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Inside Olympia – Budget and Economy

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On this week’s episode we explore the state supplemental budget with Democratic Senate Ways & Means Committee Chair Christine Rolfes, and the ranking Republican on the committee, Sen. Lynda Wilson. Plus, we discuss the state of the state economy with Washington’s economic forecaster, Steve Lerch.

In most years, the supplemental budget is a “tune-up” budget that happens in the middle year of the biennium, when legislators tweak the two-year budget written a year earlier. But this year, the supplemental budget includes more significant decisions, largely because billions in unexpected revenue have flowed into state coffers during the past year.

What to do with this extra cash? Democrats have focused on strategic spending, and Sen. Rolfes outlined priorities like helping small businesses, helping low-income people with rent and utility payments, and helping seniors stay in their homes without exhausting their social security benefits. Republicans want more tax relief, and Sen. Wilson spoke on some of those ideas, for instance a $250k “homestead exemption” on property taxes.

Democrats control both House and Senate, and must work out differences between their two spending plans before the end of the legislative session on March 10.

Lerch heads up the state’s Economic and Revenue Forecast Council, which just recently released the latest quarterly revenue forecast — which showed $1.45 billion in new revenue coming to the state in the current biennium.

When COVID hit, there were worries revenue would tank, but instead it has exploded. Why? Lerch says COVID changed consumers’ spending habits — instead of spending their money on services, people switched to buying durable consumer goods, cars, bikes, TVs, furniture. These spending habits mean more tax revenue to the state. Lerch said he expects consumer spending trends, and state revenue growth, to return to a more normal pattern of slower, lower growth.

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