Lawmakers need to re-examine budget before adjourning

Lawmakers need to re-examine budget before adjourning

Before lawmakers wrap-up their work in Olympia, they should re-examine their hefty new state spending plan. The budget may not be sustainable even with a substantial increase in taxes. It may force legislators to return to the State Capitol to cut workers, programs and services; or, even hike taxes yet again.

It has happened in the past.

For example, in the early 1980s, Gov. John Spellman (R) and a Republican legislature were forced to meet in special session continuously to deal with rapidly dropping revenues. They had to raise existing taxes and add new ones to bail out the inflated budget.

In 1979 before leaving office, Gov. Dixy Lee Ray (D) and Democrat legislators insisted on implementing statewide funding for basic education ahead of schedule. There was added revenue coming from a prosperous economy, but the economy quickly tanked a year later.

State spending jumps by 18 percent ($8.150 billion) over the next two years and $1.4 billion in new taxes are required to balance it. This increase comes on top of a nearly 17 percent hike in the current budget.

The new $52.6 billion budget requires a new 9.9 percent “extraordinary profits” capital gains tax, a two-thirds increased business and occupation taxes on service-sector employers, with an even higher rate on large tech companies, and a graduated real-estate excise tax.

Critics say the spending plan for the next two years is too high and existing revenues provide plenty of money to meet state services. They point to the most recent state Economic and Revenue Forecast Council report which found the state should collect $307 million more in the rest of the current two-year budget, and an additional $553.5 million in 2019-21; the budget legislators are tackling during this session.

The new expenditure plan is also based on unusually long period of economic prosperity. One of the brightest segment has been aerospace led by Boeing

An updated study by Aerospace Works for Washington, a coalition of business and elected officials, shows Washington’s aerospace industry is responsible for more than 83,000 direct jobs, 224,000 total jobs and total revenue of $94.4 billion. That’s 10 percent of the state’s economy.

AWW estimated in 2018, the aerospace industry made estimated direct tax payments — including B&O, sales & use and other tax categories — of $192.3 million. The total fiscal impact of the aerospace industry, including taxes paid by businesses associated with aerospace through indirect and induced impacts, summed to an estimated $567.1 million last year.

Unfortunately, there are signs the economy is weakening and the AWW study was completed before the 737 Max 8 crashes in Indonesia and Ethiopia and the subsequent grounding of all Max aircraft until software and sensor equipment is modified.

That grounding is having a dramatic impact of Boeing’s production at the Renton plant. It is expected to be extremely costly. Already, 737 output has been reduced to 2014 levels dropping from 52 planes per month to 42. The financial impact will trickle down to state and local revenue collections.

While Boeing engineers are working feverishly to make modifications and get approval from the Federal Aviation Administration and other government regulators across the world, the company sales team is attempting to prevent order cancelations and additional delays. No one knows how much it will cost or when the Max will go back into service.

Before heading home later this month, lawmakers should do an 11th hour reassessment of the budget and the revenues which they plan to balance the new budget. It would be better to adjust it now, rather than later in special session.

Don C. Brunell is a business analyst, writer and columnist. He recently retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.


Talk to us

Please share your story tips by emailing editor@covingtonreporter.com.

To share your opinion for publication, submit a letter through our website https://www.covingtonreporter.com/submit-letter/. Include your name, address and daytime phone number. (We’ll only publish your name and hometown.) Please keep letters to 300 words or less.

More in Business

Screenshot
WA Democrats consider new tax on billionaires

Plan could raise $5 billion from fewer than 100 taxpayers. Detractors fear it could drive Washington’s wealthiest out of state.

Last summer, people took advantage of the outdoor dining along First Avenue between Gowe and Titus streets in downtown Kent. In Phase 2 of the governor’s reopening plan, which was announced Jan. 28, restaurants can reopen at a maximum 25% capacity and a limit of six people per table. Photo courtesy of Kent Downtown Partnership
Restaurant reprieve: State to relax some indoor restrictions

On Monday, area restaurants and certain entertainment venues may resume indoor service, the governor said.

Stock photo
State Senate passes $1.7 billion in unemployment insurance tax relief

Targets relief to the most affected businesses; helps low-wage workers by raising their benefits

2021 Chevrolet Blazer. Courtesy photo
Car review: 2021 Chevrolet Blazer

By Larry Lark, contributor When it comes to certain car models they… Continue reading

2021 Lexus RX 350L. Courtesy photo
Car review: 2021 Lexus RX 350L

By Larry Lark, contributor It’s always a good day when a Lexus… Continue reading

The Cadillac CT4 is designed to appeal to a new generation of Cadillac buyers with its athletic design and astute driving dynamics. Courtesy photo
Car review: 2020 Cadillac CT4 Premium Luxury

By Larry Lark, contributor With apologies to Oldsmobile, “the 2020 CT4 Premium… Continue reading

2021 Mercedes E-350 luxury sedan. Courtesy photo
Car review: 2021 Mercedes E-350 luxury sedan

By Larry Lark, contributor Mercedes-Benz occupies rarified air in the automobile pantheon.… Continue reading

2021 Ford F-150 Platinum. Courtesy photo
Car review: 2021 Ford F-150 Platinum

By Larry Lark, contributor It’s always a call to action when a… Continue reading

737 MAX 7 Reveal - February 5, 2018. File photo
Boeing fined $2.5 billion for deceiving aircraft safety regulators

The Boeing Company has agreed to pay the Department of Justice over… Continue reading

Stock photo
State Department of Commerce awards grants to more than 7,800 small businesses

Newest $100 million grant round prioritized restaurants, fitness centers