State revenues from current sources are estimated to reach $50.555 billion in 2019–21, enough to cover the 2019–21 maintenance level (the cost of continuing current services). On top of the maintenance level, the House has passed a 2019–21 operating budget that would increase appropriations by $2.421 billion from funds subject to the outlook and the Senate has passed a budget that would increase appropriations by $1.697 billion.

To fund the new policy spending, the House would impose a capital gains tax, and both the House and Senate would change the real estate excise tax so its rate is graduated and increase taxes by repealing tax preferences (the state’s term for exemptions, exclusions, deductions, deferrals, credits, and preferential rates).

Some of the major spending items in both budgets include school employee health benefits and the collective bargaining agreements with state employees. Substantial increases would also be made in human services.

The proposed spending increases are historically large at 19 percent in the House and 17 percent in the Senate. They rank among the highest spending increases of the last 25 years. Given the likelihood of an economic downturn, the Legislature should carefully consider whether this level of spending is sustainable and build adequate reserves.

Read the report here.