Operating, Capital, and Transpo Budget Rollouts
It’s budget week here in Olympia! The time of year when both the House and Senate release their three budget proposals: capital, operating, and transportation.
Washington’s operating budget is our state’s largest source of funding for many of the programs and services families rely on every day. These funds are invested directly back into our communities to support all those who call our state home.
The capital budget generally provides funding support for buildings and physical infrastructure projects throughout the state. Those can include investments in affordable housing and shelter for families, broadband and water system upgrades, K-12 school improvements, and more.
The transportation budget provides funding to maintain Washington state’s transportation infrastructure, support jobs, and address key traffic and transportation problems that affect working families all over the state.
Over the past week and a half, the House and Senate budget teams have been rolling out their proposals. In the House, all three budgets were released on Monday, March 27. For details from the three House budgets, check out the recent press releases on the operating budget proposal, capital budget proposal, transportation budget proposal.
You can also watch the rollout press conferences for the House operating budget and transportation budget via TVW.
The Senate has also already released two of their budgets, rolling out their capital budget proposal on Monday, March 20 and releasing their operating budget proposal last Thursday, March 23. The Senate transportation budget is scheduled to be released later today.
The Economic and Revenue Forecast
Another key date in the budgeting process is the release of the state revenue forecast by the Economic and Revenue Forecast Council (ERFC). Each fiscal quarter, the ERFC adopts an official forecast of revenues for the current and the ensuing biennia. These
forecasts, together with any reserves left over from previous biennia, determine the financial
resources available to support the state budgets.
On Monday last week, the ERFC met to adopt a new state revenue forecast which showed a decrease in revenues from the November forecast. Dr. Lerch, the state economist, identified the major factors that drove the revenue forecast change as slightly lower Washington personal income, higher interest rates and lower real estate excise tax (REET) collections. In addition, he discussed risks impacting the forecast including impacts of recession, technology sector layoffs, banking turmoil, inflation, and the Ukraine- Russia conflict.
While the forecast is down, Washington state is still in a strong position, as we took a guarded approach in spending when our revenues were at a historic peak. That guarded approach was the correct one and we prioritized those families and communities hurting most, investing holistically and intentionally to ensure that children have food, families have a roof over their head, and communities have the supports to move on from the pandemic. Now, with less revenue than we had hoped, we’ll work to balance the budget responsibly and sustainably, while not forgetting about those most affected, especially low-income communities that suffer disproportionate impacts when budgets fail to invest in the people who need it most.
For more detail on last week’s state revenue forecast, watch the meeting on TVW.
Tax Policy to Support Critical Infrastructure and Vulnerable Communities
Two tax bills that have been approved by the House and are under consideration in the Senate would provide tax exemptions to stimulate critical broadband infrastructure, as well as provide tax relief to seniors, veterans, and those with disabilities.
House Bill 1711 provides a sales and use tax exemption for internet and telecommunications infrastructure projects involving a federally recognized Indian tribe. Internet connectivity is a challenge in rural areas and those issues have only been reinforced by the COVID-19 pandemic. If passed by the Legislature, broadband projects led by tribes would be further encouraged, advancing digital equity, supporting workforce development, and benefitting economic growth. The bill passed the House unanimously last week and has been referred to the Senate Ways & Means Committee.
House Bill 1355 provides property tax relief to more seniors, veterans, and those with disabilities. The bill expands eligibility for tax relief for these groups by increasing the calculation of income tax thresholds, accounting for the differences in property values and incomes and adjusts for inflation. It helps more people and prevents seniors from losing their benefit because of this year’s social security cost of living adjustment. The bill passed the House unanimously at the beginning of March and had a public hearing in the Senate Ways & Means Committee last week and was scheduled to be voted on in committee yesterday.
Revenues from the Climate Commitment Act
The House passed the Climate Commitment Act (CCA), landmark legislation to reduce carbon emissions and set Washington on a path to meet its statutory goal of net-zero emissions by 2050, in 2021. The new law establishes a cap and invest system that will steadily reduce carbon emissions and air pollution from Washington’s largest emitting sources and industries while investing in green infrastructure, multimodal transportation, and environmental justice.
For those unfamiliar, a cap and invest system sets an overall cap on greenhouse gas emissions with specific limits for individual businesses who must purchase credits for their allowed emissions, which they can then buy and sell. Businesses that emit fewer greenhouse gasses than their allotted credits can sell their credits to businesses that have not been able to reduce their emissions as quickly, allowing the economy to dynamically adapt while meeting the state’s overall carbon reduction goals. The overall pool of allowances will be steadily reduced to meet the state’s goal of net-zero emissions by 2050. As the pool of allowances is reduced over time, businesses will compete to buy allowances at auctions, generating revenue for the state.
The first Climate Commitment Act auction was held in February. The state sold more than 6 million allowances, with a total of around $300 million in revenues. Those funds will be invested into the Climate Emission Reduction Account for transportation projects that reduce carbon emissions and the Climate Investment Account for green infrastructure projects, projects that increase resilience in natural and working lands, and assistance for affected workers and low income people to transition to a clean energy economy.
Learn more about the Climate Commitment Act from the Department of Ecology.
I hope you found this quick update informative and useful.
I’ll continue to update you on our progress in the House Finance Committee as the 2023 legislative session continues, so look out for more Finance newsletters coming soon!
Sincerely,
Rep. April Berg