Washington state’s spending spree drives massive deficit

(The Center Square) – Over the past decade, many state lawmakers have advocated fiscal restraint during years of enormous revenue growth, arguing that Washington could face a budgetary crisis if an economic downturn were to occur.

Although the state operating budget now faces an estimated $10 billion to $12 billion deficit, their dire predictions weren’t entirely accurate, as revenue levels still remain at all-time highs.

Since 2013, the state operating budget has increased from $38.4 billion to $75.5 billion for the current biennium, a $37 billion increase that has nearly doubled spending.

Much of the increased spending occurred between 2015-19, as the Legislature wrestled with how to comply with the state Supreme Court’s 2013 McCleary decision, which found the Legislature was failing to fulfill its constitutional obligation to fully fund basic education.

During that time frame, the state operating budget increased from $38.2 billion to $52.8 billion, a 38% increase of $14.6 billion. Those figures do not include the supplemental budgets.

Within those years, public school funding also increased dramatically. The 2011-2013 operating budget invested $17.7 billion into K-12. By 2019, it has increased to $28.7 billion, a 62% increase of $11 billion; under the 2013-2025 budget, $32.4 billion is spent on public schools.

According to the Washington Policy Center, the state has increased education employees significantly since 2011, with a 25% increase in teaching staff, 42% increase in school principals, and a 66% increase in non-teacher staff positions.

However, state spending spiked in the next two biennia. Between 2019-23, the operating budget increased from $52.8 billion to $69.8 billion, a 38% increase of $17 billion.

The spending increases were funded with a combination of new taxes as well as new or unexpected revenue. In March 2019, the state Economic and Revenue Forecast Council estimated that the state would receive $50 billion for the 2019-21 biennium, $5 billion more than the $45 billion in the 2017-19 biennium.

During the 2021 legislative session, ERFC reported the state would receive $3.5 billion in unanticipated revenue; that same session legislators approved an operating budget that increased spending from the prior biennium, not including supplemental budgets, by $6.2 billion. 

The sustainability of new spending was a significant focus of discussion in the 2019 legislative session. At the time, Sen. John Braun, R-Centralia, remarked at ERFC's March 20, 2019 meeting that the state was "in the best shape we've been in, certainly in the last decade," adding that they could increase spending by several billion without having to resort to new taxes.

In disagreement was ERFC member and House Appropriations Chair Timm Ormsby, D-Spokane, said at the same meeting that surplus revenue “doesn’t take away the arithmetic problem that we came here with. This reduces our problem … but doesn’t eliminate it.”

“In order to make good on our commitments, we would need additional revenue,” he also said. “This is about paying the bills.”

The state Legislature that session would go on to enact a slew of new taxes that included:

• Senate Bill 5993, which changed and increased the hazardous waste tax.

• House Bill 2158, which imposed a business and occupation tax surcharge on certain businesses to pay for higher education programs.

• House Bill 1873, which placed a tax on vaping products.

• Senate Bill 5998, which changed the real estate excise tax from a flat 1.28% to a graduated rate.

• House Bill 2167, which placed an additional 1.2% B&O tax on certain financial institutions.

The new taxes drew criticism from minority party leaders, including Rep. Drew Stokesbary, R-Auburn, who at the time wrote that the new taxes “were rushed through the process, in the final three days of session, with absolutely no opportunity for meaningful review or comment from Republicans or the public. I am deeply troubled that the majority believes this level of spending growth is sustainable. In times of prosperity, we should be focused on building reserves to prevent the devastating cuts that were required after the last economic downturn.”

During the 2020 legislative session, Stokesbary proposed to take $1.14 billion of surplus revenue to provide tax relief, but it was rejected. Rep. Jim Walsh, R-Aberdeen, made a similar proposal that was also rejected.