Yesterday Gov. Inslee signed the 2021–23 operating budget and the 2021 supplemental. He vetoed seven items; the vetoes will improve the balance sheet. (See here, here, and here for more information on the budget passed by the Legislature.)

In the 2021 supplemental:

• The enacted 2019–21 budget had appropriated $307,500 in FY 2020 and $317,500 in FY 2021 from the general fund–state (GFS) for a study of outcomes for tenants facing eviction who have legal representation compared with those who don’t. The 2021 supplemental as passed by the Legislature reduced the FY 2020 appropriation to $57,000 and the FY 2021 appropriation to zero. Gov. Inslee vetoed these changes, noting that FY 2020 “has closed and can no longer have changes in appropriation.” However, he “will ask the Office of Civil Legal Aid to place $317,500 in reserve status for fiscal year 2021.”
• The Legislature appropriated $152.5 million from the nondebt-limit reimbursable bond retirement account for bond retirement, but this was in error so Gov. Inslee vetoed it.

In the 2021–23 biennial budget:

• Gov. Inslee vetoed $142.8 million GFS for activities that enhance, expand, or strengthen home and community-based services. This will allow the Legislature to decide how to spend this funding (see below for a detailed explanation of this issue).
• He vetoed $2.0 million GFS for a buyback of Columbia River commercial gillnet licenses. Although Gov. Inslee supports this policy, he objected to some of the language of the section, which “conflicts with Washington’s agreement with the state of Oregon on management of commercial gillnet fisheries on the Columbia River” and which “potentially limits the department from issuing fishing licenses for other species.”
• He vetoed Sec. 955, which would have created the Washington State Missing and Murdered Indigenous Women and People Task Force. According to the veto message, the bill “did not include the correct version” of the language. That said, the Attorney General’s Office “will use its existing authority to convene the task force.”
• Relatedly, Gov. Inslee vetoed $500,000 GFS for the Attorney General’s Office to fund the Washington State Missing and Murdered Indigenous Women and People Task Force.
• The budget required the Department of Revenue to convene a stakeholder work group “on future taxation of digital products that are used in the electronic processing of prescriptions to avoid increases in the cost of providing prescription drugs to consumers.” Gov. Inslee vetoed this work group because no funding was provided. Nevertheless, the governor is “directing the department to work with stakeholders to assist them in developing and drafting legislation that will help reduce the tax burden on pharmacies as it relates to digital services that are used in the processing of electronic prescriptions and transmission of prescription drug claims data.”

What’s the story with the $142.8 million veto? The American Rescue Plan (ARP) Act provided states with a temporary 10% increase to the federal Medicaid match (FMAP) for home and community-based services (HCBS). The increase will be in effect from April 1, 2021 through March 31, 2022. The additional federal funding must be used “to supplement, and not supplant, the level of State funds expended for home and community-based services for eligible individuals through programs in effect as of April 1, 2021.” Further, states must “enhance, expand, or strengthen” HCBS using state funds.

The Legislature estimated that Washington will receive $415.8 million from the FMAP enhancement, and that it is already spending $273.0 million GFS on HCBS. Thus, it appropriated $142.8 million GFS in the 2021–23 budget (sec. 738) to the Office of Financial Management (OFM) “for additional activities that enhance, expand, or strengthen” HCBS. However, it structured the appropriation so that it would be spent differently depending on at-the-time forthcoming federal guidance:

• The $142.8 million may not be spent until the federal government issues guidance on expending the federal funding or until May 10, 2021, whichever is first.
• If, by May 10, the federal government extends the time period for expanding HCBS past Dec. 31, 2022, OFM may not spend the $142.8 million via the unanticipated receipts process (instead, the Legislature would decide how to spend the funds during the 2022 session).
• If, by May 10, the federal government does not extend the time period, OFM must develop a spending plan for the $142.8 million and submit it to the Legislature for review by June 1, 2021.

As it happened, the federal government issued guidance on May 13 that allows states “to use the state funds equivalent to the amount of federal funds attributable to the increased FMAP through March 31, 2024” on HCBS. Because the guidance came after May 10, under the letter of the proviso, OFM would develop a spending plan. However, Gov. Inslee vetoed the section “to follow the spirit of the proviso and enable the Legislature to decide how the funds should be used.”