Revenue windfall could end stalemate

OLYMPIA – An improving economic outlook could allow the Legislature to do something in the next few days that it has been unable to do for nearly six months: negotiate and pass a budget, then go home.

The state Revenue and Forecast Council said Tuesday that better home sales, coupled with modest job growth, slowly strengthening consumer confidence, and growing sales and business tax receipts, mean the state can expect about $231 million more in tax revenue over the next two years than economists projected in March.

While it is a relatively small percentage of the state’s operating budget, which tops $32 billion, negotiators who have been locked in budget talks for weeks predicted it will generate an agreement relatively soon and prevent a partial government shutdown in July.

“We should wrap up our business and get out of town,” Senate Majority Leader Rodney Tom, D-Medina, said.

House Majority Leader Pat Sullivan, D-Covington, was more cautious. The forecast is good news that the economy is rebuilding, he said, but it doesn’t solve all the budget problems for expensive improvements to education in the coming years to satisfy a court mandate.

“So, while today’s forecast may get us closer to a go-home budget, we can’t pretend we’ve solved the long-term problem,” Sullivan said.

Budget negotiators were optimistic they could at least get down to the fine details of budget negotiations.

“We’ll get closer as a result of this,” said Rep. Ross Hunter, D-Medina, the chairman of the House Appropriations Committee.

“It should break one of the final logjams,” said state Sen. Andy Hill, R-Redmond, chairman of the Senate Ways and Means Committee.

Leaders of the Senate Majority Coalition Caucus, which consists of all 23 Republicans and two defecting Democrats, said the extra revenue should quiet calls from House Democrats and Gov. Jay Inslee for higher taxes by closing certain tax exemptions.

They calculate the amount of money available for the budget grew overall by $480 million in the last week: the $231 million from the revenue forecast, nearly $90 million the state might not have to spend because of decreased demand for certain programs, and $160 million from a change in the estate tax that passed last week.

If there’s no push to close tax loopholes or raise taxes, Senate Republicans would drop their demand of “reforms for revenue” and not insist on changes to the state’s workers’ compensation system.

“We still feel very strongly about the need for reform,” state Sen. Mark Schoesler, R-Ritzville, said. “We’re not linking the two together anymore.”

The revenue forecast was a mixture of positive news and negative news, Steve Lerch, the state’s chief economist, said. Concerns continue over a slowdown in China, problems in Europe, high unemployment and flat Gross Domestic Product.

The Legislature has spent the 105 days of the regular session, 30 days of the first special session and seven days so far in the second special session without an agreement on the operating budget, a two-year spending plan for many state programs and salaries that tops $32 billion. It also needs a capital budget, to cover large, non-transportation construction projects, but needs to know how big the operating budget is before it can set the capital budget.

Without an operating budget by July 1, the state would be without legal authority to spend money on some programs or pay some state workers’ salaries. Last week, Inslee ordered his Cabinet heads to begin preparing plans for a partial government shutdown if a budget doesn’t pass.  

David Schumacher, director of the Office of Financial Management, said those preparations will continue as a precaution but “I think it’s unlikely there will be any shutdown in July.”