Chief economist Steve Lerch ignited their optimism Tuesday morning with a forecast showing tax collections outpacing previous predictions for both the two-year budget expiring June 30 and the new one starting up the next day.
Overall, collections will be $231 million higher than Lerch forecast in March — $110 million for the current budget plus another $121 million for the next.
On top of those new dollars, lawmakers learned Tuesday the state will spend $90 million less than expected on public services because of a drop in demand for them.
The bump in revenues coupled with the savings may enable the House and Senate to strike a deal to erase a projected billion-dollar budget shortfall, satisfy a Supreme Court order to beef up public school funding, establish an adequate reserve and resolve several policy differences.
"It’s over $300 million of good news that we’ll have today which definitely closes the gap," said David Schumacher, budget director for Gov. Jay Inslee on Tuesday. "Shake hands tonight? I would be surprised that we can get that far tonight. Hopefully by the end of the week there’ll be a budget deal."
House and Senate budget writers echoed the sentiment.
"I expect us to negotiate a budget relatively soon," said Rep. Ross Hunter, D-Medina, chairman of the House Appropriations Committee and the chamber’s lead budget writer.
His Senate counterpart, Republican Sen. Andy Hill of Redmond said Tuesday’s reports "should break the final logjams."
But preparations will continue for a potential powering down of state government if no budget is in place by July 1 when the new fiscal year begins. Layoff notices could start going out Monday to some of the roughly 59,000 state workers, he said
"We’ll continue along until there’s a deal but I fully expect there will be a deal and at some point we’ll be able to stop," Schumacher said of the contingency planning.
Lawmakers are entering the second week of their second special session still searching for the political sweet spot to end the discord between the Democrat-controlled House and the Majority Coalition Caucus in the Senate comprised of 23 Republicans and two Democrats.
On the budget, they’ve labored on how to erase a projected $1 billion shortfall and at the same time inject as much as $1 billion more into schools in response to the Supreme Court rulling in 2012 called the McCleary decision which found the Legislature failing to adequately fund public education.
From the outset, House Democrats have pushed for new streams of tax dollars by ending exemptions, extending temporary taxes and adopting new ones.
What began as a $1.3 billion revenue package is down to two items to raise roughly $135 million — revising tax laws governing the telecommunications industry and ending a long-standing exemption allowing out-of-state residents to skip paying sales tax if the state they live in, like Oregon, doesn’t have a sales tax.
In the Senate, the Republican-run majority has insisted on reforms before revenue. They had a laundry list in excess of 30 bills entering the first extra session. It’s now down to two — an omnibus package of reforms for public schools and an expansion of eligibility for structured settlements under the worker’s compensation program.
On Tuesday, the leaders of the Senate coalition said they’ll back off the reforms if Democrats back off the revenue.
"We’ll put those reforms off the table for now and wrap this thing up," said Senate Majority Leader Rodney Tom, D-Medina, who joined the Republicans last year to form the coalition caucus. "We’ll continue those discussions next year."
Last week, the Senate did approve an estate tax bill considered a legislative fix in response to a Supreme Court ruling. The decision saved $160 million for the budget plan lawmakers are currently trying to reach agreement on.
Coalition members figure that’s all they need to do because the new forecasts provide enough money to cover what House Democrats hoped to raise with their remaining tax bills.
But that’s a point of contention as Democrats argue money raised from ending tax exemptions is needed for education.
"This is good news, of course," House Majority Leader Pat Sullivan, D-Covington said of the forecasts. "While it may move us closer to a short-term budget agreement, it doesn’t come anywhere near meeting our obligation to fully fund basic education under the McCleary decision."
Sen. Jim Hargrove, D-Hoquiam, the lead budget writer for the Senate minority, sounded ready Tuesday to end the conversation on taxes if it enables a speedy finish.
"I want to get done," he said. "It’s been a grueling session. I think the citizens want us to get done, too, so I think it’s time to wrap it up."
Jerry Cornfield: 360-352-8623; email@example.com
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