POLICY HIGHLIGHTER

Volume 13, Number 33
December 12, 2003

Six-year budget outlook: $3.1 billion deficit or $380 million surplus?

Depending on how legislators approach budgeting over the next six years—beginning with next year’s supplemental budget—Washington will face a potential $3.1 billion deficit in 2009, or enjoy a $380 million surplus. The prediction comes from a six-year budget forecast presented last Friday by the Senate Ways and Means committee.

The forecast notes that state revenues are expected to continue increasing. Assuming legislators adhere to I-601 spending limits and follow the principles outlined in Governor Locke’s new priority-based budget model, revenues will exceed expenditures by $380 million in 2009. (The estimate allows for continued funding of I-728 and the state’s proposed tax incentives for Boeing and the hi-tech industry.)

This means legislators must begin the budget process by defining the results they want, then decide which programs and services to purchase with available revenue to best achieve those results. This ensures a balanced budget.

On the other hand, if lawmakers begin budgeting with the assumption that they must continue funding all current programs, adjusting for caseload increases, they will have a massive deficit.

Legislators will face their first test next session when they develop a supplemental budget. The Ways and Means committee is projecting additional spending needs of $197 million. The trick will be to prioritize spending and offset increases in one area with decreases in another, maintaining a revenue-neutral budget and preserving the state’s emergency reserves. This will require reviewing all state programs and activities to determine how effectively they are meeting the state’s highest priorities. The questions legislators must answer are:

1. How much money does the state have?
2. What does the state want to accomplish?
3. What is the most effective way to accomplish the state’s goals with the money available?
4. How will the state measure its progress in meeting those goals?

It is also important to note that despite the progress made this year with priority-based budgeting, the state is still planning to spend $149 million more than it expects to collect this budget cycle. This shortfall should not be patched with one-time reserves.

Developing the supplemental budget will provide legislators with an opportunity to show they can stay committed to results. Their choices will determine whether Washingtonians face deficits and tax increases or enjoy budget discipline and surpluses.

Six-year forecast
(Dollars in millions)
Numbers updated by Senate Ways and Means 12/10/03

*Assumes continued funding of I-728, Boeing and Hi-tech tax incentives, reserves and any carry-forward deficits.

*Assumes continued funding of I-728, Boeing and Hi-tech tax incentives, and excludes reserves or carry-forward deficits from overspending I-601 limit.

Prepared by Jason Mercier | Budget Research Analyst

Contact: Jason Mercier | Budget Researsh Analyst | 360.956.3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org