Astonishingly, a year after suffering through retail shutdowns, failures and record unemployment due to the COVID-19 pandemic, state finances are in great shape.
April Fool’s Day was last week. This is for real.
Despite numerous tax proposals under consideration by the state Legislature in its last two weeks of the 2021 Session, members already have “an exceptionally firm foundation” from existing revenues to adopt a 2021-23 operating budget, a new Washington Research Council policy brief concludes. Put simply, that means that no new taxes are necessary or advisable for next year or the next three after that.
Regardless, Washington Retail has been hard at work fending off a handful of onerous tax proposals from lawmakers who are comfortable taxing personal wealth, car parts purchases, soft drink and retirement savings from the sale of assets including family businesses. The legality of the last idea isn’t even certain, which is a queasy prospect for many lawmakers.
“Billions of dollars have also been appropriated by the federal government over the past year for COVID relief in Washington,” the brief notes. “Raising their taxes to fund relief would be counterproductive.”
The council’s financial analysis concludes that existing state revenues without tax increases are expected to match the pre-pandemic February 2020 revenue forecast. Revenues for 2019-21 are expected to increase 13.6% over 2017-19 and by 8.2% in 2021-23.
The recovery that’s underway is a tribute not only to massive federal aid, but also to retailers who have kept their stores open safely and shoppers who have maintained strong spending levels. In the past year, unemployment has plummeted from nearly 16% at the height of the pandemic to 5.6% this past February.
The latest state revenue forecast means that the current operating budget not only projects to balance over the next four years. It results in a substantial ending fund balance of nearly $3 billion. The brief concludes that the state’s budget stabilization account, or rainy-day savings fund, is projected to be nearly $2.4 billion at the end of 2021-23.
Though billions of dollars of federal aid have poured into the state, they’re temporary. Like any other state, Washington State is expected to support itself without long-standing bailouts. An estimated $11 billion in additional federal aid to Washington is contemplated from President Biden’s latest recovery package proposal for governments and schools. Still, as of February, the state remained 232,000 short of the number of available jobs compared to last year.
Though the recovery is incomplete, an end to emergency federal funding would not leave state finances vulnerable as long as legislators refrained from using federal relief money to begin new, ongoing programs, the brief concludes.
The pending legislative mandate for this Session should be focused and clear: fostering continued economic recovery and job creation, not imposing further tax burdens or creating unsustainable new programs heaped atop a flush state budget.