State Legislature Faces Budgeting Questions in 2015
By Mike Shaw

The 2015 legislative session begins Jan. 12. The 2014 election left the Senate in Republican hands, and the House still has a Democratic majority. Yet, in each legislative chamber, the majorities are slight: in the Senate, 25 Republicans (and Democrat, Tim Sheldon) to 23 Democrats, and in the House, 51 Democrats to 47 Republicans. No vote can be taken for granted, and bipartisan consensus is necessary.

The 2014 election also made crafting an operating budget harder as voters passed Initiative 1351, the “Class Size Counts” initiative, by a 50.96 percent “yes” vote. The biennial cost associated with I-1351 is about $2 billion. This amount is in addition to the $1.2 billion (some say $1.7 billion) needed to address the State’s obligation under the McCleary decision issued by the State Supreme Court. There, the Court found that the State was not meeting its constitutional obligation to fund basic education.

You may have heard, depending on the pundit, that the state is projected to have $2.8 billion in additional revenue, and that the budget is not as bleak as purported. And that is somewhat true. The Legislature could essentially buy last biennium’s budget, cover the estimated $1.9 billion maintenance and carry forward cost with money to spare. Yet, that cushion largely disappears if you add in $275 million in added pension costs, $200 million of debt service, and $190 million for state employee health care costs. If you add bargained state worker salary increases and I-732/K-12 salary increases, then the State is $750 million in the red. All that does not include I-1351 or McCleary costs. Thus, the state faces $2.8 billion in additional revenue to cover about $5 billion in additional expenditures. Other entities calculate the deficit as high as $7.2 billion based on similar assumptions that include higher costs associated with legal obligations and other policy changes.

This budget problem could impact revenues shared with local governments, such as liquor tax revenues, the remainder of the public works assistance account, criminal justice monies, and other grant programs. Although the state is projected to have about $37 billion in revenue, roughly two-thirds of the state’s budget is protected from being cut by constitutional and federal requirements (K-12 represents 42.3 percent of the budget, and debt service and mandatory Medicaid take up other large chunks). That leaves human services, higher education and corrections as the remaining targets for cuts – and local distributions. Consequently, it is a bad time to come to Olympia and ask for anything that has a price tag. Most are trying to hang on to what little they have.

Yet, many are still pushing for a transportation funding package, and the Governor recently unveiled his climate change proposals. Also, the Legislature must address medical and recreational marijuana issues, the mental health treatment mandate issued by the State Supreme Court, and the fish consumption issue (stormwater runoff). Rarely have so many thorny issues been placed before the Legislature during a single session.

In sum, below are the major decision points:

Revenue or not? If additional revenue, then what…property tax, capital gains, B&O, etc. If not, then what gets cut?
Suspend I-1351? It has a huge fiscal impact, limited relevance to McCleary. It takes a two-thirds vote to suspend or amend an initiative within two years of its passage.
Assuming a general fund revenue vote, is there enough bandwidth to increase taxes for transportation or other infrastructure needs? If so, then what projects are included?

The Legislature has 105 days to figure it out. You can find the draft session deadlines here.

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