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Washington state Governor-elect Bob Ferguson has proposed reducing spending by $4 billion as a strong first step to the state's budgeting process, setting a tone Washington businesses and residents haven't witnessed in the past 12 years under outgoing Gov. Jay Inslee.
Ferguson's skepticism about a wealth tax proposed by Inslee also appears to be encouraging, as his unwillingness to concede that more new taxes will be needed to address a projected smaller increase in revenue for the state than earlier expected.
At a recent press conference, Ferguson said, "If you're a family, and a bread winner loses a job or gets a pay cut, you have to make choices with your budget. That's just the way the real world works."
We don't know whether to say "amen" or "finally."
As the state Legislature convened earlier this week, however, some lawmakers already were talking about the need to raise taxes. Some made the faulty leap in logic that the failure of Initiative 2117, which would have repealed the Climate Commitment Act, is indicative that voters would prefer the state raise taxes rather than cut spending. It's hard to know where to begin on addressing the magical thinking involved in such a notion, so suffice it to say, no, the initiative's failure isn't an invitation to put a greater burden on the state's businesses and citizens.
To be clear, the state has a spending problem, not a revenue problem. We've said it. The Association of Washington Business has said it. Others in the private sector have rung that bell. For years.
Now, Governor-elect Ferguson's proposal for across-the-board 6% reductions in spending requests appears to be on the mark, or at a minimum, a good start.
Because while the state is casting the issue as a $12 billion budget shortfall, state revenues are rising. Taxes on businesses already are increasing, and in some cases, they're doing so at a greater rate than inflation. The rampant spending by the state is simply increasing at a far greater rate than those revenues.
We've discussed these numbers before, and we'll do so again.
Lawmakers chose to increase spending by 16% in the 2023-25 biennium at a time when revenue was expected to increase by 3%. And now they are going into the 2025 legislative session with an anticipated $5.1 billion-plus shortfall in what agencies think they need in the next two-year state budget, and as much as $12 billion over the four-year outlook.
While the state's revenue isn't expected to be as high as previously thought in the 2025-27 and 2027-29 biennia, revenue is still expected to increase. Current state projections call for $71.43 billion in revenue in 2025-27 and $76.85 billion in the following biennium. Those are increases of 7.6% each biennium, or roughly 3.8% a year. The latest U.S. Bureau of Labor Statistics data places the current inflation rate at 2.6%. That means that if that rate of economic growth holds steady and the state's revenue forecast doesn't change, the state's budget will expand annually at more than a percentage point greater than inflation as a whole.
In this environment, Ferguson is providing a voice of reason. We hope he holds strong to it and that the Legislature discovers moderation, because at some point, the state must break this cycle of taxing its way out of irresponsible behavior.