NEWS ADVISORY

March 18, 2005

I-601's impact on Gregoire's budget proposal

Contrary to the belief of some state officials, the voter approved I-601 spending limit is still in effect. This has ramifications on the budget proposal Governor Christine Gregoire will release on Monday, March 21, at 10 a.m. Based on the $25,721 million forecasted revenue for the 2005-07 budget (includes $836 million 2003-05 ending-fund balance) and the $25,107 million voter approved I-601 spending limit law, Gregoire's budget proposal will fall into one of the four following scenarios:

1) Gregoire's budget will be balanced within forecasted revenue and the state's I-601 spending limit. This will mean that NO tax increase of any kind will be needed (this is the only scenario that follows the priorities of government budget process—focusing on program results);

2) Gregoire's budget will include requests for new taxes and expenditures that exceed the state's I-601 spending limit. Under current law this will require a vote of the people at the November election to approve expenditures and taxes in excess of the I-601 spending limit;

3) Gregoire's budget will include requests for new taxes and expenditures that exceed the state's I-601 spending limit. Rather than refer these actions to a vote of the people as law requires, state officials will eliminate the I-601 voter approved spending limit. Current law requires a vote of the people for approval of expenditures and taxes in excess of the I-601 spending limit; or

4) Lawmakers will pass a 2005 supplemental budget that spends the majority of the projected 2003-05 $836 million ending-fund balance. This action will greatly expand the I-601 spending limit and taxes will be raised to bridge the gap between the $24,885 million forecasted revenue and the new I-601 limit.

RCW 43.135.035
Tax legislation—Conditions and restrictions—Ballot title—Declarations of emergency—Taxes on intangible property—Expenditure limit to reflect program cost shifting or fund transfer.

(1) After July 1, 1995, any action or combination of actions by the legislature that raises state revenue or requires revenue-neutral tax shifts may be taken only if approved by a two-thirds vote of each house, and then only if state expenditures in any fiscal year, including the new revenue, will not exceed the state expenditure limits established under this chapter.

(2)(a) If the legislative action under subsection (1) of this section will result in expenditures in excess of the state expenditure limit, then the action of the legislature shall not take effect until approved by a vote of the people at a November general election. The office of financial management shall adjust the state expenditure limit by the amount of additional revenue approved by the voters under this section. This adjustment shall not exceed the amount of revenue generated by the legislative action during the first full fiscal year in which it is in effect. The state expenditure limit shall be adjusted downward upon expiration or repeal of the legislative action.

(b) The ballot title for any vote of the people required under this section shall be substantially as follows:

"Shall taxes be imposed on . . . . . . . in order to allow a spending increase above last year's authorized spending adjusted for inflation and population increases?"

Contact: Jason Mercier | Budget Research 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