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Washington state budget outlook forecasts shortfall for next 4 years

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OLYMPIA, Washington — Washington state lawmakers are facing a projected budget gap of more than $2 billion for the next two-year budget ending in mid-2017, in large part due to a new voter-approved initiative to shrink class sizes, according to a state budget outlook released Wednesday.

That projected shortfall does not include half of the expected financial obligation needed to increase funding for education as directed by the state Supreme Court, nor does it count the additional amount needed if collective bargaining agreements with state workers are approved.

A four-year outlook released by the Washington state Economic and Revenue Forecast Council showed that the projected shortfall for the following biennium ending in 2019 would be even larger, at $4.7 billion. If lawmakers use funds from emergency accounts and other transfers, that gap drops to about $1.2 billion for the next biennium, and about $3 billion for the one after that.

The cost of Initiative 1351, which was approved by voters earlier this month, is expected to be about $2 billion through the middle of 2017, and nearly $2.7 billion through the middle of 2019.

"I think we have a significant problem here," said Democratic state Rep. Ross Hunter, chairman of the Revenue Forecast Council and the top budget writer in the House. "We have some work to do."

But Hunter cautioned that it's not so easy to just suspend the initiative, as lawmakers have done in the past with other costly measures. Under Washington law, voter-approved initiatives cannot be amended within two years after passage unless lawmakers approve it by a two-thirds vote in both chambers.

"There's typically a lot of reluctance to change those," he said. "The question is, are there two-thirds in the Legislature to make a change to it? It's hard to get two-thirds of the Legislature to agree to when we take a lunch break."

The outlook was released along with the state's updated revenue forecast for Washington state's current two-year $34 billion budget cycle, which showed that income projection increased by $115 million since September's forecast for the current biennium that ends next summer. It also showed an increase of $275 million for the next two-year budget cycle that begins July 1.

The projected overall state budget for 2017-19 is expected to be $37 billion.

Gov. Jay Inslee is preparing a two-year budget proposal to be released next month. Lawmakers will return to Olympia in January, and the House and Senate will each present budget proposals during the 105-day legislative session. However, many anticipate special sessions because of the challenges presented by a state Supreme Court contempt order over lawmakers' lack of progress on fixing the way the state pays for public education.

The court has promised to reconvene and impose sanctions and other remedial measures if lawmakers do not make plans to solve the problem by the end of next year's session.

The high court initially ruled in 2012 that lawmakers were not meeting their constitutional responsibility to fully pay for basic education and that they are relying too much on local tax-levy dollars to balance the education budget. The court gave the Legislature until the 2017-18 school year to fix the problem. It found the Legislature in contempt in September.

Republican Sen. Andy Hill, a member of the council and lead budget writer in his chamber, said that taxes should not be lawmakers' first response to solve the budget problem, "they should be the absolute last one."

"My point of view on raising revenue is, I'm the kind of guy, who with toothpaste, I squeeze the tube as absolutely empty as I can get it, and then I cut it open and scrape out the rest. And then I go and buy a new tube of toothpaste," he said. "That's the way I would approach budgeting this year."

Hunter said that he agreed that taxes should not be the first thing considered, but in response to Hill's toothpaste analogy, he said "I think we've squeezed the tube pretty dry."

"I have not seen a practical solution to an entire budget that doesn't involve some significant additional revenue."

The next revenue forecast will be released in March.

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