Taking vetoes into account, the budget doesn’t balance over four years (plus, a note on minimum wage disemployment effects)

The Legislature passed a 2017–19 operating budget that balanced over four years; an outlook prepared for the compromise indicated unrestricted ending fund balances of $985 million in 2017–19 and $42 million in 2019–21. But those figures were based on the proposed compromise—they didn’t include any changes made by Legislators prior to voting on the budget on June 30, nor did they reflect the governor’s vetoes.

On July 28 the Economic and Revenue Forecast Council (ERFC) met to adopt the official budget outlook. Accounting for vetoes and some changes made by the Legislature, the official outlook leaves unrestricted ending fund balances of $925 million in 2017–19 and negative $57 million in 2019–21. Note, though, that total reserves (including the rainy day fund) are expected to be $1.644 billion in 2019–21. Our report on the budget was based on the numbers as passed by the Legislature. 

At the ERFC meeting, Treasurer Davidson noted that the outlook handout mentions the caseload reductions in low-income health care that the state expects due to the increase in the state minimum wage. As we wrote in our report on the budget, the state estimates that the savings will be $22.9 million in the Health Care Authority and $8.3 million in the Department of Social and Health Services.

The treasurer pointed to the recent UW study on the impacts of Seattle’s minimum wage increase and asked whether potential disemployment effects were considered by the state. Staff noted that that is a question for the Caseload Forecast Council.

According to the CFC, the Medicaid caseload forecast was adjusted for disemployment effects due to the higher minimum wage. Additionally, the June 2017 caseload forecast notes that they need “more time to assess the impacts of Initiative 1433.” Perhaps the UW study will help inform that assessment.

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