The Legislature passed a 2020 supplemental budget last month that increases appropriations from funds subject to the outlook plus the workforce education investment account (NGFO+WEIA) by $975.8 million over original 2019–21 appropriations. Of that, $839.5 million is new policy (the rest represents the cost of continuing current services). This is on top of substantial spending increases enacted last year.

The Seattle Times editorial board writes that Gov. Inslee will veto some of this spending on Friday.

State and local governments cannot commit to higher levels of spending going forward until the economic effects of coronavirus measures are better understood. That may take months. . . .

Legislative leaders from both parties are supporting deep cuts even though much of their work during last session will be erased. This cooperation is welcome but, still, the Legislature should be prepared for a special session later this year, potentially to make even harder budget revisions.

Our policy brief on the budget as passed by the Legislature includes descriptions of the major new policy spending.

The editorial notes, “Elected officials and the public must now triage spending priorities. For instance, new spending for additional school counselors is much needed and was just added to the Legislature’s budget. But that’s likely to be cut, to preserve as much of the current K-12 budget as possible.” (For those counselors in high poverty elementary schools, the budget adds $31.8 million.)

Additionally, the editorial warns, “Local governments also should be preparing for dramatic cuts, particularly in new spending programs, that the state will be unable to backfill.” (Yesterday, it was reported that the City of Tukwila is considering cutting employee wages by 10 percent due to a revenue shortfall of over $6 million.)

These potential budget cuts reflect the certainty that revenues will not come in as high as they were projected at the last forecast in February. Nationally, Bloomberg reports,

Moody’s Analytics is advising policy makers to expect no less than a 10% hit to their general fund budgets, with the actual losses likely being much larger for most states, said Dan White, the firm’s head of public sector research. That’s calculated off a baseline expectation that second quarter gross domestic product will decline 15% to 20% from a year earlier, “which is almost unprecedented,” he said.

Additionally,

The drop in state revenue could easily exceed the 11% drop that states saw in a two-year period after the 2008 recession, said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers. While rainy day funds and reserves are at a peak, he said that won’t be enough for some states to cover the deficits in revenue.

Ten percent of Washington’s 2019–21 budget (as increased by the Legislature last month) is $5.4 billion. Our rainy day fund balance is estimated to be $1.979 billion for the biennium and the unrestricted ending fund balance is currently estimated to be $917 million. As Kriss has written, we’ll have a better idea about the extent of the revenue loss in Washington when the May collections report comes out.