the 2012 Regular Session.
This new found optimism is due to the news this week that the state caseload forecast is expected to drop costs by $340 million due to reforms enacted last year and today's news of a $96 million increase in the revenue forecast.
Here is the new outlook for state revenues (Dollars in Millions):
- 2011-13: $30,284
- 2009-11: $28,218
- Increase: $2,066 or 7.3%
From today's revenue forecast:
Our current economic forecast is very similar to our November forecast, with the same muddle-through conditions expected for the rest of the biennium, along with a high degree of downside risk. Factors outside the state are the biggest threat to the U.S. and Washington economies. It is likely that Europe will enter another recession or is already in one. If the sovereign debt crisis leads to a financial crisis, the U.S. economy is likely to enter a new recession as well. The weakness in Europe has contributed to a slowdown in Asia, a concern for Washington exporters.
The Washington economy is recovering about as expected in the November forecast. There have been no major developments since November that have altered the outlook significantly. The state's economy is narrowly outperforming the U.S. economy and we expect that trend to continue.
Forecast changes due to economic conditions, including revenue already collected, added $32.2 million, for a total increase of $95.7 million above the November forecast. General Fund- State revenue for the 2011-13 biennium is now forecasted at $30.284 billion.
The initial forecast of General Fund-State revenue for the 2013-15 biennium is $32.294 billion, an increase of 6.6 percent from the revenue of the current biennium.
This $436 million swing in the state's budget outlook should end discussion of sending voters a tax package. Most of the tax packages being discussed were in the range of $500 million such as the sales tax increase proposed by the Governor.
Lawmakers still intent on going to the ballot with a tax increase proposal should keep this tax ballot history in mind: With the exception of targeted sin taxes in 2001, 1994 and a 911 tax in 1991, voters haven't been kind to tax increases proposals on the ballot.
While tax increases and "felony" budget gimmicks should now be off the table, structural reforms are still vitally needed to avoid enacting a "balanced" budget that results in a projected multi-billion dollar deficit in the next budget.
If all the Legislature does is balance the budget for 2011-13, this session will be a failure. We need lawmakers to finally provide predictability to clients of state services, citizens and businesses by demonstrating they are putting the state's budget roller coaster out of service. That's where the structural reform conversation needs to focus and should go hand in hand with any short-term budget solution that is adopted.
With the $436 million improvement in the state's budget outlook from the revenue and caseload forecasts, there are no more excuses for not getting done on-time while also enacting structural reforms such as SJR 8222 (4-yr balanced budgets) and HB 2607 (6-yr budget outlooks) to help keep the focus of spending decisions on the long-term impacts to the state's fiscal health.
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