eye on business
A Time of Plenty
Kris Johnson , AWB President
Nearly two years into the worst global pandemic in a century , it ’ s amazing to think that one of the top challenges facing lawmakers in the 2022 legislative session is figuring out what to do with all the money flowing into the state treasury .
And yet that ’ s exactly where they find themselves in this unusual and challenging time .
Rather than facing a huge budget shortfall and looking for ways to close a multi-billion dollar deficit ( as was the case during the Great Recession ), state Legislatures throughout the country are experiencing a period of unprecedented plenty .
In Minnesota , the state reported a historic $ 7.75 billion budget surplus . Idaho ’ s fiscal 2021 tax revenues came in 24 % higher than the prior year ’ s , making it the single largest revenue growth year in state history . California is expecting to carry a $ 31 billion surplus into its 2022-23 budget . Those are just a few examples of what ’ s playing out in statehouses across the country .
Washington is no exception . As of the most recent revenue forecast in November , lawmakers here had more than $ 7.3 billion extra to work with through 2025 than they were expecting when they adjourned the 2021 session last spring — and things were looking pretty good even then . That revenue combined with a nearly $ 650 million drop in the caseload forecast means the state ’ s four-year outlook shows more than $ 8.6 billion in unrestricted reserves .
The temptation will be to spend it all on new programs . We ’ ve already heard lawmakers acknowledge that while the state has a lot of money , it also has a lot of need . That ’ s true , but it would be a mistake to spend all of the surplus on new programs . New programs may sound great now , but they will present a problem during the next downturn when lawmakers will be forced to choose between cutting the programs or raising taxes to keep them going .
So , rather than find new ways to spend all of the state ’ s surplus , lawmakers would be wise to make one-time expenditures to boost the economy , rebuild reserves to ensure Washington is prepared for the next economic downturn , and look for ways to help employers and families that are still struggling to recover from the pandemic . It ’ s time to reduce the burden on employers and invest in job creation .
Although the pandemic has yet to cause serious budget problems for state governments , this remains a highly volatile and
unpredictable time where the world is one new variant away from another economic downturn . Even if that doesn ’ t happen , it ’ s hard to see how this level of growth is sustainable .
In addition to rebuilding reserves , lawmakers can make smart one-time expenditures on infrastructure and capital projects , expenditures that will help the economy without obligating future spending .
Finally , this time of plenty creates an opportunity to help those who need it most . Even though state government and some parts of the economy are not facing a crisis , the good times are by no means universal . Some employers and families hardest hit by the pandemic downturn have yet to fully recover , and everyone is experiencing rising costs due to inflation and the recent taxing spree .
In the last three legislative sessions , lawmakers raised 22 taxes that will generate $ 40 billion in revenue over 10 years , even though none of it was needed to balance the budget . If nothing else , the extraordinary revenue should bring an end to the Legislature ’ s three-year run of raising taxes .
Last year , employers needed lawmakers to focus on economic recovery and — at the very least — do no harm . Instead , they adopted a capital gains tax , a carbon tax and new fuel standards that will make it more expensive to live and do business in Washington without doing much to help the environment .
This year , they have another chance to become champions for the economy . Let ’ s hope they take it . winter 2022 13