GOVERNOR INSLEE’S PROPOSED 2015−17

BUDGETWSSDA – WASA – WASBO

Legislative Conference

March 1, 2015

Our budget needs & obligationsfar exceed revenue projections

PROJECTEDREVENUE GROWTH

MAINTAIN SERVICESAT CURRENT LEVELS

POLICYOBLIGATION

S&

LAWSUITS

BASIC EDUCATION OBLIGATION(HB 2776)

2

2015−17 BUDGET SOLUTION(INCLUDING I-1351)

I-1351 Phase-in$1.55B

Net Revenue Increase$1.42B

Budget Stabilization Account$450M

Cuts and Savings $423M

Fund Transfers$217M

3

Under the Governor’s budget …

Our schoolswill be

stronger

Our air will becleaner

Our kidswill be

healthier

Our tax systemwill befairer

4

Education» Largest-ever state investment in early learning

» Increases basic education funding by $1.3 billion:› Reduce K-3 class sizes to 17 ($448 million)› Implement full-day kindergarten statewide in 2016−17 ($108 million)› Fully fund MSOC in 2015−16 ($752 million)

» Promotes student success, higher graduation rates

($87 million)

» Funds first teacher COLA since 2008

» Freezes tuition and boosts financial aid5

HB 2776 fully implemented in second year of biennium

6

Health & human services

» Adds community beds for psychiatric patients

» Funds civil admission and competency restoration wards at Western State Hospital

» Adds Child Protective Services staff to reduce caseloads and speed up responses

» Adds child and family welfare services workers to ensure safety of foster children

» Increases reimbursements to foster parents

7

Natural resources

» Enhances State Parks operations and maintenance

» Implements carbon pollution reduction program

» Increases oil spill prevention and response

» Boosts efforts to prevent toxics in our waters

8

State employee compensation

» Funds 28 collective bargaining agreements negotiated under state law

» Funds modest pay raises for most state employees − 3% and 1.8%

» First general wage increase since 2008

» Total cost (including non-represented employees) − $440 million NGF-S

9

Revenue collections are at historically low levels when compared to overall economy

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Fiscal Year

General Fund-State revenue as percentage of Washington personal income

Projected

Washington State Economic and Revenue Forecast Council, September 2013

› In 1990, GF-S revenue equaled about 7% of total personal income.

› If the same were true today, we would have about $15 billion in additional revenue for current biennium.

10

Alaska

North D

akota

New York

Wyoming

Vermon

tMain

e

New Je

rsey

Minnes

ota

Wiscon

sin

West V

irginia

Californ

ia

Conne

cticu

t

Hawaii

Rhode

Islan

d

Delaware

Illinois Iow

aOhio

Penns

ylvan

ia

Nebras

ka

Massa

chus

etts

Kansa

s

Michiga

n

New M

exico

Indian

a

Arkans

as

Kentuc

ky

Nevad

a

Marylan

d

Colorad

o

Oregon

North C

arolina

Mississ

ippiUtah

WASHINGTON

Montan

a

Louis

iana

Arizon

aTex

asIda

ho

New H

amps

hire

Georgi

a

South

Carolina

Florida

Virginia

Oklaho

ma

Missou

ri

Alabam

a

Tenne

ssee

South

Dakota

$50

$70

$90

$110

$130

$150

$170

$190

$210

$230

In 1995, Washington ranked 11th in state and local tax collections … By 2011, we ranked 35th

State and Local Tax Collections Per $1,000 Personal IncomeFiscal Year 2011

Washington $98.95

Source: Bureau of Economic Analysis and Census BureauU.S. Department of Commerce

U.S. Average = $108.31

11

Governor’s revenue package

» Impose 7% tax on capital gains above $25,000 for

individuals, $50,000 for couples ($798 million)

» Increase state cigarette tax by 50 cents per pack;

start taxing e-cigarettes/vapor products ($56 million)

» Repeal 5 tax breaks ($282 million)

» Use portion of new revenue generated by market-

based carbon pollution reduction plan ($380 million)

» Reinstate or extend 8 tax breaks, including B&O

credit on research and development

12