April 2, 2014 | Vol.54 N.14

Setting the stage for the 2015-17 budget debate

With seven minutes to spare, lawmakers adjourned at 11:53 p.m. on the last day of the 60 day 2014 Legislative Session, avoiding for the first time in several years going into a special session. Among the bills passed was a 2014 supplemental operating budget (SB 6002). Unlike previous years, when major re-writes of the budget were needed, SB 6002 was a true supplemental budget making minor changes to state spending. This was possible due to an improvement in the state’s revenue forecast and adherence to the state’s landmark four-year balanced budget requirement.

The 2014 supplemental operating budget makes modest adjustments to state spending. According to a Senate Ways & Means summary:

2013-15 2015-17

Total Revenue 33,971 36,474

33,657 36,443

Unrestricted ending fund

315 31

Constitutional reserve

583 942

Total reserves 897 974

“The conference supplemental operating budget increases Near General Fund-State and Opportunity Pathways spending by $155.1 million. Of the $155.1 million, $89.2 million is associated with maintenance level changes for caseload and other adjustments based on current law requirements. The conference supplemental budget then provides $65.9 million in net policy enhancements and increases.”

The largest policy spending increase in the supplemental operating budget is $58 million for “K-12 materials, supplies, and operating costs.” While increasing spending subject to the balance sheet to just under $33.7 billion, lawmakers left an ending fund balance of $315 million, with total reserves, including the constitutionally protect budget reserve, of $897 million. The spending increase adopted projects to comply with the state’s four-year balanced budget requirement.  Here’s a summary:

Four-Year Budget Outlook
(Dollars in Millions):

An encouraging development this session was the rejection of efforts to undermine the state’s important four-year balanced budget law. One of the provisions of HB 2244 (capital resource changes) passed by the House by a vote of 87 to 11 would have allowed some capital funds to count as operating resources for purposes of complying with the state’s four-year balanced budget requirement. This was done in an attempt to game the provisions of the four-year balanced budget requirement and drew this rebuke from State Treasurer Jim McIntire:

“Restoring funding to the PWTF [Public Works Trust Fund] is a laudable goal, but the outlook gimmick is unacceptable. I will get more worried about this if I see it baked into a budget proposal.”

The Senate did not act on this House proposal, and left the four-year balanced budget provisions intact. Meanwhile, despite the fact that on three occasions over the last two years the Senate has unanimously approved SB 5910 to move up the state’s revenue forecast during long sessions to February 20th, the House refused to take any action on the proposal. This is a missed opportunity that could have helped avoid future special sessions, because this long-overdue reform would have three important benefits:

The budget debate would begin a month earlier, instead of being crammed into the final weeks of session;

The legislature would have more time to act on the budget, which would give lawmakers and the public more than a few hours to read and review the budgets before public hearings are held and legislative action is taken on the proposals; and;

Not waiting till the last moment to work on the budget would remove the pressure lawmakers feel to use “Title-Only” bills to circumvent Article 2, Section 36 of the state constitution.

Meanwhile, casting a strong shadow over the 2014 supplemental budget debate was the Supreme Court’s order in the two-year old McCleary lawsuit. A January 9, 2014 order issued by the Court indicated justices wanted lawmakers to significantly increase K-12 funding in the 2014 supplemental budget. The Court said:

“The legislature is embarking on a short session in 2014, where it has an opportunity to take a significant step forward. We are aware that OSPI has submitted a supplemental budget request of approximately $544 million, with $461 million addressing basic education funding. The need for immediate action could not be more apparent. Conversely, failing to act would send a strong message about the State’s good faith commitment toward fulfilling its constitutional promise.”

The justices ordered lawmakers to submit by April 30, 2014 “a complete plan for fully implementing its program of basic education for each school year between now and the 2017-18 school year.”

The Court’s detailed budget directives to the legislature raise separation of powers concerns, however. Dissenting from the Court’s January 9 order, Justice Jim Johnson said:

“This court’s expanding control of the legislature’s funding of education continues to be a violation of the state’s constitution. I, once again, direct this court to article IX, section 2 of our state constitution, which requires that ‘[t]he legislature shall provide for a general and uniform system of public schools.’ This court’s exercise of continuing jurisdiction in this case usurps what is intended to be and what expressly is a legislative function and duty. It is particularly illogical that the court purports to bind legislators – and a governor – who were not even elected at the time of the earlier order . . .

The legislature – not any court – is the body capable of gathering relevant information regarding competing state budget interests and funding each according to available resources provided from the economy and tax resources.”

Depending on how the Court responds to the legislature’s April 30 report and 2014 supplemental operating budget will determine whether Washington is on the path to a constitutional crisis or whether the separation of powers between the judiciary and legislative branches will be respected.

Though there were missed opportunities for enacting important fiscal reforms during the 2014 legislative session, the supplemental operating budget is a steady proposal that leaves Washingtonians in a good position to turn attention to the choices presented for the 2015-17 budget. The 2014 election will provide voters the opportunity to pass their own judgment on what direction they would like the 2015 legislature to take, and how lawmakers can best keep the state’s budget on a sustainable path while balancing the infinite demands for increased spending with the need to not harm the state’s opportunity for economic recovery and growth.

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