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Published on Friday, December 18, 2015

Governor releases supplemental state budget proposals

Didn’t the state just pass a budget?

It seems like the state just passed its operating budget because 2015 was the longest legislative session in state history. In odd numbered years like this one, state lawmakers are tasked with enacting a two- year operating budget, and the Legislature did not do that until June 29. The next step in the budget process happens now, when the state makes any needed adjustments to that two-year budget. It starts with the release of the Governor’s supplemental proposal in mid-December.

On Thursday, December 17, Governor Inslee released his proposed supplemental operating, transportation, and capital budgets. According to the Office of Financial Management, the supplemental operating budget needs to address a $455 million shortfall. While the state has an extra $245 million in revenue since it passed the budget earlier this year, it also has an additional $700 million in costs, including paying for the state’s worst wildfire season in history and increased Medicaid, healthcare, and jail costs.

No cuts to state shared revenues

Despite these pressures, AWC was cautiously optimistic that addressing this shortfall would not involve taking more revenues shared with cities, and the Governor did not propose any cuts to state shared revenues such as liquor profits, marijuana excise taxes, or municipal criminal justice.

The proposal does rely on about $42 million in fund transfers, which unfortunately includes sweeping an additional $10 million from the Public Works Trust Fund into the state general fund.

Increases to mental health funding

One of AWC’s 2016 legislative priorities is increased investments in the state’s human services network. The Governor’s proposal includes additional funding for health and human services, including new money for wrap-around service programs, community-based services for individuals in mental health crisis, and the recruitment and retention of mental health staff.

Proposed tax increases for K-12 education

The Governor also proposed an increase in teacher pay to help address the state’s teacher shortage. Specifically, he is proposing the minimum teacher salary be raised to $40,000 per year (from the current $35,700), a one percent raise for all other teachers and staff, and additional funding for a mentoring program for beginning teachers.

To pay for these items, he is asking for the following four tax changes that would raise $101 million in the state’s 2017 fiscal year:

  • Converting the nonresident sales tax exemption to a refund program.
  • Repealing the sales tax exemption on bottled water.
  • Limiting the REET foreclosure exemption.
  • Repealing the use tax exemption for extracted fuel, except hog fuel.

Each of these items were proposed, but not passed, in the 2015 session. The first three items would generate additional revenue for cities as well.

Fixes new multi-modal fund distributions

As we reported back in September, the statewide transportation package included new quarterly distributions of gas tax revenues and multi-modal funds for cities and counties. Unfortunately, through an oversight, the multi-modal funds for local governments were not appropriated in the transportation budget and therefore could not be distributed. The Governor’s proposed supplemental transportation budget fixes that issue. If a supplemental transportation budget passes in the 2016 session that includes this fix, cities could potentially receive distributions from the multi-modal account beginning in the first half of 2016.

What’s next?

The House and Senate will have their own approaches to addressing the shortfall in the state budget, and this is just the first of what is likely to be at least three supplemental budget proposals considered during the 2016 legislative session.

Categories: Budget & finance
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