OLYMPIA — Tax collections are rising, giving Washington lawmakers billions of dollars more to spend, as the economy recovers from the covid lockdown faster than expected, the state’s chief economist, Steve Lerch, reported March 24.
Lerch forecast that general fund revenues will total $52.334 billion for the two-year budget cycle that ends June 30, a 13.6% increase over the previous biennium.
Looking farther ahead, the state can expect to collect $56.615 billion over the following two years, or an 8.2% increase, Lerch said.
The upbeat forecast means the state’s budget has returned to its pre-pandemic condition. “We’re kind of back to normal, I think,” said David Schumacher, the governor’s budget director.
Lerch’s presentation to budget committee leaders was a prelude to two-year spending plans that Senate and House Democrats are rolling out.
The revenue forecast did not include money coming to the state from the most-recent federal stimulus bill. Schumacher said the state will receive $4.2 billion over three years.
In addition to current revenues, Democrats are looking at new taxes, including a capital gains tax and a soda tax. Carbon taxes also are a potential source of more revenue.
Vancouver Sen. Lynda Wilson, the top-ranking Republican on the Ways and Means Committee, said the forecast suggests the Legislature can afford to cut taxes.
“I think this is unprecedented news that should quell the talk of the need for increasing taxes or creating new taxes,” she said.
Ways and Means Committee Chairwoman Christine Rolfes, D-Bainbridge Island, said the forecast was “great news.”
“It means the pandemic didn’t clobber us in terms of offering services,” she said.
Rolfes said the Legislature shouldn’t go on a spending spree or pass large tax cuts. “I think we’re on a steady course,” she said.
State budget officials feared last spring the coronavirus lockdown would slash tax collections and create a huge deficit.
Lerch attributed the better-than-expected rebound to the development of a vaccine and federal stimulus checks.
Personal incomes spiked, he said, and retail sales were higher than expected and real estate transactions, a major source of tax revenue, boomed.
“We are definitely looking at stronger revenue collections and a stronger economy than we had anticipated in November,” he said.
Congress made federal aid to states dependent on states not cutting taxes. Rolfes said her committee already has heard testimony on several bills proposing small tax cuts.
“We are now looking into whether we can do those kinds of bills,” she said.