Gov. Inslee’s 2023–25 operating budget proposal is funded via the increased revenue forecasts since the current budget was adopted and a transfer of $2.1 billion in reserve funds (from the Washington rescue plan transition account) to the general fund–state (GFS). Policy level reductions in the proposed 2023 supplemental to the 2021–23 budget also help to balance the proposal for 2023–25.

The governor’s proposed 2023 supplemental would reduce 2021–23 appropriations from funds subject to the outlook (NGFO) by $977.0 million. That includes maintenance level (the cost of continuing current services, adjusted for enrollment and inflation) increases of $356.1 million and policy level reductions of $1.333 billion.

First, the proposal would reduce 2021–23 NGFO appropriations by $800 million by canceling an early payment to the Teachers’ Retirement System (TRS) Plan 1. The original 2021–23 biennial budget had set aside that $800 million (to be paid on June 30, 2023) to reduce the unfunded liability in TRS 1. As we noted at the time, this action was expected to result in the plan being fully funded in 2023–25, two years ahead of schedule. According to the governor’s budget documents (see page 114), under current law, TRS 1 is expected to be fully funded in 2023; under his proposal, it would be fully funded in 2025.

(In 2021, the Legislature transferred $1.820 billion from the budget stabilization account to the GFS. Money is fungible, but that transfer freed up $1 billion to seed the Washington rescue plan transition account and $800 million to reduce the TRS 1 unfunded liability.)

Second, the governor’s supplemental proposal would reduce the GFS amount available for the family and medical leave insurance (FMLI) account, should it be in deficit on June 30, 2023. The 2022 supplemental budget set aside $350 million for this purpose, given the paid family and medical leave (PFML) program’s financial troubles. The governor’s proposal would provide just $80 million for this purpose (saving $270 million in the NGFO). That may be sufficient to cover a FMLI account deficit: At a Nov. 30 meeting of the Legislative Task Force on Paid Family and Medical Leave Insurance premiums, staff mentioned that the Employment Security Department estimates the account balance will be -$44 million at the end of the biennium. However, at that same meeting, the task force voted to recommend changes to the premium rate structure, and the recommendations included using the $350 million to seed a reserve for the program. If that money is instead used for other state programs, the PFML premium rate may need to be higher than anticipated in the proposed recommendation.

Third, during the pandemic the state has received an enhanced federal match for Medicaid. These extra federal dollars supplant state spending on Medicaid, freeing up those state dollars for use elsewhere. The enhanced match is only in place for the duration of the federal public health emergency. The 2022 supplemental assumed that the enhanced match would last through June 30, 2022. The emergency is still in place (it was most recently renewed on Oct. 13). The governor’s proposal assumes that the enhanced match will be in place through June 30, 2023. Consequently, the proposal books NGFO savings of $562.3 million.

There are two major NGFO spending increases in the 2023 supplemental proposal:

• $100.0 million to help fund the University of Washington’s Medical Center and Harborview Medical Center.
• $72.1 million for wildfire suppression costs.

(For more on the governor’s proposals, see here and here.)