Gov. Inslee has proposed a historically large 2019–21 operating budget that would increase spending from funds subject to the outlook (NGFO) by $9.973 billion (22.3 percent). Of that spending, $6.415 billion is the cost of continuing current services and completing implementation of the K–12 spending required by the state Supreme Court’s McCleary decision. Current resources are enough to fund that maintenance level.

The governor proposes $3.557 billion in new policy changes. These include funding collective bargaining agreements reached with state employees, increasing allocations for school support staff, altering limits on local levies, implementing a new special education funding structure, and increasing funding for state hospitals and homelessness programs.

To help fund the $54.634 billion spending proposal, Gov. Inslee proposes a tax package that would increase revenues by $3.689 billion. If enacted, 2019–21 revenues would increase by 17.2 percent over 2017–19. (Current revenues are already expected to increase by 9.2 percent.) The package includes a 9 percent capital gains tax and a 67 percent increase to the business and occupation tax on services.

The proposal would leave $2.789 billion in total reserves at the end of the biennium, and it would balance over four years. However, the budget would dedicate $2.090 billion of the new revenues to the education legacy trust account, thereby avoiding an extraordinary revenue growth deposit to the rainy day reserve fund. The high level of spending along with this revenue diversion make the sustainability of the proposal questionable. But this represents just an opening bid: Typically, the Legislature appropriates less than the governor proposes, and legislators have indicated that the tax package as proposed probably won’t be enacted.

The full policy brief is available here.