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A newly released brief published by a Washington-based think tank claims the state operating budget will have a $5.1 billion shortfall for the upcoming 2025-2027 biennium driven by new state spending.
However, the state agency tasked with helping write the governor’s budget proposal says the final figure could be different depending on next month’s revenue forecasts.
In its Oct. 21 brief, the Washington Research Council claims that “the cost of maintaining current services in the upcoming 2025–27 operating budget is expected to be higher than currently-forecasted revenues for funds subject to the outlook.”
Using figures based on the State Economic Forecast Council’s latest revenue forecast from last month, they estimate the budget ending balance could be negative $5.120 billion, with just $2.977 billion in the budget stabilization account also known as the rainy day fund.
However, the WRC notes that “these are preliminary estimates, and there are two more revenue forecasts and two more caseload forecasts before the Legislature enacts the 2025–27 budget. These forecasts could considerably change the revenues and maintenance level spending in our estimated outlook.”
Washington state’s operating budget is constrained by a four-year balanced budget requirement in which spending through state accounts cannot exceed state revenue forecasts put out by ERFC, which it does on a quarterly basis.
While there are several initiatives on the November ballot that could repeal several state revenue sources such as the Climate Commitment Act and the excise tax on income derived from the sale of capital gains, WRC asserts that the estimated shortfall is “the result of choices made by the Legislature. In short, the state increased spending even as it knew revenues would come in more slowly. Further, the Legislature used reserves to increase general spending; as a result, remaining reserves are expected to be insufficient to cover the shortfall.”
The state Office of Financial Management helps the Governor’s Office with handling other state agency budget requests before releasing an operating budget request to the Legislature. Following the September ERFC revenue forecast, OFM Director Pat Sullivan, a former state representative, warned in a statement that "we will face significant challenges in meeting all our obligations in our next budget. There are some tough fiscal choices ahead.”
The Center Square reached out to OFM for comment regarding WRC’s claim of a $5 billion shortfall. Deputy Communications Director Hayden MacKley wrote in an email that “not all state agencies have submitted their budget requests to OFM yet, so we don’t know what the final amount of the requests will be. When we look at the maintenance-level requests from agencies that have come in, we see some different totals than what the Washington Research Council have, and that could be because of the timing of when the data was obtained.”
He added that “we’re still evaluating what out of those requests should be considered maintenance level. We look at whether the specific agency proposals are really an additional cost of keeping a program as it is (maintenance level), or if it’s an expansion of that program (policy level.) We also scrutinize the numbers carefully to ensure they’re correct. With every budget cycle OFM receives more requests than are ultimately funded in the governor’s proposal or in the final enacted budget.”
With another caseload and revenue forecast impending next month, he said those “will affect the numbers that go into the governor’s proposed budget.”
In an email to The Center Square, ERFC Chair Sen. Lynda Wilson, R-Vancouver, wrote that during the 2021 legislative session Republicans "offered the Democrats a balanced budget proposal that featured progressive property-tax relief and unprecedented support for Washington manufacturing. It didn’t require new taxes and came in $4 billion lower than the Senate Democratic budget without draining the rainy-day fund. But as we know, the Democrats had their own agenda, which included approving the capital-gains tax and the cap-and-tax law."
She added that in the 2022 supplemental budget "the Democrats approved more than 1,300 new policy-related appropriations at a cost of more than $6 billion and still did nothing to provide tax relief for families.
"Even though the current budget situation is more easily traced to 2021, I can make the case that it really dates to when one-party rule returned to Olympia in 2018 – and the huge tax increases and unchecked Democratic spending that followed, starting in 2019."
Sen. Ways and Means Committee Chair Sen. June Robinson, D-Everett, was not available for comment prior to publication.