Inslee to agency leaders: Money’s too tight for new programs

As Washington Gov. Jay Inslee fashions his last budget proposal, he’s told directors of state agencies to not ask for money for new programs or expansion of existing ones.

He wants them to tighten their spending as they deal with increasing demand for public services and rising costs to provide them.

Tax collections “will likely support the maintenance of current programs, but not growth,” David Schumacher, Inslee’s budget director, wrote agency leaders last month. Any funding request “should focus on continuing these programs” and only address caseload increases “while not expanding existing programs and services,” he wrote.

Three initiatives on the November ballot add further uncertainty as each threatens a source of dollars for state spending. Their passage “could negatively impact revenues that are collected, fund entitlement, and other programs and services,” Schumacher told them.

The June 3 letter concerns funding requests agencies hope Inslee will include in his proposed operating, capital and transportation budgets for the 2025-27 biennium. Requests are due Sept. 10. Inslee will put out his spending plans in December.

They will be the last of the Democrat governor ’s three-term tenure, and will serve as a starting point for lawmakers and the next governor, who will be drafting and passing new budgets in 2025.

Jaime Smith, Inslee’s executive director of communications, said the instructions “simply reflect the likely budget situation reflected in recent forecasts.”

“We continue to implement several big initiatives around things like behavioral health, housing, workforce and climate that are reflected in the maintenance level so we’d like to make sure we keep those going, and then we can assess any additional requests,” she said in an email.

Schumacher’s letter preceded by a few days the release of the June revenue forecast, containing the biggest drop in state tax collections since the pandemic.

Washington chief economist David Reich outlined a $477 million decline for the current budget, which runs through next June, with another $189 million dip expected in the next fiscal cycle. He said lower capital gains tax collections and less consumer spending are the primary reasons for the downturn since the last forecast came out in February.

Last month, Schumacher and legislative budget writers said the drop in revenues did not require any immediate response. The state’s $2.4 billion reserve fund can be tapped for funding gaps that might arise before spending plans are enacted next year, they said.

“I think (the budget instructions) were very wise. This is not a time to start programs,” Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee, said Thursday. “Revenue is very flat. We know the costs of maintaining what we have exceed the revenues coming in.”

In addition to inflation, there are a few unknowns certain to put pressure on budget writers. One, for example, is the price of new collective bargaining agreements the Inslee administration is now negotiating with more than a dozen public employee unions. Contracts approved two years ago cost a little more than a billion dollars.

Inslee will roll out his budget plans after two more forecasts come out – one in September, the other in November.

If the trajectory of revenue collections doesn’t change, “we’ve got some issues,” Robinson said.