When they return to work in January, legislators should heed a lesson most of us learn at an early age: Just because you have money doesn’t mean you are compelled to spend it.
Such prudence is warranted as state revenue projections continue to balloon. The latest forecast, released Tuesday, projects that revenue will reach $66.7 billion for the two-year cycle that started July 1. That marks an increase of $663 million from what chief economist Steve Lerch predicted in June; another increase is anticipated when the next forecast is released in November.
The latest announcement has some Democrats reacting like children on Christmas morning. “We need to take a look at where we have put dollars, how those are being used and what gaps need to be filled,” said Sen. June Robinson of Everett, the incoming chair of the Senate Ways & Means Committee.
In April, lawmakers passed a two-year operating budget of $70 billion, covering most state programs and salaries for 2023-25, plus state support for public schools and universities. That represents a 56 percent increase to the operating budget over the past two decades.
The increase might sound outrageous, but nationwide inflation has been a cumulative 67 percent over the past 20 years, and Washington’s population has increased 30 percent. Adjusting for those facts, per-capita state spending has actually decreased since 2003.
WalletHub.com this year ranked Washington — despite its reputation as a high-tax, high-spend state — as having the 25th-highest tax burden on its residents. And for fiscal year 2021, the Kaiser Family Foundation found that per-capita spending by the state government was below the national average.
That likely seems counterintuitive, with the Legislature frequently seeking new revenue streams and new ways to spend. A new capital gains tax went into effect this year, following contentious debates that ended at the state Supreme Court, and that tax has added more revenue to state coffers than expected. A carbon pricing system implemented this year has raised surprising amounts of money but is not included in the revenue forecasts.
None of this, however, should distract from a fundamental fact about revenue that lands in the coffers of state government: The money belongs to the people of Washington. State revenue is part of a social compact in which elected officials agree to collect and spend money for the common good. Meanwhile, we rely on those officials to efficiently and responsibly spend and manage that revenue.
Part of being responsible is to have some savings in case of an economic downturn. In Washington, those savings are in the Budget Stabilization Account, colloquially known as the “rainy day fund.” Lawmakers this year replenished the fund, which was spent down in the early days of the COVID pandemic, and ensuring its stability should be a top priority.
So should efforts to bolster and support Washington’s small businesses, which provide the foundation of the economy. Helping businesses find employees during a labor shortage and adjusting the Business & Occupation Tax can provide stability for businesses that account for more than 99 percent of the state’s companies.
In other words, there is more for lawmakers to consider than simply how to spend newfound revenue. As Sen. Lynda Wilson, R-Vancouver and the ranking member of the Ways & Means Committee, said: “I’m inclined to take a wait-and-see attitude.”
The hope is that all lawmakers will embrace such prudence.