We estimate that the state surplus in funds subject to the outlook (NGFO) is now $11.249 billion over four years. On top of that, the state has one-time funds: $1.0 billion in the Washington rescue plan transition account, $1.273 billion in general federal relief funds, and about $1.2 billion in the budget stabilization account.

This rosy situation is thanks to $7.356 billion in increased forecast state revenues since the 2021 legislative session ended, $349.8 million from collections coming in above the most recent forecast, and $2.388 billion in savings from lower-than-expected costs to continue current services.

Gov. Inslee’s supplemental budget proposal would add new NGFO spending totaling $4.185 billion in 2021–23. His proposal would not reduce taxes, and it would increase reserves.

The governor’s office has emphasized the one-time nature of some of the state’s available resources and the slower forecasted revenue growth going forward as reasons not to reduce taxes. It is good to be cautious when enacting new, ongoing policies, lest the expected revenues not materialize. The state does have some one-time revenue, but under the official forecast most of the state’s available resources are not projected to disappear in future biennia. If the slower growth (as currently forecasted) in revenues makes tax cuts unrealistic, then increasing spending would be unrealistic as well.

The governor made a choice to use the surplus on new spending (and increases to reserves). The Legislature could reasonably choose to use some of the surplus on tax reductions as well. After all, as far as budget sustainability is concerned, spending increases and tax cuts are two sides of the same coin.

Read the report here.