Most of us learn the lesson at an early age: When you unexpectedly come into some money, you pay the bills, maybe buy something small, and save the rest. That cash might come in handy for a rainy day, you know.
Governments, however, often operate like a child holding a couple dollars at the candy store: If the money is there, it is meant to be spent, right? What is the point of having cash if you don’t spend it? Right? But with unexpected revenue coming into the state coffers over the next couple years, lawmakers should take the mature approach and save it. That rainy day might be coming sooner than we think.
Recently, there has been nothing but sunshine for state budget writers. With a booming economy, tax revenue has grown at a robust pace and has routinely exceeded expectations. Last week, state economists estimated that revenue through June 2019 will be $298 million more than what was forecast as recently as February. That earlier projection was used by lawmakers as they made adjustments to the 2017-19 state budget, and the latest numbers also suggest an increase of $297 million for the 2019-21 biennium.
It will be tempting for lawmakers to view the new projections as a windfall that must be spent and there are, indeed, some pressing needs. Most recently, Washington lost $53 million in annual federal funding for Western State Hospital, and that hole will need to be filled from the state budget. Spending increases also must be considered for fighting wildfires, overdue infrastructure improvements, and health care — depending upon what Congress does to dismantle the Affordable Care Act. In addition, it would be helpful if lawmakers could reach an agreement to replace the Interstate 5 Bridge and formulate plans for additional bridges across the Columbia River.
But the prudent course of action would be to, well, act prudently.
Lawmakers in recent years have greatly increased spending, primarily in fully funding public education. Following the 2012 state Supreme Court ruling in McCleary v. Washington, state funding for basic education has grown from $13.4 billion in the 2011-13 biennium to $22.8 billion in the current two-year budget. That was accomplished, in part, through a statewide property tax that has hit residents with a bit of sticker shock this year. The idea is that with more education funding coming from the state, local levies that previously paid for basic items such as teacher salaries can be reduced.
The increased spending, however, should not serve as a template for future actions. As we learned just a decade ago, downturns are an inevitable part of the economic cycle, and Washington must prepare for the next one.
President Donald Trump’s anti-trade policies are particularly dangerous for our state, and burgeoning trade wars with China and Canada have targeted Washington’s leading trade partners. Lori Punke Otto, president of the Washington Council on International Trade, has warned, “The administration’s decision to impose tariffs on Chinese imports will harm key Washington state industries, including aerospace, agriculture products like apples, cherries, pears and wine, and also transportation carriers like our ports and railroads.”
All of that should serve as a call for caution on the part of lawmakers. The state has $2.9 billion in reserves, and we hope that no economic downturn requires its use. But it is best to prepare for rain, just in case.