California Journal of Politics and Policy

These reports summarize the 13 western state budgets for the 2018‒2019 fiscal year. The majority of the western states are financially sound, but several states continue to struggle nearly 10 years after the recession.  In this regard, there are stark differences across the states in this region.

Since the early 1980s, Alaska has relied on oil taxes for almost all of its state government revenue.  Like many resource-based economies, including many of the Western states, the result is a boom and bust economy.  With production declining and the price of Alaska’s North Slope crude around $75 per barrel, the state is in a bust cycle, with a large state government deficit.  Although Alaska is experiencing a somewhat improved revenue outlook compared to 2017, the state’s executive and legislative branches continue to wrestle with unpopular political choices; do we implement a state income tax, tap the state’s Permanent Fund sovereign wealth fund (and thereby reduce or eliminate Alaska’s annual Permanent Fund Dividend payment to Alaskan residents), or some combination of those two approaches?  In Spring 2018, the Alaska State Legislature—supported by Independent Governor Bill Walker—chose the first of these options, tapping Alaska’s Permanent Fund to fund state government operations for the first time.  The result is a dramatically improved fiscal position for 2019, and although the state remains in deficit, chances of a balanced budget are much improved.  Use of the Permanent Fund has not been popular, however; a number of incumbents who supported the use Permanent Fund earnings were defeated in November 2018 by opponents who campaigned on the issue.  At the moment, Alaska’s fiscal future remains in doubt.

The FY2019 budget saw the country’s largest movement of teachers descend on the state capital and force Governor Doug Ducey to scramble to save his re-election prospects.  Gradually growing through social media, the #RedforEd movement culminated with 50,000 teachers and supporters walking out of classrooms and descending onto the Capitol grounds. Gov. Ducey deftly rose to the occasion from his initial one percent raise to a 20 percent raise by FY2021 before the walkout commenced, moving the pressure to legislators to seal the deal, which they did on May 3, 2018. Stronger revenue growth than prior years enabled the governor and Legislature to find the necessary funds.

California passed a 2018‒2019 budget with record budget surpluses as the state attention shifted to the upcoming 2018 election. This was Jerry Brown’s final budget after sixteen years as governor, a state record. Brown was concerned the state’s volatile income tax revenues might not hold up during a future recession and wanted to store as much of the surplus away in the state’s emergency “rainy-day” fund. Continuing the annual pattern, Democratic legislators wanted to spend some of the surplus on social services, including the increasing problems of homelessness and affordable housing.  In addition, legislators began to address the long-ignored problem of sexual harassment in the capitol and was on the front line of the #MeToo movement, leading several legislators to resign. Democrats did well in the November elections, leading to an even bluer California.

During the final year of Governor John Hickenlooper's second term as governor the General Assembly passed a state budget including $11.42 billion in General Fund spending that increased funding for nearly every state department. Governor Hickenlooper prioritized increased spending for education and the criminal justice system as Colorado residents also considered tax increases for education and transportation. Colorado’s economic trajectory remains generally positive, and recent budgetary reform has allowed policymakers to make greater investments in key issue areas.

Hawaii adopted a state budget that authorizes $14.3 billion in spending for FY2019. The Aloha State’s economy continues to benefit from record-breaking tourist numbers and robust federal military spending.  Although the state’s unemployment rate is among the lowest ever recorded for any state in the nation, the cost of housing has made it increasingly difficult for working families to purchase a home.  Tax revenues are strong, but they remain very dependent on the tourism industry.  Hawaii also faces huge liabilities for pension and health care payments that are promised to retired state employees.

Like Idaho’s population and economy in general, state budget appropriations have increased moderately each year. The 2018 legislative session focused upon tax changes and continued infrastructure investment. Ongoing challenges in the state include disparity between the regions in terms of economic and population growth and the disconnect between citizen preferences and legislative action in Medicaid gap funding.

Montana uses a biennium budget; there was not a legislative session in 2018.The 65^th Montana Legislature ended its constitutionally mandated 90-day biennium session with a $10.3 billion, two-year all funds budget in April 2017.  The Republican-controlled legislature returned to its contentious tradition. There were several big issues, but due to budget shortfalls, and few policy issues were resolved. Infrastructure bills generally failed, although the first gas tax in decades passed to help with infrastructure needs. Montana’s colleges and universities took significant cuts in their budgets and tuition increased roughly 13 percent. Except for K-12 programs, most state agencies’ budgets were cut. Overall, it was a grim legislative session that produced very few results and resolved few problems. The balanced budget lasted less than two months when revenue projections turned out to be wrong and the governor had to use his authority to further cut expenses, which included layoffs and additional cuts to state agencies and services. It was a session marked by lack of funds and budget cuts across most agencies. As the fall season began, the state budget appeared to be in shambles only months after the session adjourned. A special session was called in November 2017 to address Montana’s $227 million budget shortfall, largely a result of the most expensive state fire season in Montana’s history.  Bills were passed to address the shortfall.  Governor Steve Bullock allowed most of the bills to become law. Although some funding would later be partly restored after the special session for some agencies, most of the cuts remained.

Nevada is experiencing solid economic performance during 2018.  The state budget is resting on a solid foundation in terms of satisfying revenue projections contained in the 2017-2019 biennial budget.  Nevada successfully faced and responded to a state economic environment that was characterized for many years by recession, a budget crisis and political budget fights.  The budget in Nevada is currently stable and Nevada has experienced steady economic improvement during fiscal year 2018–2019.  The Nevada Legislature meets once every two years during odd-numbered years and 2018 represents an off year for the Nevada Legislature.  The off legislative year consists of monitoring economic indicators and the preliminary construction of the new biennial budget. The 2018 General Election represented an election year of great success for Democrats in Nevada. The 2018 General Election produced unified state government with the Democrats looking forward to being solidly in control of Nevada government in 2019.

In January 2018, the New Mexico State Legislature convened for its regular session, a thirty day budget session, per its constitutional mandate. Thirty days later the legislative session ended quietly and the state of New Mexico closed the book on the great recession and a decade of financial and political strife. The 2018 legislature passed a $6.38 billion dollar budget, re-supplied dangerously low general fund reserves, and provided small raises to teachers and state employees. Oil and gas revenues are up, unemployment is slowly coming down and legislative-executive political battles have muted. The balanced budget, signed by the governor in early March, brings the state back to where it began almost 10 years before, leading one observer to refer to the time as the “lost decade in New Mexico” (Cole 2018).

The 2018 midterm elections strengthened the Democrats’ control of Oregon’s state government. Governor Kate Brown won re-election with 50percent of the vote defeating moderate Republican Knute Buehler with 46.6percent of the vote.  Democrats also increased their seats in both the House and Senate, leading to super majorities in both houses. Governor Brown and the Democrats in Salem have taken fairly strong progressive policy stances in 2017 and 2018, particularly opposing President Trump’s immigration and marijuana policies, reinforcing the West Coast carbon-reduction pattern, and strongly supporting health care coverage expansion. With a booming economy and unemployment at record lows, the state seems to be able to deliver on its progressive agenda for the 2017-19 biennium, but funding progressive policies in the future will be a challenge for the governor for a variety of reasons. The fate of this progressive vision depends on five elements: (1) the continuation of the favorable economy and the corresponding revenue growth in the approaching budget cycle; (2) the ability to manage the ongoing taxing and spending structures that include major obligations for the Public Employees Retirement System (PERS); (3) the constraints of ongoing dependency on income taxes; (4) the vicissitudes of Trump era politics and policy with declining federal funds; and (5) continued public support for expansive public policies.

The Utah Legislature faced two major budget and tax policy challenges leading into the 2018 General Legislative Session: federal tax reform and a citizen’s initiative to increase public school funding.  Together, the two created a unique opportunity for legislators to re-balance the state tax system and generate additional revenue for public education. During the session, Legislators addressed these issues as well as homelessness, Medicaid expansion, transportation investments, and others.   By the end of the 45-day session, the state had a $16.8 billion budget for FY19, which was a 3.8 percent increase over the budget passed by legislators for FY18. This report provides details about the FY19 budget, examines the budgeting process, provides highlights on key budgetary items, and discusses the economic and demographic factors that impacted the budget.

As a state that overwhelmingly relies on sales tax revenue, Washington benefitted from a strong economy in 2018.  However, that revenue was necessary as the state faced a court ordered deadline to fully fund K-12 education, and a need to address transportation, mental health, and a capital budget held over from the 2017 session. This is all in addition to creating a new Department of Children, Youth and Families.  The state government was under unified government for the first time since 2012 which may have contributed to the state completing its work in a supplemental budget year on time and adjourning by the March deadline.

The Wyoming Legislature concluded its 2018 twenty-day budget session on March 15^th, a few days beyond its normally allotted time. The Legislature was able to meet longer than four weeks this year without holding a special session because it had three days left over from last year.  In large part, the extended session was the result of the House and Senate’s inability to agree over education and construction spending.  The nearly $3 billion general fund biennial budget includes small increases for local governments ($105 million), strengthening cybersecurity ($2.2 million), senior centers ($200 thousand), an allotment to pay off the Capitol Square construction project, and additional funding for community colleges.  According to Jim Magagna, executive vice president of the Wyoming Stock Growers Association, collegiality, something that has long been a hallmark of Wyoming’s Legislature, has significantly diminished this year with important divisiveness within the majority party (Rogers 3/23/18).  A major sticking point, the state’s $850 million structural budget deficit, was never fully resolved.  Here, the deficit is going to be paid mostly out of savings and unrealized capital gains from the state’s investments in the stock market. The state’s final budget keeps funding levels for most of state government generally stable, with increases in spending on social services that former Govenor Matt Mead argued were hit too hard by cuts passed during the previous legislative session (Rosenfeld 3/10/18). Cuts were felt in many agencies, with some program elimination, but seemingly little disruption to most state services.