A new budget outlook, and possible budget process changes

Yesterday the Economic and Revenue Forecast Council adopted a four-year budget outlook based on Gov. Inslee’s proposed 2017–19 operating budget. According to the outlook, his proposal would leave a near general fund–state plus opportunity pathways (NGFS+) unrestricted ending balance in 2019–21 of negative $2.041 billion (and total reserves would be negative $596 million). Meanwhile, the revenue legislation proposed by the governor would increase from $4.352 billion in 2017–19 to $7.013 billion in 2019–21.

At the maintenance level, K–12 spending increases would go from $802 million in 2017–19 to $1.434 billion in 2019–21 (including K–3 class size reductions to be implemented pursuant to the McCleary decision) and spending increases for the I-732 COLAs for teachers would go from $406 million to $1.051 billion. Also, I-1351 (K–12 class size reduction) is scheduled to become effective in 2019–21, increasing spending in that biennium by $1.866 billion.

At the policy level, teacher compensation related to McCleary would increase by $2.951 billion in 2017–19 and by $5.554 billion in 2019–21. That 2017–19 figure is higher than I had understood from the budget documents. Apparently, it includes not only $2.746 billion for competitive salaries and educator training, but also $139.1 million for health benefits, $50.0 million for teacher mentoring, $11.0 million for alternate routes for teacher preparation, and $7.5 million for principal support and mentoring.

Additionally, there is an item for I-1351 at the policy level (on top of the amount in maintenance level): $330 million in 2017–19 and $631 million in 2019–21. The governor proposes implementing some of I-1351 early. Section 502(2)(a)(ii) of the proposed budget bill (SB 5048) would increase allocations for school nurses, social workers, psychologists, and guidance counselors (but not all of the proposed new allocations reach the levels of I-1351). Half of the state’s school districts would get the new allocations in SY 2017–18, and all districts would get them in SY 2018–19. Section 502(4)(a) would increase the allocation for parent involvement coordinators (but not all the way to I-1351 levels), and section 502(4)(b) would increase allocations for paraeducator training (again, not to I-1351 levels).

The large negative ending fund balance in 2019–21 under the governor’s proposal helps explain why his budget assumes a suspension of the four-year balanced budget requirement (RCW 43.88.055). A bill has been introduced in the House that would do so: HB 1438. It would suspend the requirement for the 2017–19, 2019–21, and 2021–23 biennia. The bill asserts that the suspension is necessary to fully implement I-1351 and to comply with the McCleary decision.

Additionally, SB 5114 was passed out of the Senate Ways & Means Committee on Jan. 18. It would permanently move up the spring revenue forecast. Currently (RCW 82.33.020), revenue forecasts must be prepared and submitted to the Legislature on Nov. 20, Feb. 20 (in even-numbered years), March 20 (in odd-numbered years), June 27, and Sept. 27. The 2015 supplemental (SHB 1105) required the March 2015 forecast be moved to Feb. 20, 2015. SB 5114 would require the spring forecast be submitted by Feb. 20 in every year. The bill has an emergency clause, so it would take effect immediately if passed.

Lastly, I want to recommend a new budget visualization tool from the Office of Financial Management. When we put together our reports on the budgets, we go through the budget bills themselves and spend a lot of time at fiscal.wa.gov, going through the numbers in each of the agencies to tally up policy and maintenance level spending. OFM’s new tool will make it much easier for more casual observers to quickly see what spending is proposed in whatever agency they’re interested in—and how much of that is carry-forward, maintenance, or policy level. For example, say you want to know what is proposed for the Department of Agriculture. First, you can see that the natural resources budget area is small as a percent of the budget. Then, when you click on the Department of Agriculture, you can see the amount of carry-forward funding, and then choose whether to see maintenance or policy level spending, which are further broken out into programs. This is only available for the governor’s proposed 2017–19 budget. I hope it will be used for future proposals as well.

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