As I wrote yesterday, Gov. Inslee vetoed a provision of the supplemental 2015–17 operating budget that would have diverted funds from the public works assistance account (PWAA) in 2017–19. Consequently, the budget as signed by the governor does not balance over four years. I wanted to provide some more context today.

First, it’s important to be clear that the budget still balances in the current biennium.

However, the supplemental that the Legislature passed left an unrestricted ending fund balance of just $9 million in 2017–19. That’s not much of a cushion, but it did meet the requirements of the four-year balanced budget law—even though the law does not would not normally apply this year, since the Legislature appropriated funds from the budget stabilization account (the rainy day fund). [See update at bottom of post.] (Note also that the law says the “legislature must adopt a four-year balanced budget”—it does not require the governor to sign one.) The PWAA provision that was vetoed helped to keep the budget in the black over four years.

The table below shows how the 2015–17 biennial budget and the 2016 supplemental used the PWAA. Transfers from the PWAA to the general fund in 2015–17 total $89.0 million—those transfers were not vetoed.

Additionally, the enacted biennial stated (Sec. 959) that in 2017–19, the Legislature “intends to allocate” $73.0 million of future loan repayments “to support basic education.” That provision was not vetoed last year.

In the 2016 supplemental (Sec. 935), the Legislature added to that language that in 2017–19 it “intends to continue the policy since 2013 of not authorizing new loans from the account,” and it increased the $73.0 million by $154.4 million—to total $227.4 million. This section is what the governor vetoed.

The trouble with these statements of intent for 2017–19 is that they do not bind future Legislatures. They represent a potential source of funds for the next Legislature, but the next Legislature could just as well ignore them.

The four-year balanced budget requirement is an important way to encourage budget sustainability and fiscal responsibility. It is most useful in keeping a Legislature from adding funding in one biennium that bow waves in the following biennium and from simply shifting costs from one biennium to the next. In this case, the governor vetoed a provision that was basically a suggestion for the next Legislature (because, as he wrote, “there is a clear need for future public infrastructure improvement throughout the state”).

Update 4/20/16: ESHB 2988, the bill that appropriates funds from the budget stabilization account for wildfire costs this year, specifies that those appropriations do not suspend the four-year balanced budget requirement. The bill does not make changes to the balanced budget law (RCW 43.88.055), so future Legislatures will still have the leeway not to produce a budget that balances over four years should they have to tap the rainy day fund.