Oh, you're so scary with your big brain around
these stupid rules, Brian. Way to go. I mean.
Welcome to County Connection. the official podcast
of the Washington State Association of Counties,
where we dive into the legislative issues shaping
the future of our communities. From budgets to
public safety, infrastructure to elections, we'll
break down what's happening in Olympia and how
it impacts counties from across the Evergreen
State. Stay informed, stay engaged, and join
us as we amplify the voice of Washington's 39
counties. Welcome back, everybody, to the County
Connection podcast. Probably the last podcast,
believe it or not, of the 2026 legislative session.
The budgets are in, folks. The final versions
of the budgets are in, which means, drumroll
please, I've got Brian Enslow back here with
me in the studio to kind of do a wrap -up. Not
kind of. We're actually going to do a wrap -up
of what is in the state supplemental budgets
as we move forward for the last half of this
biennial. biannual legislative session and biannual
year. It is the end of, I don't know why I keep
saying the second half of the biannual legislative
session. It is the end. Today is the end, Brian.
It is sine die. Yes, sir. I thought for a second
maybe you had like an inside joke or drinking
game. No, I wish I did. Like every time he says
biennial. Yeah, well, I've got a seltzer here.
Every time we say biennial, drink. There you
go. I've got a mint tea. We're just two crazy
guys here talking budgets on Sine Dies. This
is not the frat house that we came from. No,
no. Not at all. My back hurts. We're not here
to talk about your medical ailments, Brian. No,
I'm just saying. You're making me feel like I'm
having dinner with my parents. Come on now. So
at the time we're recording this, it is 3 o 'clock
on Sine Day. Sine Day? Sine Die. Or even perhaps
more sophisticated, C -N -I -D -A? We could say
that. For the Latin at heart, which means...
Without day. It does. Exactly. I looked that
up the other day. Yeah. It's exactly what it
means. Way to go. I've been saying that in the
podcast a couple of times and people just give
me a puzzled look like, what are you talking
about? Yeah. And it's because, so when you adjourn
from the, when you end a floor session. You're
nailing this, man. When you end a floor session,
you have to actually identify what day you're
going to next meet. And then of course, but on
Sinead Eye. You don't, you don't, you are without
day because you're not coming back. You're not
coming back. I mean, you are eventually, but
it'll be a new legislative session. Correct.
So at the end, this legislation, legislative
session, essentially they will adjourn. By the
way, drink your tea. We said it a couple of times.
They will adjourn without day, without any further
determined day that they're going to meet. So
it's the end. Yeah. Yeah. It's perfect. And we
great job on that explanation. Yeah. We think
they're getting done. I think they're getting
done. I mean, whether it's 1159 or yeah, it doesn't
matter how late it has to go. They're going to
get done. Yeah. Yeah. There's no, I have to say
for one person, I'm glad I'm so glad they're
getting done. I'm, I'm wore out. How do you feel?
Um, I'm ready for a little, a little, a little
time away from, you know, away from, I live in
Olympia. It's like, well, actually I live in
the County. I live in Thurston County. I live
in Thurston County. I'm an Olympia adjacent.
So I'm not going to get away away. But once you
get a mile away from that sundial that's on the
center of campus there, it's a different mindset.
And I'm looking forward to spending a little
bit of time away. Well, as you know, I live on
the other side. And I don't care what the weather
is doing. It's trying to keep me from going over
that. For sure. I don't know if you've been paying
attention. I'm surprised we're not doing this
on Zoom. I'm surprised you're not already over
there. Well, I keep getting all the wash dot
updates on my phone. That's all the buzzing.
It's like every 30 seconds there's another. I
bet Mitch is loving that. Oh, yeah. There's another
wreck and another, you know, westbound's closed.
Now eastbound's closed. Now westbound's open.
Now eastbound's open. Now eastbound's closed
again. It's been doing that for two days. But
thankfully, actually, we need this. snow up there
but i'm telling you i'm i'm putting that f -150
in four -wheel drive and there's nothing that's
stopping me from getting back over uh to a little
r &r on the east side of the state after this
session that's for sure and by f -150 he means
like a Early 90s B2600 Mazda in powder blue.
Ford pickup truck. It's white. It's not powder
blue. Just in case you're wondering, members,
he does not have an American pickup truck. I
do, too. What are you talking about? All right.
Well, let's lay it out here. You know, we talked
about at great lengths really just a couple of
weeks ago the supplemental budget. proposals
that came out from the House and the Senate,
right? And before that, we talked about the governor's
proposal and kind of what to expect and what
we thought would be happening in... you know,
in the future. And here we are. We are at the
future. We have the conference committee report.
Those were issued yesterday. You can go see those
on TVW. The documents for the budgets are all
online. You can read any of this that you want
to. Or you can just be like the cool kids and
listen to this podcast and you'll know everything
you need to know by the time we're out of here.
Yeah. So let's break it down. Don't go online.
Don't go on fiscal law. Don't do that. Don't
look on the three -way comparison reports. Yeah,
it's totally boring. This is a labor -friendly
state. That's my scope of work. Do not impede
on my scope of work. Do not do that on your own.
Oh, man, you're starting to sound like, well,
I'm not even going to say. All right, let's break
it down. You want to start with the operating
budget or you want to talk about the capital
budget? Whoa. I mean, the capital budget's only
there to serve the operating budget. And you
can't really talk about one without the other
eventually. So let's talk about the operating
budget. All right, let's start there. Okay. So
we had a proposal from the governor, right? We
had an operating budget that was right around,
I think, $77, $78 million. We had the House come
in at $79 .9. We had the Senate come in at $80
.2. And the final version, or $80 .1 maybe, and
the final version actually was high. than both
the senate and the house versions just slightly
higher came in at 80 .2 billion dollars yes why
why was it higher do you think just things changed
with the revenue forecasts or uh they got uh
you know they found a little bit of money here
and there well certainly the proposals were higher
than the governor's proposal because because
they had both an additional corresponding revenue.
So they had, you know, 900 million extra, but
they also had increased caseloads. So they did
have, um, they, you know, they had, um, a little
bit more money to spend, but they also had a
little bit more obligation to cover in the maintenance
level. So, um, but, uh, how did, you know, how
did you come to a number between the house and
Senate that was even more than the highest bookend
right than either proposal well you know a lot
of that is the um there were um a few transfers
here and there that weren't assumed in like both
budgets yeah so i know so when they combine the
budgets they kind of took all the transfers right
um they made um they have a lower ending fund
balance so they kind of took less you know there's
fewer dollars in the in the cash account yeah
it's only like 200 million that's interesting
that you say that because i didn't actually get
a chance to look at that as far as my prep for
this but i i did look at what their ending fund
balance was in this budget and it does seem like
it's lower than either one of the previous proposals
yeah that's my you know it's it's only it's like
230 million and so they're taking a little bit
more out than maybe of reserves or or their you
know Traditionally, before you had the budget
stabilization account, I think there was a general
consensus that anything less than $500 million
was not irresponsible, but getting a little dicey.
I think the fact that they still, depending on
where you are in the four -year outlook, have
a fairly healthy amount in the budget stabilization,
I think that made them a little bit more comfortable
to just take their... unrestricted cash reserves.
What you and I would think is current expense
or household would just think you're checking
account. Yeah. Okay. Interesting. It looked like
the other thing that kind of struck me as I was
going through it, just kind of broad stroke,
it looked like they followed more of the Senate's
proposals, you know, kind of on a line item per
line item than the House's proposals. You know,
that was, so I think it's, you know, We are the
number one Washington State County government
podcast, and I think probably local government
podcast. You're making me blush again, Brian.
I mean, come on. There's no proof of that. So
I think it's always important to... But I think
it's true. Yeah. I think it's always important
to caveat that we have a bias and a lens. That's
true. Right, because we're not in the nitty gritty
of the K -12. Right. But with respect to... What
I would say the overall architecture and also
just the specific components of the budget that
we care about. That was my sense, too, is that
the Senate prevailed. Yeah, very much so. I kind
of went through the broad strokes on the agency
detail in the. The document that gives you the
three different versions, right? The House version,
the Senate version, and the conference committee
version. And, you know, not in every case, but
broad strokes, it looked like the Senate version
really did prevail. Yeah, and some of that I
wouldn't say isn't fair about to suggest like
a... like who in the arm wrestling contest who
won. But if you're going to spend more resources,
and some of the differences that we were thinking
about or focusing on were like the Senate had
$300 million more to spend. So when you're saying,
oh, they moved to the Senate, and we just said
the final budget spent $400 million more than
the House. So in a lot of cases what we saw were
cuts that were taken in the House because they
were assuming fewer dollars. Yeah. And so they
moved to the Senate position, which was to not
cut. So, for instance, just local the in commerce,
there was eight million dollar or so cut for
climate grants not taken in the Senate. Yeah,
right. So to say that they moved to the Senate
position or the Senate prevailed. And not taken
in the conference committee bill either. Yeah.
So I guess my point is, it's like some of that
perception is. There were cuts in the House and
not there were more cuts in the House's original
proposal because they use fewer resources. The
Senate had more resources, use fewer cuts. So
then when I was just kind of looking through
the horse train, like, oh, they took the Senate
position, they took the Senate. But really, they
just spent more money. Yeah. And they didn't
have to take cuts that were assumed in the House
position. Well, and there were some big items.
It's interesting that you mentioned that because
broad strokes, you know, you kind of look at
it on its face and you go, OK, you know, they
really did kind of defer to the Senate. But then
there's some other really big pieces that we're
going to get into. Right. That public works assistance
account, for instance, that they did take the
Senate version of that. Right. But. Well, no.
What? We can just do it right now. Well, wait
a minute. Wait a minute. I thought they did,
but maybe they didn't. Let's talk about that.
But then you've got the budget stabilization
amount, the budget stabilization account amount,
the transfer in, which they took the house version,
right? And they did the payback according to
the house version. So there were some other big...
Which would make sense if you take... It'd be
a little bit disingenuous if they took... But
yeah. Yeah, yeah, yeah. But on the public works
transfer... I guess maybe it was a bit of a hybrid
version. So, yeah, yeah, yeah. And then there's
what you called the triple bank shot, right?
Which is a different bank shot now. It is a different
bank shot. And it's more. It is more. It's more.
And it's more complicated. Ladies and gentlemen,
new and improved. Now with more bank, now with
more masse. Yeah, and I'm eager to talk about
that. But that was a House proposal, right, for
the most part. It didn't come out in exactly
the same fashion. Incorrect. What? It was a Senate
and House proposal last time. It was just described
in the House summary, so you could actually see
it easier, but it was not described in the Senate.
Really? I didn't think it was a dual proposal
in the last version. I thought the Senate version...
I could be wrong, but I think it was in both.
Okay, I remember it being very well described
on the House side. It was well described in the
House. Okay. In the House summary. Well, this
is why you're here, Brian, because... I believe
it was included in the Senate budget. Because
you understand the ins and outs and what's going
on behind the scenes better than I do. Let's
just quickly talk about the Public Works Assistance
Account. Okay, let's do it. So you weren't wrong.
They did take the Senate approach. Okay. And
they took the House approach. Okay, a little
bit of both. So it was a hybrid version. So I
know we have repeat listeners, but there might
be some new listeners. So the last time we talked
about this, I said there was kind of a pickle.
Because, you know, the Senate budget transfers
$375 million in cash, essentially, in revenues
coming into the public works assistance account
for projects. And sends it to the operating budget
and replaces it with bonds. Yes. Okay. Which,
which. Okay. Wait a minute. Say that again. Say
it again. So the, the public works assistance
account is funded from repayments. Yep. And then
also like breed revenues and some other things.
Right. Okay. So there's, it's cash account. Right.
Okay. And then, and what the Senate proposal
was, was to take that cash and go spend it in
the operating budget. Okay. Now their proposal
was initially to. The Senate proposal was to
refill all of that cash with bonds. That's right.
The House proposal, so this was the pickles,
which from a project standpoint, you're kind
of like, oh, that's good, but we worry about
the long -term math on that. The House was, we're
just going to take $75 million away from you,
and we're not going to backfill it. Right. Okay,
so we're like, oh, which one do we like? I mean,
this one has more money for projects, but this
one doesn't have this. you know accounting move
that we feel is weird maybe it's challenging
long term yeah for sure i mean you'd have to
it's a head scratcher right they did both yeah
so they did both so so they they absolutely did
both so they take 540 million dollars of climate
commitment cash yep okay of that people are like
we're gonna i'm not gonna make you do math but
you can whiteboard this at home if you get your
whiteboard it's 540 million dollars in climate
commitment The cash of which $240 million goes
to higher ed debt, which then frees up money
that they get to spend in higher ed. So $240
goes to higher ed debt. Yep. Okay. So that means
you only have $300 million of climate commitment
cash left. Right. And where do you spend it?
Public Works Assistance Account. Public Works
Assistance Account, which leaves a whole of $75
million. That then... Yeah. Transfers. And you
transfer that 75 plus the 300 that you just supplanted.
And then you take that 375 million. To the operating.
To the operating. Plus you take that 240 million.
To the operating. To the operating as well. Yeah.
So you actually take 615 to the operating budget.
Right. Of which you only replaced 540. Leaving
the public works system. So they did both. Right.
They took the Senate mechanism, slightly different
because it's filled with cash instead of bonds,
which means the kind of the accounting problem
and the notion that you would use general obligation
bonds and debt to backfill. Right. They kind
of ameliorated that problem because now they're
using a different color of cash. Well, it's all
enabled by CCA funding. Yes. Right. Which is
a declining source of. Yeah. So there's still.
And also a little bit of a head scratcher with
some of the ways that they're using the money
and whether it's consistent with the intent behind
that entire policy. I would be worried about
if I was looking to get a public works assistance
account project funded in the future, would it
have to meet. Some of those CCA requirements.
Yeah. Potentially. Potentially. I agree. And
what's interesting is. This $615 million is almost
a little bit of a compromise between the House
version and the Senate version of how they originally
used CCA money in their first budget proposals,
right? The House only used about $240 million.
The Senate used a billion, and this $615 million
is kind of right in the middle. Yes. For those
of you at home, one of the most powerful charts
that I use when it comes to budget notion. Okay,
so draw a circle. Draw a circle. Now take a line
and like bisect that circle. Right in half? Half.
Okay. That is how a lot of these negotiations
happen. Shocking. It's powerful. So we did half.
Yeah, we staked out our position over here. They
staked out theirs over there. Guess where we
met? Right in the middle. Yeah, that's oftentimes
what happens. Yeah. Well, so that's interesting.
So you had that. It's just so hard to explain.
But the money went from, you know, total CCA
funding that was used in the final proposal was
almost $840 million. Yeah. $300 million scraped
off the top used for new projects in the capital
budget. See, here we are already talking about
the capital budget. But then that $539 million,
that $540 million supplants. Existing projects
and existing bonded debt. That bonded debt now
goes to replace bonded debt somewhere else, a
portion of it. And then $300 million goes. someplace
else in the public works assistance account,
and you end up with essentially dumping $615
million into the operating budget. Yes. Through
this, what I would consider or characterize as
a bit of an accounting maneuver or gimmick, and
you would say is a symphony of creativity. Yes.
A masterpiece. In order to make these budgets.
maximize their potential for providing services
to the people of Washington state. Did I characterize
that correctly? I mean, Adrian Newey designs,
you know, an innovative wing for an F1 car and
he's, you know, he celebrated and has paid hundreds
of millions of dollars, but you know, a humble.
You know, OPR staffer comes up with a very creative
solution to solve a financial problem that their
chair has presented themselves and you besmirch
them instead of celebrate them. Not besmirching.
It's just, it's tomato, tomato, man. Castigate
them. Castigate. That's a great word. I love
that word. Boy, I tell you, I don't know. I don't
know if I can keep up with the linguistics here.
Let's keep going on the operating budget. What?
I'm not even going to say it. I'm not even going
to say it. All right, let's keep going on the
operating budget, though. So we've talked about
the public works assistance account transfer.
Yeah, and we briefly mentioned the budget stabilization
account, but we should just circle back to that.
Yeah, let's do that. So as you mentioned, in
the House proposal, there was $880 million of
cash that was taken out of the budget stabilization
account and then paid back in out years. from
the, um, left one, um, policy bill. Right. Um,
the Senate version had a less aggressive transfers
around 750 million. The final budget moved to
the house position, 880 that's taken out of the
budget stabilization to help, help build up that
revenue total in order to get to 80 .2 million
or billion million. Yeah. And, um, and then as
we mentioned, There is not found money, but money
that has been moved out of the pension system
from a policy bill. that I believe we've talked
about here. But just quickly, it kind of takes
the existing surplus in the Left One policy,
kind of rewrites it and carves some of that out
and redirects that towards... And that bill did
pass. Yes. I believe it was on a concurrence
list this morning, as a matter of fact, either
this morning or last night. So that bill will
be passed as long as the governor signs it. Yes.
But the implementation of that bill is still
a couple years out. Yeah. Which is why the payback
isn't until 2029, I think. This last year. There's
a lot of things happening in the last year of
the four -year outlook. Yeah. And let's touch
on the four -year outlook again really quickly.
Sure. Because a lot of the numbers that we're
talking about so far today have really been based
on the two -year budget. Washington State has
a two -year biennial budget. We've mentioned
that a few times. But they also have a four -year
outlook. And it's not the only time we're going
to talk about the four -year outlook today because
there's some other pieces here that are really
interesting that I think talking about the four
-year outlook and putting that in context is
going to be important. The four -year outlook,
Washington State is the only state that actually
budgets this way from my understanding, where
we are required legally to not just pass a two
-year budget, but actually consider how that
affects the subsequent two years in the four
-year outlook as part of the process and publish
those results, right? And when you think about
things like... budget stabilization account and
reserves, right? Or the implications of new policies
that create ongoing obligations. That's where
that four -year outlook really gets helpful because
you can see, okay, what are the implications
of what I'm doing today? based on what I'm assuming
in revenues moving forward and additional cost
increases forward, what is that going to have
in kind of general terms, right? Kind of macro
terms, because it's not obligating you to do
anything in the future. It can either give you
information or you can actually show intent,
but there's no legal obligation to follow through
with that at that point. And things can change
between now and then. But it does kind of give
you that. you know i don't know periscope look
into okay what are the yeah what are the likely
outcomes here right and um you know we're gonna
have a real pinch point in year three a real
real pinch point but then that kind of overturns
itself a little bit or corrects itself a little
bit because you turn on a two billion dollar
spigot right and where does that two billion
dollar spigot come from from the newly well it's
not enacted but it has passed the legislature
yep the Tax on millionaires. Yeah, and there's
a whole podcast on that that we just produced
and released. And so if you haven't listened
to that one, it's Brad Banks and myself kind
of talking about all of the ins and outs of how
that bill affects local governments and some
of the political implications and political maneuvering
that that bill went through in order to get passed
here in the legislature. That bill actually was
passed out of the Senate. last night as a matter
of fact uh and the governor has basically said
he's going to sign it so there's still said he
was going to sign it a week ago friday right
he had a press release at 11 15 on friday it
was essentially to the striker there were minor
changes right um adopted on during the house
nothing significant to the point where i think
that it would change the outcome so but of course
that thing's got lawsuits and citizens initiatives
and other things that it's going to face as far
as hurdles moving forward before and that is
a 20 -day bill circling all the way back i'm
sure that that one is a 20 -day bill yeah but
that's an important piece of the four -year outlook
here yeah uh because that it is It is what makes
the four -year outlook solvent. Because the third
year of the four -year outlook puts us back in
another billion -dollar hole pretty close. It's
wild. Yeah. Because... I found that really interesting
also. I found it really interesting too. And
where my brain went was cash flow. Yeah. And
I don't know how many of our listeners have...
Well, actually, a lot of our listeners are business
owners, right? And many businesses have seasonality
to their cash flow, right? Absolutely. Whether
you're great in the Christmas season or you're
a farmer and you harvest, you know, in the fall
or the spring or whatever it may be, almost every
business has some level of seasonality. Yeah.
And so tax collections are... are very seasonal
in Washington state because, because you have,
um, you have, uh, not, so you have April, you
have your property tax, right? And some, and
many, but certainly not all households pay their
entire property tax, um, bill in April. So when
you combine, April property tax collections with,
as Paul mentioned, the sales tax collection spike
from Christmas, the state is pretty flush in
April. Right. And then it just kind of goes down
and down and down and down until you get back
to October where you have your second. your second
property tax collection come in. And they're
collecting, you know, sales tax quarterly and
whatnot. But of course, you know, they are subject
to the seasonality that everybody else is. Yeah.
So again, when you, you know, just, just in a,
in a typical state cycle there, there's the most
money in the bank in April. Right. And then it
just starts going, drying down until about October
and then it pops back up again. And then, okay.
Yeah. And so when you, when you think about that
and you think about that, third year of the biennium
starting in july one right and going till june
i mean it's gonna hit that trough yeah for sure
and and and as paul alluded to on the four -year
it was 800 and i don't have it in front of me
i apologize but it was like 839 million dollars
a lot of money it was a lot it was close to a
billion and and what's interesting about that
did you watch the conference committee discussion
or the hearing itself on tvw Yes. So do you remember?
While I was shaving. Okay. And putting on dress
clothes. So there's another piece. And learning
a new knot. I'll have to show you. It helps if
you're a taller gentleman. A new knot for your
tie? Yeah, yeah, yeah. Oh, nice. It gives you
a symmetrical knot that was still length. So
it's kind of like a Windsor. Like a square or
what? Let's not digress on that. But for those
of you who are out there. No, I wasn't watching.
Please tell me. There are many ways to tie a
necktie. It's not just the one your grandfather
taught you or your dad taught you. No, but if
you've gained 10 pounds over a short session
and need a little bit more length on your tie,
like I do, and you can't do Windsor anymore,
I've got a great knot for you. All right. We'll
keep that in mind. But the piece that I want
to bring up as part of this discussion on the
four -year outlook, and by the way, since we're
talking about 63, Before I move on, for those
of you who are wondering, was the $200 million
that was promised to local governments in the,
you know, backroom discussions around that intent
section that ended up being in 6346. While all
the local government resources were stripped
out, the answer is yes, the $200 million is in
the four -year outlook as a potential expense
starting in 2029, the second year of the next
biennium. Now, again, you know. sticking exactly
with the comments that we made before and the
comments that we made in the earlier podcast.
That, of course, is not something the state is
obligated to do. It's just something they're
putting out as a marker, as something they intend
to do, so that it shapes kind of the four -year
outlook more accurately according to today's
intentions. But all those things can change.
Yeah, it's really interesting. We have a legal
requirement to produce a four -year budget. Right.
But the actual budget bill... It's only two years.
Or in this case, even fewer because it's only
to the end of the biennium. Right. And to Paul's
point, if you go into the materials that were
published with the budget within the summary
document, if you kind of scroll through and look
at the expenditure and outlook. detail in the
local government in the in the general government
section you will see a local government fiscal
health account right and it will say zero zero
zero and then 200 million in that fourth year
right furthermore if you go to the one page four
year budget outlook document i although you won't
see it specifically identified you will see in
the all other policy yeah you will see an an
increase a spike of 431 million and i think it's
embedded in there right and i think that is 200
for this and then 231 for the um working families
tax credit which by the way uh i also wanted
to talk about was changed significantly in this
bill too in how they're paying for that uh and
you just hit on it i i feel like i want to go
back to where i was going but since you brought
it up you're the host no the working family tax
credit originally was going to be paid for with
cca dollars in the Governor's proposal. Right,
in the governor's proposal. And I think in the
House proposal as well, wasn't it? The House
proposal included a portion of funding. It was
around 300 and some million out of CCA for the
underlying existing program. The money that is
here is actually for expansion. Right. So it's...
So the existing program has – you have to have
a kid. Right. And then it's kind of capped at
a certain age. This goes – this makes it eligible
for income on both ends. It goes down to 18.
Right, lowers the age. Irrespective of whether
you have a kid or not. Family, single, whatever
it may be. And goes up to 65. Yeah. And so –
that policy change is budgeted in the millionaire's
tax bill. Right, that's where they're getting
the revenue from in the conference version. So
there's no CCA swap, meaning Climate Commitment
Act fund swap, into the working family tax credit.
They're basing it all. on this requirement for
implementation of the millionaire's tax the new
income tax bill yes yeah okay so let's think
ballot strategy no kidding right so let's um
go back so we kind of digressed on both of those
items but i want to circle back to the conference
committee meeting itself the hearing oh yeah
yeah right and the other piece that i wanted
to talk about here because i mean only I mean,
I don't even watch that. I mean, I mean, I mean,
I but there was an important piece in here that
I think is really interesting when we're talking
about patches on my I have like leather patches
on my jacket. You're not. What's your important
piece? Important. What was said? There's an important
piece that was said here that you don't necessarily
see in the budget unless you're listening to
those hearings. And it's important because when
you're talking about the four year outlook and
you're looking at what they're booking as far
as not just revenue, but also expenses. looking
out for years, and how this Climate Commitment,
or I'm sorry, not Climate Commitment Act, but
this new millionaire's tax may or may not change
the numbers, right? Because remember, in the
third year, we just talked about there's a billion
-dollar hole that's being created by this budget
that they suddenly dig out of in the fourth year,
and that's all because of the new revenue. But
at the same time, they're only booking... On
the expense side, an annual growth rate of 2
.2 % in this budget and in the four -year outlook.
And historically, over the last decade, the annual
increase in expenses... 7 %? 15%. Annual? Annual.
Around 15 % per year, according to... Oh, for...
Some of the statements that were made by the
minority party members who were on that committee.
This was one of the things that they basically
said this thing is built on a foundation of falsehood
because that four -year outlook is nowhere near
accurate because of that difference in really
13 % in expenses, which on the state level when
you're talking about an $80 .2 billion budget
or whatever it ended up being, right? $80 .2.
13 % is a lot of money. So we need to parse this
because what I would... So the four -year outlook
is based on an assumption of existing programs
and then an inflation factor associated with
that. Sure. So that's maintenance level. So how
much more... And so what you're saying is they're
using a 2 % number. 2 .2. And what I was saying
is the CPI for Seattle, we use IPD, which we
don't have to go into here. Sure. Can I please,
though? Okay, a little. Sure. You've got to make
it tight, though. So the difference between CPI
and IPD. Look at you. You look like you're gleeful.
I am. It's all inflation to me, but you're like,
the difference between CPI and IPD. Do it, Brian.
Come on. So these are inflationary indexes. Right.
And what they do is they take a market basket
of goods, okay, and they compare how much that
market basket of goods varies from one year to
another. Okay. Makes sense. And CPI assumes the
same market basket of goods. Implicit price deflator.
assumes that you make choices based on the price
of goods. So for instance, your market basket
changes. So Paul, who kind of a snob, buys like
organic milk. When prices go up, Paul will choose
not to buy organic milk. He will buy Lucerne
brand milk instead of Best Day dairy or whatever.
And so for that reason, implicit price deflator.
always lag cpi because it's assuming substitution
yeah because it makes sense right i mean if something
that you're buying the numbers in front of me
but the cpi has been what five six percent implicit
so so what i'm saying is inflationary versus
i think the number what you're talking about
is the actual growth in spending which is which
has captured you know expanse in programs like
Sure. Like we're buying a whole lot. So not only
is it costing more. Per, but there's also more
of them. Yes. Okay. And that's, I just want to
make sure. Yeah, because your expansion in cost
isn't necessarily just your inflation base. It's
also your case load growth. Yeah. Like for HCA
and others. So I don't actually know what the
number assumption is for the four year, but you're
telling me it's a 2 % growth factor. That's what
they said. Which? I couldn't find that in the
documents. Which might be supported by an economic
forecast. It does not seem conservative. Yeah,
it does seem conservative from an expense standpoint.
But also interesting in kind of working against
that argument is the fact that they also didn't
include any growth. in revenue based on revenue
forecasts. They had new revenue, right, from
legislation. Sure, but they have to use the revenue
forecast in front of them. They can't. Right.
They can't. There is an independent elected forecaster
who gets to decide what the world of money is.
And things can change quite dramatically sometimes
from year to year. Well, that's what's so interesting.
Well, I mean, there's a lot of interesting things.
I mean, nothing's as interesting as what I just
said around implicit price deflator. But I mean,
clearly. Yeah. I mean, I was riveted, like literally
chained to my chair. I couldn't move. I was so
riveted. But there's. You know, that means I
wasn't riveted at all. Right. $2 billion is a
big number. You don't even care. I'm in a convertible.
I'm going down the freeway at 70 miles an hour.
I've got my favorite tunes on. You are the train
that cannot be stopped. I'm not going to let
you derail me. All right, do it. You must be
fun at parties. Look, when we... When we make
a change to the sales tax, like the base rate,
we have a pretty good understanding of what one
-tenth of one percent gets because we have good
data. But when we invent a completely new tax,
it's hard. It's hard to try to understand because
you don't have good data because you weren't
taxing it before. So we need every single cent
of that $2 billion that's being projected. And
there's a lot of uncertainty built into that
number. Now, to be clear, I want to be clear
about this. When you say we need, you mean the
state budget is really dependent. It's not you
or I, Paul. Yeah, I just want to be clear about
that. Because WASAC did not support or oppose
that bill on any level. We were simply interested
in the local government kind of components associated
with it. If this budget were the Seahawks. And
I felt like I was part of this team, this budget.
You would say. But the Seahawks or this budget
needs darn near all of this money to actually
come in. Right. Which is always. To just stay
balanced where it needs to be. Yeah. And so there's
a lot of uncertainty. That was the message that
I got was there's still a lot of uncertainty
out there around what this revenue will actually.
drive as far as actual money for the budget.
There's a lot of uncertainty out there on that
four -year outlook and what it looks like. And
if for some reason, a citizen's initiative, a
lawsuit, whatever ties that thing up or even
overturns it, this budget in the out years looks
a whole lot different. Remarkably so, one might
say. there'll be a lot of challenges and decisions
that will have to be revisited. Wailing and gnashing
of teeth is what I would say. This isn't a hot
take show. This is just us trying to provide
fair and balanced analysis. Interesting. It's
so interesting. And you mentioned, just kind
of continuing along that vein, when you were
talking about, and I was going to mention this,
about the cuts that were in the budget. Versus
in the proposals. If you go back and look at
this version, there's a lot less cuts in this
final version than there were in either the Senate
or the House versions originally. Yes. I would
say fewer. What did I say? I'm sorry. I'm just
being a jerk. Did I say? You said less. What's
the difference? Okay. All right. This is what
happens, folks, on the last day of the session.
All right. Well, I think that's a pretty good
kind of explanation of what's in the operating
budget. And since we've already talked about
the capital a little bit, let's go there and
just kind of give folks a bit of a flavor as
far as where we are on the capital budget. We
ended up at right around $890 million. on the
capital budget in total new expenditures. 435
of that based on new debt. 455 of that based
on other funds, state, federal accounts, et cetera.
A good portion of that coming from CCA, 300 million,
right? The previous proposals from the House
were at 910. Almost 911 million from the Senate,
a little lower at 723. This one definitely leans
towards the House amount more so than the operating,
which leaned a little hard. a little harder towards
the Senate version. The debt in both proposals
was lower substantially. Well, I guess it depends
on how you look at it, but I think substantially
lower. Both the House and the Senate were right
around that $400 million mark for debt in their
original proposals, and this is over $400 million,
$435. Your bond fund capacity at the end is about
$1 .3 billion. kind of left over. And we kind
of went through the CCA funding and all that.
But overall, still a pretty skinny supplemental
budget by most measurements, wouldn't you say?
Oh, yeah. Yeah. I mean, this budget mostly serves...
The needs of the operating fund. Yeah. Yeah.
Which is interesting. That's unusual. It is unusual.
I can't remember the last time I really saw that.
You know, we've had some interesting transfers
the last couple of years. The transportation
budget, which we haven't really talked about.
We mentioned it a little bit. A little bit, but
it got some interesting transfers in previous
years that we hadn't really seen much of in recent
years. And that was a... Oh, shoot, I'm forgetting
the... I mean, like Black Swan event of COVID
where you had all the ARPA dollars where you
could actually do a $16 billion transportation
package with no bonds. And so you took $2 billion
out of the operating budget to help facilitate
that. Right, right. And then also when the CCA
was passed, there was, I think, $50 million scraped
off of that, if I'm not mistaken. Yeah, yeah,
yeah. You know, some interesting transfers there
that we hadn't really seen in the past. But this
is something new where you really do have the
bond capacity and this swapping of dollars on
the capital budget side that's propping up the
operating budget in some interesting ways. And
we talked about this a little bit in previous,
but we have new listener. Every day? One or two.
I just aim for one a week. You know what I mean?
Is anyone out there? The bond model is predicated
on how much you spend. There's a statutory and
constitutional debt limit. It's not one -tenth,
but just roughly for argument's sake, for every
$10 you spend on the operating, you get $1 in
bond. And as we mentioned, We weren't in a recession
for the most part for the last however many quarters.
Right. And so our revenue protections were fine.
So our bond model was fine. And then last year
they added $8, $9 billion in revenue. So you
juiced the bond model. Yeah, by about a billion
bucks. We're juicing the bond model again at
the end of this four -year period. And so conceptually,
next year when we talked... when they start sitting
down to do their operating budget again, they
might be in a similar situation where they continue
to have quite a bit of operating tension and
still a significant amount of money on the credit
card. So when we talked about that $800 -plus
million hole in year one of Next Binance, and
you're trying to, again, I don't want you to
whiteboard or confuse, but in year three of the
four -year outlook, in the first year of the
next buy and end, before all of the billionaire
cash comes in, the bond model might again have
to support the budget. It'll be interesting.
It will be interesting. But other than that,
there's not much. I mean, we already covered
the public works assistance count. That was really
the big thing. I mean, there's just not a lot
of new in the budget. It seems so silly to say
this, but with only $900 million to spend, $889
million, $890 million to spend, just not a lot
in there. But normally, you're looking at a billion
and a half or a $2 billion appropriation out
of the capital budget and a supplemental. And
we're talking about culverts. A lot more local
projects that could get added, a lot of agency
kind of spends and new programs that could get
added, simple provisos that are trying to achieve
things here and there, sometimes very small,
sometimes larger. And a lot of that stuff just
didn't manifest itself in any way this year.
I don't know how many proposals they got, but
I'm going to assume they got a lot more than
they funded. Oh, we talked about this. Yeah,
we did. A little bit on previous podcasts. We
sure did. And we sparked quite a few debates
about pudding versus cookies. Yes, yes, we did.
But everyone agrees that... Cookies are a better
idea for your pockets. That pudding is a funner
word to say. It definitely is. So, Paul, one
thing we should probably cover before we wrap
up is, okay, so today's the last day. There's
this whole bottleneck of legislation and bills
and things like that. Two questions, Paul. How
much time does the governor have to sign all
this stuff? 20 days. Okay. And then when does
it actually become law? 90 days. After the 20
or when he signs it. Right. Unless it has some
sort of emergency clause or a date certain. Okay.
So for instance, like the millionaire's tax won't
go into effect until January 1st, 2029. Yeah.
And so there will be things that get, there will
be legislation that gets. Partial vetoes. Yeah.
The budget itself is in Washington state. We
don't have what's called line item veto. Right.
And so you can't just go in and substitute words
like you can't just like like Paul shall, you
know, do such and such. And we can't we don't
can't just like strike shall. Right. If we're
in the budget, if the governor thinks you should
spend 12 million and you're only spending 10
million, he can't scratch off 10 and put in 12.
Yeah. So. So the budget document is unique, and
there's a lot of case law around this. Yes. A
lot of case law. It's surprising, actually, how
much case law. But it constitutes – I'm sorry.
It can be boiled down to a simple concept of
single subject. So the governor has veto authority
that some people misconstrue as line item because
a lot of times budgets are just – items or provisos
right but the governor can go in and he can veto
a a sub a single subject as long as he like vetoes
the entire subject so if you have a if you know
so for in the capital budget he can he can he
can veto entire Right. But he can't just veto
a zero. No. The way it would be written in the
budget would be, okay, it's section 133, which
might be Department of Commerce, whatever, housing
division. And then they have subsections, which
of the amounts that are appropriated, so much
is spent for this and maybe a description of
that. Or the second one would be something else.
He could go to subsection one, subsection two,
and just... line item that whole subsection yeah
that's where his authority is exactly and it's
the same thing in a bill itself right where you
have each one is is is organized in sections
he has section veto authority uh not line item
authority there either so he can't change a word
but he can say you know i don't like these provisions
12 you know these provisions so i'm eliminating
the whole section yeah or the whole bill for
that matter sure i mean technically he could
veto the budget He could. That's happened before.
Yeah. During the first Locke administration,
it was a 49 -49 House. Is that true? Or was it
Republican -controlled? It was a Republican -controlled
Senate and I think a split House. And they passed
the budget as a five -day bill. Oh, wow. To try
to jam the governor. And he vetoed most of it.
Yeah. So it has happened. In this case, we'd
have to come back in for a special session. Yeah,
that'd be fun. Let's do that. No. No, I agree.
Let's not do that. Let's not do that. Let's not
do that. And I feel like there was one other
little nugget I wanted to make sure we know,
but I think that's it. Oh, pocket veto. We don't
have pocket vetoes. That's the other nugget.
So what does that mean, Paul? Well, it means,
well, in places where pocket vetoes exist, right?
You imagine the governor or the president or
whoever gets a bill on their desk and they read
it and they go, you know, I've got a certain
amount of days to act on this thing. I don't
think I want to. Literally folds it up, puts
it in their pocket, never gets seen again. In
Washington State, if that were to happen, the
bill becomes... At the end of the 20 days. At
the end of the five or the 20 days, regardless
of whether the governor has acted or not. So
there's no such thing as a pocket veto in Washington
state. If the governor chooses not to act, that
is fine. But that doesn't stop the legislation
from taking effect. Correct. And it has the same
full force of law as any other bill that the
governor did sign. I don't know if I've ever
seen it, but you could imagine a scenario where
a governor has some sort of. personal belief
about something and doesn't actually want to
sign it, but doesn't want to risk having the
veto overturned or something like that. Yeah,
I mean, I could think of a variety of different
scenarios. I mean, the governor, for instance,
I mean, maybe a governor. gets sick, you know,
towards the end of it. It doesn't have time.
Yeah. And the, and staff has to decide which
ones are priority and which ones aren't, you
know what I mean? And he simply just doesn't
take action on a handful of bills. Well, it doesn't,
it doesn't stop the fact that the legislature,
it doesn't under overturn the legislature's decision
to pass it. Yeah. There was that weird deal a
couple of years ago where Inslee. signed two
bills at one time because they were enacting
the same section of code and then wanted the
code revisor to sort it out yeah i never understood
why he didn't just quote -unquote pocket veto
both of them because that would have had the
same effect it would have had this yeah it wasn't
quite as it could you even read i don't know
how do you do that which hand is legal i don't
know i don't know all right yeah that was weird
Yeah, those are good points, though, because
a lot of people do ask me those questions from
time to time. What if the governor doesn't act?
Well, it actually really doesn't matter. It doesn't
matter. Once the time clock has wound down on
that five days or that 20 days, the bill goes
into effect at whatever schedule it would have
otherwise gone into effect. It's just so interesting.
It seems like every time we have a conversation
about the legislative session and the legislative
process, it all comes down to the clock. Yeah.
every piece of it it's like we're playing a game
almost right because you know if you don't meet
certain deadlines if you don't meet the clock
the clock runs out you know there are consequences
one way or the other or in this particular case
if the legislation is passed both chambers there
are no consequences yeah the only consequence
is the governor loses his or her opportunity
to actually Either sign the bill or have influence
on the proposal or the policy itself. Well, Brian,
thanks again for coming. It's always good to
see you, and it's always great to talk about
budget with you. I don't know anybody who I could
call who would be more insightful or more fun,
frankly, to have this chat with. Your experience
being part of the budget team over there at the
state in the past really makes it. I think, for
our members and certainly for me, too. So thanks
for doing that. I really appreciate it. Happy
to be here, Paul. Happy sine die, man. Yeah.
Cheers to you. I hope you get some rest. I need
it. I need it. Yeah. And thanks for all your
help on the policy side. You know, you've been
a big assistance to our members, especially on
those housing bills and got another bill through
this year, House Bill 1345. Kudos to you. Thank
you, Paul. Excited about that. Yeah, I was, too.
I was glad to see it. Thanks to our members as
well for everything that you do in your home
counties. We know how tough it is to be a locally
elected official, and we know why you do it and
how dedicated you are to your job. And don't
think that doesn't go unnoticed here in Olympia
by your team here at WASAC. Hope you can join
us for our next chat. And until then, take good
care. Thanks for tuning in to County Connection.
Stay in the loop by subscribing to us through
your preferred podcasting app and following us
on LinkedIn, Facebook and Instagram. And don't
forget to join the hub, your go to source for
the latest news and updates from the Washington
State Association of Counties. Until next time,
stay connected and stay informed.