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Sen. Brad Hawkins | A strong economy is helpful for state budgeting

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I’m thankful for Washington’s growing economy. A strong economy means more jobs, which enables more people to work and earn money to support themselves and their families.

The latest employment figures we have are from May, and, according to the state’s Employment Security Department, Washington added 8,500 jobs that month alone. Statewide, our May unemployment rate dropped slightly, to 4.7 percent. The national job news is even better, as the U.S. unemployment rate in May was 3.8 percent, a significant drop from the 4.3 percent jobless rate nationally a year earlier.

There is positive job news locally, too. May’s 4.9 percent unemployment rate for Chelan and Douglas counties is the lowest rate for that month since 1990.

Besides producing more jobs, our state economy has also generated more state revenue. As one of your state legislators, I can definitely say this is good news for Washington.

One of the things we know about economies is that they are often cyclical — something people in our region’s tree fruit industry and other agricultural sectors know about — and those cycles directly affect our state’s operating budget. A vibrant economy means strong state revenue collections through the sales tax, business and occupation tax, real estate excise tax (which has seen a steady rise thanks to an increase in construction and a hot housing market) and other taxes. Strong revenue collections also provide the Legislature an opportunity to set aside surplus revenue.

Unfortunately, just as harvests fluctuate, and not every year brings a bumper crop, economic downturns do occur. Whenever the state economy slumps, it can mean a significant drop in state revenue, raising the possibility of spending cuts to state services. That’s why it was prudent that Washington voters approved the creation of the state’s Budget Stabilization Account (often referred to as the “Rainy Day Fund”) back in 2007, which directs extra state revenue collected during strong economic times to automatically be set aside to provide a buffer for the budget when the state faces tough economic times.

Over the past six years, Washington’s growing economy and the resulting positive revenue numbers have enabled the Legislature to make historic budget investments in K-12 and higher education. This in turn allowed us, as of June, to officially meet the state Supreme Court’s requirements (under its McCleary decision) regarding education funding.

The revenue outlook ahead, however, is mixed. The most recent quarterly state revenue forecast estimates that the state’s general fund will see an increase of $298 million in the current biennium, an additional $287 million in the 2019-21 biennium and $380 million more in 2021-23. While that is welcome news, the latest forecast also warned that the threat of a trade war and tariffs to Washington products, like apples, could have a potential negative impact on Washington’s economy, and in turn, our revenue and budget situation.

The prospect of a trade war and its impact on our state, especially the agricultural industry that is key to North Central Washington, is just one of several challenges or unknowns that other legislators and I must continue to monitor as we move closer to developing and voting on a new two-year state budget in 2019. Other unknowns are how long the state’s construction and housing markets will remain strong, as well as Washington’s famed tech industry. We must also take into account the tendency among some legislators to want to spend more and more taxpayer money.

As we look ahead, policymakers should always strive to make Washington a more business- and tourist-friendly state so that our economy can continue to grow, both here at home and statewide. We must also continue to focus on creating responsible budgets, demonstrating prudent investments of taxpayer dollars, and building adequate reserves to insulate our state in case the economy cools.

 

Brad Hawkins is our 12th District state senator representing North Central Washington in Olympia.