Starting with the 2017-19 budget, Washington will have one of the toughest balanced budget requirements in the country, assuming lawmakers don’t amend or repeal the statutory protections created by SB 6636.

According to the National Conference of State Legislatures (NCSL), every state except for Minnesota, Mississippi, New Hampshire, Vermont and Washington has a constitutional requirement for a balanced budget. Among these states, only Vermont and Washington don’t have statutory requirements for a legislative balanced budget. That was until the Legislature adopted SB 6636 by a vote of 79-19 in the House and 38-9 in the Senate.

Although advertised as a statutory 4-year balanced budget requirement taking effect with the 2013-15 budget, a large loophole delays the full impact of the requirement until the 2017-19 budget. As noted by Section 1. (2)(b) of SB 6636:

“’Projected maintenance level’ means estimated appropriations necessary to maintain the continuing costs of program and service levels either funded in that appropriations bill or mandated by other state or federal law, and the amount of any general fund moneys projected to be transferred to the budget stabilization account pursuant to Article VII, section 12 of the state Constitution, but does not include in the 2013-2015 and 2015-2017 fiscal biennia the costs related to the enhanced funding under the new definition of basic education as established in chapter 548, Laws of 2009, and affirmed by the decision in Mathew McCleary et al., v. The State of Washington, 173 Wn.2d 477, 269 P.3d 227, (2012), from which the short-term exclusion of these obligations is solely for the purposes of calculating this estimate and does not in any way indicate an intent to avoid full funding of these obligations;”

This means that the 2013-15 and 2015-17 budgets will not have to account for the out-year maintenance costs associated with the McCleary ruling, freeing up capacity to increase spending elsewhere in the budget. This exemption will no longer apply starting with the 2017-19 budget, however. This means that should the statutory balanced budget requirement still exist, Washington will have one of the strongest balanced budget requirements in the country requiring all spending to be sustainable over a 4-year period.

Another interesting exclusion from the maintenance level projections concerns the costs associated with the Collective Bargaining Agreements (CBAs) negotiated by the Governor and potential salary increases:

“Section 4. (2)(a) . . . Estimates of ensuing biennium expenditures must exclude policy items including, but not limited to, legislation not yet enacted by the legislature, collective bargaining agreements not yet approved by the legislature, and changes to levels of funding for employee salaries and benefits unless those changes are required by statute. Estimated maintenance level expenditures must also exclude costs of court rulings issued during or within fewer than ninety days before the beginning of the current legislative session;”

As a practice the Legislature has not voted on the CBAs as a separate document but their approval has been assumed with the adoption of the budget funding the various promises.

There are a few others exemptions to the 4-year balanced budget requirement:

“Section 1. (3) Subsection (1)(a) and (b) of this section does not apply to an appropriations bill that makes net reductions in general fund and related funds appropriations and is enacted between July 1st and February 15th of any fiscal year.

Section 1. (4) Subsection (1)(b) of this section does not apply in a fiscal biennium in which money is appropriated from the budget stabilization account.”

This means “early action” budgets like the one adopted last December or those that rely on appropriations from the constitutional budget reserve account do not need to comply with the 4-yr balanced budget requirements.

According to Section 1 (2)(a) of SB 6636, the revenue growth assumed for determining whether a budget balances over 4-years:

“. . .means the beginning general fund and related fund balances and any fiscal resources estimated for the general fund and related funds, adjusted for enacted legislation, and with forecasted revenues adjusted to the greater of (i) the official general fund and related funds revenue forecast for the ensuing biennium, or (ii) the official general fund and related funds forecast for the second fiscal year of the current fiscal biennium, increased by 4.5 percent for each fiscal year of the ensuing biennium;”

As noted by the State Economic and Revenue Forecast Council, Total Near General Fund revenue growth since FY1995 (through 2015 forecast) has averaged 3.34% a year. This includes two years of negative revenue growth in FY 09 & FY 10 (great recession impact). Excluding those poor fiscal years, revenue growth has averaged 4.49% per fiscal year.

Notwithstanding the various exemptions and the fact the 4-year balanced budget requirement is statutory and not constitutional, should SB 6636 survive the tinkering of future legislators, starting with the 2017-19 budget lawmakers will have to adopt spending (including basic education) that is projected to be sustainable over 4-years.


[Reprinted from the Washington Policy Center blog]