For
years now, critics of the state Legislature have called
on
lawmakers to stop delaying and get to work addressing
Washington’s
core budget problem — namely that it doesn’t bring
in
enough money to sustain its spending.
But
every year, lawmakers seem to find new and creative ways to
postpone
dealing with the underlying problem, usually by balancing
the
budget through some combination of federal aid, tax and fee
increases,
targeted cuts and accounting gimmicks.
Last
fall’s election appeared to mark a turning point. Voters
soundly
rejected Initiative 1098, the state income tax proposal,
and
overwhelmingly approved Initiative 1053, which requires the
Legislature
to receive a two-thirds vote to approve new taxes, or
seek
a vote of the people. Voters also repealed the tax on bottled
water,
soda and candy that lawmakers imposed just months earlier
as part
of last year’s patchwork budget fix.
Pundits
and politicians agreed. The voters sent Olympia
a
loud and clear message: Fix the state’s budget problems
without
raising taxes.
But
even if there was broad agreement on the message,
there
was still plenty of room to differ on a response to it.
Republicans,
still in the minority in both houses but with
greater
numbers as a result of the November election, seized
the
moment and raised the volume of their cry for a reset of
state
government.
“Judging
from the clear messages sent earlier this month,
the
people of Washington are ready, just as Senate Republicans
are,
for a ‘reset’ of state government,” Sen. Joseph Zarelli, the
caucus’
budget leader, said before Thanksgiving.
Similar
statements came from Democrats. “We’re going to
prioritize,
and if it doesn’t fit, it’s not going to be funded,” Rep.
Jeff
Morris, D-Mount Vernon, said shortly after the election.
Yet
majority Democrats resisted calls for an early special
session
to begin addressing the budget shortfall, and some
in
the party bristled at Gov. Chris Gregoire’s proposal to
eliminate
the state Basic Health Plan.
Even
after years of lawmakers of both parties stating
publicly
that it’s time to make fundamental changes in
Olympia,
it was clear that sharp differences remained
over
exactly what that means. Figuring out how to resolve
those
differences will be the central tension of this year’s
legislative
session.
Lawmakers
finally
met
for a one-day
special
session in
e
a r l y D e c e m b e r
after
Gregoire issued
an
ultimatum. The
result:
Rare bipartisan
agreement
on a bill
that
cut nearly $600
million
f rom the
2009-11
budget deficit.
Zarelli
said the deal
represented
a move
in
the right direction
and
Gregoire hailed
the
accomplishment.
“Let
me say I am very
proud
of what the
Legislature was able
to do today and how
they did it,” she said.
But Sen. Mike
Hewitt, R-Walla
Walla predicted the
spirit of bipartisan
cooperation would
not spill over into this year's
session. “This is an
aberration,” Hewitt
told The Seattle
Times. “These were
decisions that had
to be made because
of the shortness of time, and when we get into the regular
session I would not see this amiable love ship forever.”
HOW WE GOT HERE
Lawmakers received the bad news Nov. 18: The state’s
projected revenue had dropped unexpectedly by another
$385 million, raising the shortfall for the 2009-11 budget
to $1.1 billion. The estimated budget gap through 2013 had
ballooned to $5.7 billion.
The sluggish economic recovery was blamed for the grim
report, but the economy isn’t the only problem. Years of
spending increases are also a factor. Despite the troubled
economy, total state spending in Washington has increased
a total of 43 percent in the last five budget cycles, according
to a report by the Washington Policy Center. During the
same period, the state’s population grew only 11 percent, and
inflation increased just 19 percent.
As bad as things are, there are signs that the state’s economy
is already improving, too. Virtually every state in the country,
including Washington, expects total tax collections to grow
in fiscal year 2011, according to the National Conference of
State Legislatures. Three states — Washington, Oregon and
Colorado — are expected to see tax collections rise more than
10 percent.
Washington’s total collections are expected to
grow by 14 percent, the group reported. Other estimates peg
the growth at 16 or 17 percent. The increase is fueled in part
by an estimated $700 million from the new taxes lawmakers
imposed last year, but even without those, the growth in tax
collections would be approximately 9 percent.
Washington’s total tax collections are predicted to return
to 2008’s peak level during fiscal year 2012, according to the
National Conference of State Legislatures.
So why the crisis? It’s due in large part to the severity of
the recession. It didn’t help, though, that lawmakers avoided
fixing the underlying problem sooner. “The problem,” says
Jason Mercier of the Washington Policy Center, “is that we didn’t
really align spending in the last budget. We rolled
the dice that the economy would bail us out.”
LOOK TO PRIVATE SECTOR
Soon after the disastrous November revenue forecast, officials
announced a plan to close the state prison on McNeil Island
in Pierce County, and the governor called for a suspension of
state agency rule-making.
The latter was meant to appease the business community, and the
move was generally well-received. However,
it contained a number of exceptions and was just a start to the
ways in which lawmakers can look to the private
sector to help the economy.
The state’s leading business organizations, including AWB and the
Washington Roundtable, both published
detailed series’ prior to the start of this year’s legislative
session offering suggestions for solving the budget problem.
AWB’s series was aimed at raising the profile of the state’s
private sector economy as lawmakers considered
their options. The first paper called on lawmakers to fix the
state’s workers’
compensation system, and the second looked at the unemployment
insurance
system.
The economy won’t improve significantly until the unemployment
rate drops,
but soaring payroll tax rates are hampering hiring.
The third paper called for fundamental changes in the way the
state spends
tax dollars. To balance the budget for the long-term, lawmakers
must enact
real reforms, prioritize how they spend tax dollars, focus state
resources on
essential services, and resist raising costs on business and
individuals. Specific
proposals called for re-instating the original spending limits
imposed under Initiative 605, restricting the transfer
of money from dedicated funds and allowing agencies to contract
out for services from the private sector.
Another series called Thrive Washington, put out by the Washington
Roundtable
and Washington Research Council, examined key budget issues with
an aim toward
putting forth practical solutions. The second paper in the series,
“Nine Steps to Budget
Sustainability,” made recommendations to integrate priority-based
budgeting with
performance reviews, reduce state workforce and adjust
compensation, consider selling
underused or unnecessary state assets, and use competitive
outsourcing.
Jim Warjone, incoming chairman of the Washington Roundtable and
chairman of Port
Blakely Companies, described the series in a guest piece published
by The Seattle Times.
“The goal must be to restructure operations to create a
sustainable budget that focuses on
services that drive economic growth,” Warjone wrote.
By all accounts, the task facing this year’s crop of lawmakers is
a difficult one, arguably
the most difficult in memory. It’s possible, however, that
something good could come
from it.
“The stars have totally aligned for that reset of government,”
Mercier said.
HOW LAWMAKERS COULD STILL AVOID THE PROBLEM
Given the size of the budget shortfall and the constraints on
raising taxes, it’s all but certain
that lawmakers will be forced to make substantial cuts in state
spending. Possible moves
include eliminating the state’s Basic Health Plan, continuing the
pay freeze for state workers
and adding more furlough days, and not funding Initiative 728 —
the class-size reduction
initiative passed in 2000 — and Initiative 732, which mandates
annual raises for teachers.
Postponing funding of the measures would save more than $1
billion.
But whether the legislative session will end with a true re-sizing
of government is an
open question. Despite claims from the governor and legislators
that the days of “nibbling
around the edges” are gone and that entire programs must be cut,
it’s at least conceivable that
lawmakers could avoid making very many wholesale cuts.
Some
activists have suggested putting a tax measure to the vote of
the
people, a move that may not be politically possible so soon after
the
November election. Even without doing that, lawmakers could
avoid
substantial program eliminations through a combination of lots
of
cutting around the edges, sliding expenses into the next budget, and
possibly
even another federal bailout.
The
governor already indicated she’s willing to consider pushing a
regular
payment to school districts from June 30 to July 1, a move she
admitted
was a “gimmick.” It’s hard to say what kind of other similar
moves
are possible.
Richard
Davis of the Washington Research Council estimated that
the
hard budget deficit was really more in the range of $2 billion to $2.5
billion.
The balance of the deficit consisted of items that lawmakers
have
pledged to pay for but have not yet funded.
“My
guess is that about half that will be solved by gimmicks,”
Davis
said. “They can always kick the can forward by promising to do
something
later.”
Lawmakers
may get a better sense next month of whether the
economy
will recover fast enough to soften the blow of this session’s
budget
cutting. The latest revenue forecast is due out in March.
“My
prediction is they’re not going to do anything more than
they
have to,” Davis said. “Structural changes take a while for
savings
to be realized, so I don’t think we’ll see as much of that as
we
would have hoped.”
