California Journal of Politics and Policy
(CJPP) is an online journal of original scholarship, focusing on state and
local politics, public policy formation and implementation, especially in the Golden
Volume 9, Issue 1, 2016
WESTERN STATES BUDGET REPORT – 2016-17
This issue of the Journal is part of a series we publish each year in cooperation with Kem C. Gardner Policy Institute at the University of Utah and faculty at 14 western universities.
Despite low oil prices and predictions that Alaska would fall into a recession in 2015 or 2016,the Alaskan economy remained resilient into 2016, despite significant tailwinds. However, Alaska’sresilient economy does little for the state government budget, due to the state’s high relianceon oil for tax revenues.
The Fiscal Year 2016 budget process began with a new Republican Governor Doug Ducey. He and Republican leadership coalesced relatively quickly on a budget that was promoted as being able to balance the state budget and uphold Arizona’s values. Closer scrutiny instead reveals an austerity budget that made severe cuts to higher education and significant weaknesses in meeting legal K-12 funding levels, cutting Medicaid payments to hospitals, and underfunding or curtailing programs for lower income Arizonans.
California’s budget politics were temporarily sidetracked by an increasingly severe statewide drought, forcing the state to take action. Democratic lawmakers elected new leadership, who, like their predecessors, argued the state should increase social spending. The major budget clash centered on California’s booming economy and what to do with a large projected tax surplus. The legislature wanted to spend the revenue, while Governor Jerry Brown downplayed the fiscal estimates and wanted to squirrel away the extra money in the state’s new rainy-day fund. Brown sparred with the University of California over UC’s increasing reliance on out-of-state students to fund the university, limiting the number of spots for California students.
California was in a better position during the 2016-2017 budget cycle than it had been in previous years. Rather than arguing over budget cuts, the majority Democrats spent their time debating spending priorities. In the end, legislative Democrats and Governor Jerry Brown both claimed victory, which left the state on a solid financial footing. As Governor Brown entered the second half of his second term, the Democratic Party continued to strengthen its hold on the state. November 2016 Election Day victories provided the party with a two-thirds majority in the legislature, ensuring state government in the coming years would remain an exclusively intraparty affair.
By most metrics, Colorado’s economy continues to recover from the recession. State revenues have reached the point where tax refunds mandated under the Taxpayer’s Bill of Rights (TABOR) are a distinct possibility. Governor Hickenlooper’s 2015–2016 budget is generally in line with his previous budgets, while including contingency plans for TABOR rebates. The legalization of recreational marijuana has provided the state with a new revenue stream, although taxes and fees collected in 2014 fell short of initial projections.
This year's budgeting is characterized by more uncertainty than in previous years.
In 2014, Hawai‘i’s incumbent governor, Neil Abercrombie, failed to win his party’s nomination for reelection. Because incoming governor, David Ige, took his oath of office a mere two weeks before the biennial budget was due, the budget request prepared by the Abercrombie administration was sent to the legislature. The new governor and his staff rushed to put together proposed changes, and the adjusted request was received more than a month after the legislature began work on the budget. Some of the governor’s adjustments were accommodated, but many were not funded to the extent requested. The budget package that emerged left little wiggle room for the governor to finance new pet projects and policy proposals.
The 64th Montana Legislature ended its constitutionally mandated 90-day biennium session with a $10 billion, two-year, all funds budget on April 28, 2015. Some observers claim Democratic Governor Steve Bullock and Democrats came out the winners, although Republicans controlled the legislature. The governor signed 431 bills into law this session, vetoed 53 bills, and allowed 19 to become law without his signature.
Overall, the session was less contentious than in recent years in the Republican controlled legislature. There were few “big issues” other than expanding Medicaid under the Affordable Care Act provisions and campaign finance reform. The GOP controlled legislature passed the expansion. Revenue was not a problem for the new biennium, which usually helps make the session run more smoothly. Overall, it was hardly an exciting legislative session since there were few controversial policy areas addressed by the legislature and governor. In the past, some sessions have been highly contentious, but that was not the case with the 64th Montana Legislature. With divided government, the legislative session ended with a balanced budget and state in fairly sound fiscal condition.
The Nevada economy has been slowly improving and the Nevada budget is resting on a solid foundation in terms of satisfying revenue projections contained in the 2013-2015 biennial budget (Nevada Department of Employment, Training and Rehabilitation, 2013). Nevada successfully faced and responded to a state economic environment that has been characterized for the past few years by recession, a budget crisis and political budget fights. The budget in Nevada is currently stable and Nevada has experienced slow economic improvement during fiscal year 2013 – 2014. Nevada’s economic improvement, compared to many other areas of the United States, has been slow and it will probably take a considerable amount of time before Nevada experiences significant recovery from the recession. The Nevada Legislature meets once every two years during odd numbered years and 2014 was an off year. The off legislative year consists of monitoring economic indicators, preliminary construction of the new biennial budget and previewing the fall general election.
Nevada has experienced steady economic growth since the Great Recession of 2008. The state budget is resting on a solid foundation in terms of satisfying revenue projections contained in the 2015-17 biennial budget.
In early spring 2016, New Mexico was experiecing a bleak midwinter. The economy is showing signs of recovery, but the recovery is slow, uneven, and behind the state's western neighbors and rthe nation. Promising economic forecasts in December gave way to downward projections in January and, while costs have risen, state revenues have not. Demographically, more people are leaving New Mexico than are arriving. The people who remain are poorer and less educated than their national or regional counterparts. Political scandals have rocked both the executive and legislative branches. It has been a difficult winter in New Mexico.
Oregon's economy has continued to recover from the great recession. Job growth in 2015 returned to mid-1990 levels with 3% annual growth leading to more than 57,000 new jobs. The office of Economic Analysis sees revenues growing strongly with corporate taxes and personal income taxes growing at double digit rates over the first four months of the 2015-2017 biennium.
Utah political observers thought in the 2015 legislative session legislators addressed somemajor issues, while leaving some, including Medicaid expansion and the relocation of the stateprison, to be handled later. The 2015 legislature did address several significant public policy issuesthat will have long-term impacts. Two tax increases passed, an increase in the fuel tax andan increase in property taxes with the goal of reducing disparities in education funding across thestate.Lawmakers focused heavily on criminal justice reform, passing legislation that significantlyimpacts policy. Relocation of the state prison was also discussed at length, though ultimately legislatorsopted to hold off on a final decision. The Prison Relocation Commission tackled the issueduring the year. A final policy issue that will catch the attention of those living outside thestate is the passage of the LGBT nondiscrimination law.
Formulation of Utah’s $15.1 billion FY 2017 budget as usual reflected the state’s characteristic fiscal conservatism, however this year featured two notable changes – recognition of the state’s commitment to education, and a long-sought compromise on Medicaid expansion. As usual, a big share of new funding – more than two thirds – supported public and higher education. The total amount – $446 million – was 15% less than new money provided in the previous session. However, the Governor and Press praised legislative efforts this year, whereas last year’s appropriations were met by public protest. The debate about Medicaid Expansion, a hot topic in Utah, finally reached a compromise. The plan is not considered “full expansion” under the Affordable Care Act, but it does provide medical coverage to the neediest individuals experiencing poverty. Other notable budget changes include reversal and redirection of several transportation tax earmarks, and funding to challenge the federal government over control of public land.
With great anticipation, the 2015 Washington state legislative 105-day long session convened Monday January 12 to address a number of legislative issues left on the table at the end of the 2014 legislative session. These issues include amendments to the recreational marijuana statute (Initiative 502) enacted in 2012, oil-transport via rail, minimum-wage, loss of the No Child Left Behind waiver, and gasoline-tax increases for enhancements to the state’s transportation infrastructure. The provisions of the Washington State Constitution outlining the “paramount duty” to amply provide for the basic education of youth remained the virtual elephant in the room, casting a giant shadow over all budget bills.
Wyoming’s general legislative session concluded March 6, 2015 with the passage of 185 bills and nearly $285 million in new spending. Because this was a general session rather than a budget session, very few budget issues were addressed. However, key budgetary matters this year included: (1) addressing a $222 million shortfall brought about by falling oil prices and (2) several new capital construction projects spread across the state and at the University of Wyoming. Wyoming democrats in the legislature were profoundly disappointed by one financial measure, the failure to pass a Medicaid expansion plan. According to Mary Throne, House Minority Floor Leader, “We had the ability to insure 17,000 people and save the state money. We had the support of business, local governments—certainly the support of my community, the largest city in the state—and yet for completely illogical reasons it was rejected."
 This legislative session was a “regular” session rather than a “budget” session, meaning that only supplementary budget issues could be considered. Even-numbered years are reserved for budget sessions, while odd-numbered years are reserved for the general session.