By Jason Mercier

First the good news, state revenue is currently projected to grow by $2.75 billion (8.2%) over 2013-15 for use in the 2015-17 budget. The bad news according to the Office of Financial Management (OFM):
“OFM projects revenue growth for 2015–17 will fall far short of what will be needed to maintain current services, cover mandatory increases and provide an additional $1 billion to $2 billion to meet the state’s constitutional basic education obligations.”
Among the budget challenges facing the state is the contempt ruling against the legislature for K-12 funding. Another major wildcard is what the voters decide to do with I-1351 (class size reduction) and its multi-billion dollar unfunded mandate.
Given that the Governor has already indicated that tax increases will be needed to meet all of the budget demands it is a bit curious to see him agree to state employee contracts negotiated in secret that would add hundreds of millions in additional costs to the 2015-17 budget.
Yesterday the Governor reached an agreement with the union that covers general government employees. According to OFM:
“We cannot discuss the terms of the agreement until after it has been ratified by the membership and officially submitted to the Office of Financial Management for determination of financial feasibility. The agreement must be submitted to OFM by Oct. 1. OFM will not make its financial feasibility determination until after the November 19 state revenue forecast. If the agreement is deemed financially feasible, it will be included in the Governor Inslee's proposed 2015-17 budget. OFM estimates the economic provisions associated with this agreement would cost about $250 million (General Fund-State) over two years for all represented and non-represented general government employees.”
This brings the known costs of pay raises being proposed for 2015-17 (including teachers) to $661 million:
• Teachers - $321 million (I-732)
• General Government - $250 million
• SEIU 775 - $90 million
The cost for higher education contract pay raises is not known at this time. Those contracts include a "me too" clause to get the same percentage pay raises as general government. Needless to say those costs will increase the current $661 million estimated for 2015-17 pay raises.
Assuming the state is still using the renowned Priorities of Government (POG) process, the highest priorities will be purchased first within the $36.7 billion of forecasted revenue for 2015-17. One would assume this would include responding to the Court's contempt ruling for McCleary. Pay raises would appear to be at the bottom of the priority list. Under POG budget writers purchases the highest priorities first leaving discussion for tax increases to focus on those priorities at the bottom of the list.
This means that if tax increases are proposed for 2015-17 and the pay raises are included in the budget, the first $661 million of any tax increase would be to provide pay raises.
Of course, OFM must first determine these pay raises are "financially feasible." Given the current budget outlook it will be interesting to see what decision is reached. If they are deemed financially feasible and the Governor still requests tax increases the legislature will not be able to make changes to the contract but can reject them forcing the process to start all over again behind closed doors.
While in the short term these contract negotiations should be opened up to the public, ultimately they should be limited to non-economic issues. Anything requiring an appropriation (especially one relying on a tax increase to fund) should be part of the normal public budget process in the legislature and not be a take it or leave it (which is unlikely due to time constraints on budget and need for re-opening negotiations late in session) proposition for lawmakers buried in the back of the budget.
As for the question of whether voters would support tax increases to provide for $661 million plus in pay raises, any doubt about what that poll result would show?