The looming shortfall is exasperated by record spending at the state level

Brett Davis
The Center Square Washington

According to the Office of Financial Management, Washington state is projected to face a budget imbalance of between $10 billion and $12 billion over the next four-year outlook period.

The looming shortfall is exasperated by record spending at the state level. Democrats approved more than 1,300 new policy-related appropriations at a cost of more than $6 billion in the 2022 supplemental budget alone.

OFM officials blame slowing revenue forecasts, rising costs and expanding need for the looming budget gap, while critics claim the state has been reckless with its spending and hasn’t prioritized how best to utilize taxpayer dollars.

This deficit is due to the recent revenue forecasts that were adjusted down and the increase in caseloads and the cost to maintain existing programs,” OFM Pat Sullivan said in a Nov. 8 memo.

OFM Deputy Communications Director Hayden Mackley went into more detail about several factors contributing to the deficit.

“The amount of forecast revenue for the next four years has dropped since the most recent budget was enacted in March,” he emailed The Center Square. “The budget is required by state law to be balanced over four years – that’s why the projected deficit is calculated through June 2029 as we plan for the 2025-27 budget. The 2024 supplemental budget that was enacted was balanced over a four-year period, through the end of fiscal year 2027.”

According to estimates released Wednesday by the Washington State Economic and Revenue Forecast Council, Washington’s projected near general fund revenue collections through 2029 decreased by $400 million overall from the September forecast.

“We’re seeing an increase in forecasted caseloads, which are the projected numbers of people that receive state services,” Mackley continued. “Some of the larger increases are in state-funded kindergarten and child care programs. We’re also seeing an increase in costs related to inflation, and other costs of maintaining programs. Some programs included in that ‘maintenance level’ are constitutional and other legal obligations; others are enacted by the Legislature.”

Not everyone is buying OFM’s explanation for the looming deficit.

Washington Research Council’s Emily Makings took lawmakers to task in a Nov. 12 blog, stating that the “estimated shortfall is the result of legislative spending choices. The Legislature chose to increase appropriations in 2023-25 by 15.8% over 2021–23, at a time when biennial revenues were expected to increase by 3.5%. Now that bill is coming due.”

She previously noted that “Compared to the February revenue forecast (on which the current budget was based), the September revenue forecast is down by just $608 million through 2027–29. It didn’t help matters, but the revenue forecast decrease is not the cause of the problem. (Further, 2025–27 revenues are forecasted to be $5.132 billion higher than 2023–25 revenues.)”

Todd Myers, Vice President for Research at the Washington Policy Center think tank echoed those sentiments.

“Fundamentally, this problem was created by mismanagement of the budget and putting political priorities ahead of fiscal sustainability,” he said. “What the Legislature did was to put programs at risk in the hope that the threat of cutting key programs is enough to force the public to support yet another huge increase in state taxes. It is backward.”

Further complicating matters is the fact that the budget gap does not include the almost $1.4 billion needed to pay for the two-year collective bargaining agreements negotiated with state employee unions in the next budget.

“The determination on the collective bargaining agreements hasn’t been made yet,” Mackley explained. “This determination will occur close to when the governor’s budget proposal to the Legislature is published in mid-December.”

There is precedent for denying the pay raises.

Gov. Christine Gregoire was sued in late 2008 by the Service Employees International Union’s Local 775 for suggesting that workers’ pay raises be dropped as part of addressing the state’s impending budget deficit.

The union was awarded pay and benefits increases worth more than $80 million in binding arbitration.

In April 2010, however, the state Supreme Court ruled it can’t force a governor to budget for raises awarded to a public employee union, even though state law says the governor “must” include that money in their spending proposal.

Myers said whatever decision is made regarding the pay raises will be an indication of the state’s priorities.

“At the very least, it is clear that the $1.3 billion in pay raises is not justifiable,” he said. “If the Legislature approves that contract, it will be very clear that legislators chose pay raises over programs that don’t get the funding that was previously promised.”

In the meantime, Mackley pointed to Sullivan’s memo that “directs state agencies to propose cost-saving measures, including hiring freezes and program delays, in response to the projected deficit. Agencies may choose to implement measures like hiring freezes or layoffs that result in immediate savings.”

This report was first published by The Center Square Washington.