The weather forecast calls for a wintery mix. The state budget forecast calls for a nearly $1 billion shortfall. Could be better, could be worse, as they say.
But how much worse could it be?
The current debate over the federal fiscal cliff is one more wakeup call: it could get much, much worse. Federal funds are not guaranteed. January may bring automatic cuts to many federal programs. The possibility of these small cuts (8.2%) have many tax consumers warning of dire consequences. Yet the State of Washington has done nothing to wean itself from federal funds, or even to develop a contingency plan.
The state's current budget relies on federal politicians for about 30% of all state spending. Through October, the state has received nearly $12 billion in this biennium from the federal government. (For comparison, during the same period the state collected $21.5 billion in taxes.) To state policymakers this is "free money," even though it all comes from taxpayers and it generally comes back from the feds with strings attached.
The current situation puts state government and those who reliy on it at risk. While current warnings about federal sequestration are overblown, more substantial cuts in federal funding would, at least for a time, interrupt basic services. Major state policy changes would be required if federal funds went away, or even if they were cut by half or just a quarter. (Remember, sequestration is an 8.2% cut--the equivalent of someone who earns $60,000 getting a pay cut to $55,080, in an economy where a lot of people lost there jobs entirely.)
Incoming Gov. Inslee should require his agency directors to inventory what federal funds they receive and to develop contingency plans in case those funds are signifigantly reduced. The state spends time and money planning for natural disasters and terrorist attacks, it should also plan for the disasters that may result from gross political mismanagement in the federal government. One state that has taken some proactive steps to consider what would happen--and what to do--if federal funds stop flowing is Utah.
For more information about state reveues, visit fiscal.wa.gov. To compare Washington's reliance on that other Washington, check out the Tax Foundation's new map, linked at Bob Williams's State Budget Solutions website, where they offer a great deal of additional state-by-state information and analysis.