H-0391.2

HOUSE BILL 1225

ByRepresentatives Couture, Connors, Low, Jacobsen, Rude, McClintock, Keaton, Walsh, Ley, Dufault, Barnard, and Caldier

AN ACT Relating to reforming the Washington state budgeting process through requiring prioritized spending on essential state functions, placing limitations on state spending and revenue proposals, and requiring accountability for every dollar spent within the state budget; amending RCW 43.88.030 and 43.88.055; adding new sections to chapter 43.88 RCW; creating a new section; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1. The legislature recognizes that the exponential growth of state operating budgets is imprudent, unsustainable, and threatens the ability of the state to provide essential services to Washington citizens. While caseloads for essential programs have fallen and revenue collections have reached record levels, the pernicious trend of vastly growing budgets focused on nonessential luxury spending has led to one of the largest budget deficits in state history.

These exponential increases in state budgets have come with little benefit to the citizens of Washington state. Over the past decade, Washington state has experienced declining student test scores, fewer students attending postsecondary education, significant spikes in the number of unsheltered homeless individuals in our communities, stagnant carbon emissions, skyrocketing violent crime rates, a worsening housing shortage, severe increases in the cost of housing, steep drops in business climate, and has become one of the least affordable states for working families in the nation. Despite the multitude of promises made about increased state spending to fix these crises, this legislature has unequivocally failed to deliver on these commitments.

Therefore, the legislature intends to reform the state budgeting process to require accountability for every taxpayer dollar spent, ensure that lawmakers prioritize spending on essential services prior to luxury spending items or tax increases, and place limitations on state spending to ensure fiscal discipline and responsibility.

Sec. 2. RCW 43.88.030 and 2023 c 474 s 8035 are each amended to read as follows:

(1) The director of financial management shall provide all agencies with a complete set of instructions for submitting biennial budget requests to the director at least three months before agency budget documents are due into the office of financial management. The budget document or documents shall consist of the governor's budget message which shall be explanatory of the budget and shall contain an outline of the proposed financial policies of the state for the ensuing fiscal period, as well as an outline of the proposed six-year financial policies where applicable, and shall describe in connection therewith the important features of the budget. The biennial budget document or documents shall also describe performance indicators that demonstrate measurable progress towards priority results. The message shall set forth the reasons for salient changes from the previous fiscal period in expenditure and revenue items and shall explain any major changes in financial policy. Attached to the budget message shall be such supporting schedules, exhibits and other explanatory material in respect to both current operations and capital improvements as the governor shall deem to be useful to the legislature. The budget document or documents shall set forth a proposal for expenditures in the ensuing fiscal period, or six-year period where applicable, based upon the estimated revenues and caseloads as approved by the economic and revenue forecast council and caseload forecast council or upon the estimated revenues and caseloads of the office of financial management for those funds, accounts, sources, and programs for which the forecast councils do not prepare an official forecast. Revenues shall be estimated for such fiscal period from the source and at the rates existing by law at the time of submission of the budget document, including the supplemental budgets submitted in the even-numbered years of a biennium. However, the estimated revenues and caseloads for use in the governor's budget document may be adjusted to reflect budgetary revenue transfers and revenue and caseload estimates dependent upon budgetary assumptions of enrollments, workloads, and caseloads. All adjustments to the approved estimated revenues and caseloads must be set forth in the budget document. The governor may additionally submit, as an appendix to each supplemental, biennial, or six-year agency budget or to the budget document or documents, a proposal for expenditures in the ensuing fiscal period from revenue sources derived from proposed changes in existing statutes.

The budget document or documents shall also contain:

(a) Revenues classified by fund and source for the immediately past fiscal period, those received or anticipated for the current fiscal period, and those anticipated for the ensuing biennium;

(b) The undesignated fund balance or deficit, by fund;

(c) Such additional information dealing with expenditures, revenues, workload, performance, and personnel as the legislature may direct by law or concurrent resolution;

(d) Such additional information dealing with revenues and expenditures as the governor shall deem pertinent and useful to the legislature;

(e) Tabulations showing expenditures classified by fund, function, and agency;

(f) The expenditures that include nonbudgeted, nonappropriated accounts outside the state treasury;

(g) Identification of all proposed direct expenditures to implement the Puget Sound water quality plan under chapter 90.71 RCW, shown by agency and in total; and

(h) Tabulations showing each postretirement adjustment by retirement system established after fiscal year 1991, to include, but not be limited to, estimated total payments made to the end of the previous biennial period, estimated payments for the present biennium, and estimated payments for the ensuing biennium.

(2) The budget document or documents shall include detailed estimates of all anticipated revenues applicable to proposed operating or capital expenditures and shall also include all proposed operating or capital expenditures. The total of beginning undesignated fund balance and estimated revenues less working capital and other reserves shall equal or exceed the total of proposed applicable expenditures. The budget document or documents shall further include:

(a) Interest, amortization and redemption charges on the state debt;

(b) Payments of all reliefs, judgments, and claims;

(c) Other statutory expenditures;

(d) Expenditures incident to the operation for each agency;

(e) Revenues derived from agency operations;

(f) Expenditures and revenues shall be given in comparative form showing those incurred or received for the immediately past fiscal period and those anticipated for the current biennium and next ensuing biennium;

(g) A showing and explanation of amounts of general fund and other funds obligations for debt service and any transfers of moneys that otherwise would have been available for appropriation;

(h) Common school expenditures on a fiscal-year basis;

(i) A showing, by agency, of the value and purpose of financing contracts for the lease/purchase or acquisition of personal or real property for the current and ensuing fiscal periods; and

(j) A showing and explanation of anticipated amounts of general fund and other funds required to amortize the unfunded actuarial accrued liability of the retirement system specified under chapter 41.45 RCW, and the contributions to meet such amortization, stated in total dollars and as a level percentage of total compensation.

(3) The governor's operating budget document or documents shall reflect the statewide priorities as required by RCW 43.88.090.

(4) The governor's operating budget document or documents shall identify activities that are not addressing the statewide priorities.

(5)(a) Beginning in the 2021-2023 fiscal biennium, the governor's operating budget document or documents submitted to the legislature must leave, in total, a positive ending fund balance in the general fund and related funds.

(b) Beginning in the 2021-2023 fiscal biennium, the projected maintenance level of the governor's operating budget document or documents submitted to the legislature must not exceed the available fiscal resources for the next ensuing fiscal biennium.

(c) For purposes of this subsection:

(i) "Available fiscal resources" means the beginning general fund and related funds balances and any fiscal resources estimated for the general fund and related funds, adjusted for proposed revenue legislation, and with forecasted revenues ((adjusted))pursuant to ((the greater of (A))) the official general fund and related funds revenue forecast for the ensuing biennium((, or (B) the official general fund and related funds forecast for the second fiscal year of the current fiscal biennium, increased by 4.5 percent for each fiscal year of the ensuing biennium)).

(ii) "Projected maintenance level" means estimated appropriations necessary to maintain the continuing costs of program and service levels either funded in the governor's budget document or documents submitted to the legislature or mandated by other state or federal law, adjusted by the estimated cost of proposed executive branch legislation, and the amount of any general fund moneys projected to be transferred to the budget stabilization account pursuant to Article VII, section 12 of the state Constitution. Proposed executive branch legislation does not include proposals by institutions of higher education, other separately elected officials, or other boards, commissions, and offices not under the authority of the governor that are not funded or assumed in the governor's budget document or documents submitted to the legislature.

(iii) "Related funds" has the meaning defined in RCW 43.88.055.

(d) (b) of this subsection (5) does not apply:

(i) To any governor-proposed legislation submitted to the legislature that makes net reductions in general fund and related funds appropriations to prevent the governor from making across-the-board reductions in allotments for these particular funds as provided in RCW 43.88.110(10); or

(ii) In a fiscal biennium for which the governor proposes appropriations from the budget stabilization account pursuant to Article VII, section 12(d)(ii) of the state Constitution.

(6) A separate capital budget document or schedule shall be submitted that will contain the following:

(a) A statement setting forth a long-range facilities plan for the state that identifies and includes the highest priority needs within affordable spending levels;

(b) A capital program consisting of proposed capital projects for the next biennium and the two biennia succeeding the next biennium consistent with the long-range facilities plan. Insomuch as is practical, and recognizing emergent needs, the capital program shall reflect the priorities, projects, and spending levels proposed in previously submitted capital budget documents in order to provide a reliable long-range planning tool for the legislature and state agencies;

(c) A capital plan consisting of proposed capital spending for at least four biennia succeeding the next biennium;

(d) A strategic plan for reducing backlogs of maintenance and repair projects. The plan shall include a prioritized list of specific facility deficiencies and capital projects to address the deficiencies for each agency, cost estimates for each project, a schedule for completing projects over a reasonable period of time, and identification of normal maintenance activities to reduce future backlogs;

(e) A statement of the reason or purpose for a project;

(f) Verification that a project is consistent with the provisions set forth in chapter 36.70A RCW;

(g) A statement about the proposed site, size, and estimated life of the project, if applicable;

(h) Estimated total project cost;

(i) For major projects valued over five million dollars, estimated costs for the following project components: Acquisition, consultant services, construction, equipment, project management, and other costs included as part of the project. Project component costs shall be displayed in a standard format defined by the office of financial management to allow comparisons between projects;

(j) Estimated total project cost for each phase of the project as defined by the office of financial management;

(k) Estimated ensuing biennium costs;

(l) Estimated costs beyond the ensuing biennium;

(m) Estimated construction start and completion dates;

(n) Source and type of funds proposed;

(o) Estimated ongoing operating budget costs or savings resulting from the project, including staffing and maintenance costs;

(p) For any capital appropriation requested for a state agency for the acquisition of land or the capital improvement of land in which the primary purpose of the acquisition or improvement is recreation or wildlife habitat conservation, the capital budget document, or an omnibus list of recreation and habitat acquisitions provided with the governor's budget document, shall identify the projected costs of operation and maintenance for at least the two biennia succeeding the next biennium. Omnibus lists of habitat and recreation land acquisitions shall include individual project cost estimates for operation and maintenance as well as a total for all state projects included in the list. The document shall identify the source of funds from which the operation and maintenance costs are proposed to be funded;

(q) For any capital budget request for funding in the 2023-2025 or 2025-2027 fiscal biennia by an institution of higher education to address a cost increase for any major project, a statement describing the unexpected project costs, ways the agency has mitigated or will mitigate the estimated project costs, and identification of other funding that may be applied to the project. For purposes of this subsection (6)(q):

(i) "Cost increases" means total project costs estimated above those listed in the prior agency budget request and for which the legislature relied in making a funding decision for design or construction, adjusted for C-100 inflation factors; and

(ii) "Institution of higher education" has the meaning provided in RCW 28B.10.016;

(r) Such other information bearing upon capital projects as the governor deems to be useful;

(s) Standard terms, including a standard and uniform definition of normal maintenance, for all capital projects; and

(t) Such other information as the legislature may direct by law or concurrent resolution.

For purposes of this subsection (6), the term "capital project" shall be defined subsequent to the analysis, findings, and recommendations of a joint committee comprised of representatives from the house capital appropriations committee, senate ways and means committee, legislative evaluation and accountability program committee, and office of financial management.

(7) No change affecting the comparability of agency or program information relating to expenditures, revenues, workload, performance and personnel shall be made in the format of any budget document or report presented to the legislature under this section or RCW 43.88.160(1) relative to the format of the budget document or report which was presented to the previous regular session of the legislature during an odd-numbered year without prior legislative concurrence. Prior legislative concurrence shall consist of (a) a favorable majority vote on the proposal by the standing committees on ways and means of both houses if the legislature is in session or (b) a favorable majority vote on the proposal by members of the legislative evaluation and accountability program committee if the legislature is not in session.

Sec. 3. RCW 43.88.055 and 2021 c 199 s 103 are each amended to read as follows:

(1) The legislature must adopt a four-year balanced budget as follows:

(a) Beginning in the 2013-2015 fiscal biennium, the legislature shall enact a balanced omnibus operating appropriations bill that leaves, in total, a positive ending fund balance in the general fund and related funds.

(b) Beginning in the 2013-2015 fiscal biennium, the projected maintenance level of the omnibus appropriations bill enacted by the legislature shall not exceed the available fiscal resources for the next ensuing fiscal biennium.

(2) For purposes of this section:

(a) "Available fiscal resources" means the beginning general fund and related fund balances and any fiscal resources estimated for the general fund and related funds, adjusted for enacted legislation, and with forecasted revenues ((adjusted))pursuant to ((the greater of (i))) the official general fund and related funds revenue forecast for the ensuing biennium((, or (ii) the official general fund and related funds forecast for the second fiscal year of the current fiscal biennium, increased by 4.5 percent for each fiscal year of the ensuing biennium));

(b) "Projected maintenance level" means estimated appropriations necessary to maintain the continuing costs of program and service levels either funded in that appropriations bill or mandated by other state or federal law, and the amount of any general fund moneys projected to be transferred to the budget stabilization account pursuant to Article VII, section 12 of the state Constitution;

(c) "Related funds," as used in this section, means the Washington opportunity pathways account, the workforce education investment account, the fair start for kids account, and the education legacy trust account.

(3) Subsection (1)(a) and (b) of this section does not apply to an appropriations bill that makes net reductions in general fund and related funds appropriations and is enacted between July 1st and February 15th of any fiscal year.

(4) Subsection (1)(b) of this section does not apply in a fiscal biennium in which money is appropriated from the budget stabilization account pursuant to Article VII, section 12(d)(ii) of the state Constitution.

NEW SECTION.  Sec. 4. A new section is added to chapter 43.88 RCW to read as follows:

(1) As used in this section, unless the context clearly requires otherwise:

(a) "Agency activity" means major activities of state agencies pursuant to RCW 43.88.090 and described in the office of financial management's agency activity inventory for the appropriate biennium.

(b) "Program" means a service or a group of services designed to accomplish a specific public goal and result in specific public benefits except for those entitlement services listed in the definition of "caseload" under RCW 43.88C.010 (7) and (12). For the zero-based budget review under this section, a program is any distinguishable service or unit that makes up an agency activity. In most cases, an agency activity will encompass several programs, although in some cases the agency activity could be one program.

(c) "Zero-based budget review" means:

(i) Information and analysis regarding an agency's programs prepared by the agency as required by subsection (3) of this section that must be included as a separate document in an agency's biennial budget request under this chapter; and

(ii) Consideration of the information provided under (c)(i) of this subsection by the governor and the legislature during the budget development process.

(2) Beginning in 2026 and in each even-numbered year thereafter, the legislature must specify, in the omnibus operating appropriations act or in other legislation, programs for which agencies must perform a zero-based budget review under subsection (3) of this section. It is the intent of the legislature that 20 percent of all state programs be subject to a zero-based budget review each biennium, so that every program receives a zero-based budget review within a 10-year cycle. When selecting programs for review, the legislature may specify programs by functional area, such as education, health care, other human services, natural resources, and general government, or may specify programs as prioritized by the legislature. When selecting programs for a zero-based budget review for a particular biennium, the legislature may broaden or narrow the definition of program for specific agencies.

(3) Beginning with biennial budget requests for the 2027-2029 fiscal biennium and with each biennial budget request thereafter, agencies must submit zero-based budget reviews for the programs identified by the legislature for review that biennium under subsection (2) of this section. Information and analysis submitted by agencies for the zero-based review under this section shall include:

(a) A statement of the statutory basis or other basis for the creation of each program and the history of each program that is being reviewed;

(b) A description of how each program fits within the strategic plan and goals of the agency and an analysis of the quantified objectives of each program within the agency;

(c) Any available performance measures indicating the effectiveness and efficiency of each program;

(d) A description with supporting cost and staffing data of each program and the populations served by each program, and the level of funding and staff required to accomplish the goals of the program if different than the actual maintenance level;

(e) An analysis of the major costs and benefits of operating each program and the rationale for specific expenditure and staffing levels;

(f) An analysis estimating each program's administrative and other overhead costs;

(g) An analysis of the levels of services provided;

(h) Where applicable, an analysis estimating the amount of funds or benefits that actually reach the intended recipients; and

(i) Other information and analysis requested by the legislature in the legislation identifying the agency programs for review under subsection (2) of this section.

(4)(a) The governor and legislature shall consider the information and analysis provided by agencies under this section in the budget development process. The house of representatives appropriations committee and the senate ways and means committee shall hold at least one public hearing on the information and analysis submitted by agencies under the zero-based budget review.

(b) The information and analysis submitted by agencies under the zero-based budget review process must be filed electronically with the state's fiscal website managed by the legislative evaluation and accountability program committee.

NEW SECTION.  Sec. 5. A new section is added to chapter 43.88 RCW to read as follows:

(1) The legislature must enact appropriations for state operating expenditures in separate, prioritized appropriations bills as required by this section.

(a) Operating appropriations must be enacted in separate bills for the following purposes:

(i) First: For payment of principal and interest on outstanding debt of the state.

(ii) Second: For basic public education of children in grades kindergarten through 12.

(iii) Third: For assessing and collecting state revenue.

(iv) Fourth: For public safety.

(v) Fifth: For public health.

(vi) Sixth: For public assistance programs.

(vii) Seventh: For all other state purposes.

(viii) Eighth: For the legislature, judiciary, and statewide elected officials in the executive branch.

(b) Operating appropriations bills must be enacted in the priority order established in (a) of this subsection. Before either house of the legislature may take a final vote on legislation that raises state taxes, it must first enact operating appropriations legislation that funds the maximum number of operating appropriations bills in priority order with revenues projected for collection under existing tax laws.

(c) To implement the requirements of this section, the legislature must assign agencies to one of the priority categories in (a) of this subsection. The legislature may divide the activities of an agency among multiple categories, but it is not required to do so.

(d) For purposes of this section, "raises state taxes" means any action by the legislature that imposes a new tax, expands a tax base, or increases an existing rate of taxation, including modifications to any tax preference, where such action increases state tax revenue deposited in any state account appropriated in state operating budget legislation.

(e) For purposes of this section, revenue projections are made by the economic and revenue forecast council as established in law, or its successor entity.

(2) The legislature must enact all biennial appropriations bills for operating, transportation, and capital purposes no later than 30 days before the beginning of the fiscal biennium for which the appropriations are made.

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