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Legislature: To Spend or Not to Spend |
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Written On: January 2006 |
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Written By: by Paul Schlienz |
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This question hangs over the 2006 legislative session.
Unlike previous sessions that were dominated by wrangling over budget shortfalls, the state is now in the enviable position of having more money than it needs thanks to an upturn in the economy, which resulted in a projected $1.4 billion budget surplus. Now there’s the question of what to do with this money.
"We need to keep a good, healthy reserve in the state," said Sen. James Honeyford, R-Sunnyside, the Senate’s Republican caucus chair.
Honeyford is a strong proponent of establishing a state rainy day fund of at least $500 million that the Legislature would only be able to access in emergencies.
Reflecting the thinking of the Senate’s GOP leadership, Honeyford also insists on the need for using some of the surplus to cover state pension funds left exposed at the end of the 2005 legislative session and putting additional funds into heating pre-schools.
In general, the Legislature’s Republican minority supports holding on to the surplus except in instances where there are unanticipated, unmanageable changes in entitlement caseloads; where corrections are needed to remedy serious technical errors in the original budget; when emergencies occur; and when there are opportunities to reduce state government costs.
Gov. Christine Gregoire, too, emphasizes the need to resist the impulse to simply spend the budget surplus. While calling for some targeted investments, she is insisting that a significant portion of the surplus be saved as a cushion against a possible economic slowdown and to meet rising costs for existing state services.
"We can avoid tax increases to support existing state programs if we spend wisely and save," Gregoire said. "That is the stability that I want in state government, but we are not standing still."
In contrast, the Legislature’s Democratic leadership has indicated it will push to use much of the surplus to fund existing legal obligations, including the state employee pension system, paying for caseload increases in the K-12 school system and corrections system, and for enrollment increases in the state’s higher education system.
Not all legislative Democrats, however, agree with their leadership’s emphasis on spending the surplus instead of saving it.
"We should hold on to as much money as we can," remarked Sen. Tim Sheldon, D-Potlatch. "We have such a volatile economy that it’s important to have a healthy reserve."
Meanwhile, the business community is echoing Sheldon’s thinking by calling for restraint in spending the surplus.
"Our message to the Legislature is to use some of that money in paying down the debt and funding the pension plans; then bank the rest so that in 2007 the state doesn’t have to tax businesses to make up for a shortfall," said AWB’s Vice President of Governmental Affairs Gary Chandler.
Chandler also hopes the Legislature will follow the Priorities of Government budget model—which ranks government services in order of need and funds them according to priority. This system was successfully utilized by the Legislature and Gov. Gary Locke, in 2003, and produced a budget that added no new tax burden to Washington’s business community.
Will 2003 UI Reforms Survive?
Unemployment insurance, an issue of great interest to the business community, has received much attention since 2003, when the Legislature made significant changes to the system. The 2003 reforms changed the unemployment-benefit calculations from the two highest quarters to four-quarter averaging, based on what an employee earns throughout the entire year. However, during the 2005 session, the Legislature passed EHB 2255, which switched the calculation back to two-quarter averaging, which has increased costs for employers. This change to two quarter averaging is, however, due to sunset on June 30, 2007.
EHB 2255 set up a task force including legislators and representatives of business and labor who met throughout the second half of 2005 to examine the unemployment insurance system and make recommendations to the 2006 Legislature.
The business community remains concerned that labor and its allies in the Legislature may attempt to make two-quarter averaging permanent.
"That is something that we absolutely cannot allow to happen," AWB Governmental Affairs Director Mellani McAleenan said, commenting on the prospect of the sunset provision on two-quarter averaging being removed. "Without the sunset, two-quarter averaging would financially strain the unemployment insurance system. There would be no choice but to raise taxes to pay for those benefit changes."
Family leave, a highly controversial workplace issue, passed in the Senate but was defeated in the House in 2005. It could, however, return in 2006. The measure, which would have required employers to provide paid family leave for employees, was supported by labor and opposed by business, which would have born its costs.
While it is clear that the business community will oppose it if it returns, it is unclear if 2006 will see a serious attempt to bring back family leave.
"Family leave might come back, but I just don’t know that we’re going to do anything that large this year," House Majority Leader Lynn Kessler, D-Hoquiam, said. "I’d be surprised if we did because we’d like to get out of session in 60 days. If we couldn’t get family leave out of the House last year, I don’t see why we could this year."
The Senate’s Democratic leadership has indicated that family leave is not one of its priorities for 2006.
"I don’t see family leave at this point," Senate Majority Leader Lisa Brown, D-Spokane, said. "I do think the House was pretty clear that family leave wasn’t where they wanted to go last year. So, I don’t think it’s likely this year."
I-912 Defeat Puts Spotlight on Transportation
With the defeat of Initiative 912, which would have rolled back 2005’s gas tax increase, transportation funding has been secured for 2006 and beyond. Undoubtedly, transportation will prove to be a significant issue in the 2006 legislative session.
In 2005, the Legislature used an emergency clause to get around restrictions on tax increases without voter approval in order to raise the gas tax to fund an $8.5 billion transportation plan. The Legislature’s rationale was that projects, including the replacement of Seattle’s decaying Alaskan Way Viaduct, the outmoded 520 bridge and parts of I-90 that are susceptible to rockslides, qualified as emergencies.
Ironically, none of these big ticket projects will break ground for at least four years.
"I-90 will not be worked on until 2011," Chandler said. "The Legislature needs to take another look at these projects. If they’re emergencies, we need to start on them right away."
Sheldon believes projects, like the Alaskan Way Viaduct, are taking too long because the state is evaluating too many alternatives.
"We’re down to the point where we’re really wasting money on studies," Sheldon observed. "The state is evaluating all these alternatives on the viaduct, and that’s not cost effective. I think we’ve set up some priorities, we’re going to build some projects, and the Puget Sound needs to get on board."
According to Brown, the Puget Sound’s regional transportation structure may be retooled or readjusted to make it more efficient.
Chandler also believes the Legislature is overusing the emergency clause.
"The Legislature has to get its credibility back," Chandler stated. "Don’t put emergency clauses on bills because they’re controversial. Put emergency clauses on bills if they’re really emergencies. Out of the 98 bills the Legislature passed in 2005 under an emergency clause, none of them were really emergencies."
Business to Fight Health Care Mandates
In 2005, health care was a major issue in the Legislature. Proposals ranging from allowing state employees to access health savings accounts to the controversial pay-or-play mandate, which would have forced employers to either provide health care for their employees or pay a tax to pay for their enrollment into the state’s Basic Health Plan, were all put on the table.
This year, pay or play is likely to be back in a somewhat truncated form.
"I think Sen. [Karen] Keiser [D-Des Moines] has a scaled-back version of the pay-or-play bill," Brown said, "that would apply to the largest businesses in the state with over 5,000 employees."
In addition, Brown expects to see a bill from the governor related to using evidence-based processes to help control costs and a bill related to partnering with small businesses for coverage.
Assistant House Minority Leader Mike Armstrong, R-Wenatchee, promises to attempt to pass the health savings account legislation that was nearly approved in 2005. He and his caucus also want to reduce health care costs by removing mandates.
"We have 48 mandates right now on health care," Armstrong said. "We need to start removing some of those mandates and allow a basic health care plan that employees and employers can buy. Currently, in this state, you have to pay for the Cadillac version of health insurance. Not everyone needs acupuncture or chiropractic care. If you don’t need those benefits, you shouldn’t have to pay for them."
On the education front, the business community, which worked for years to establish higher educational standards, is very keen on preserving the current system where the Washington Assessment of Student Learning Exam is used to measure student achievement.
"As there have been in the past, we anticipate some moves to lower those standards as kids have had a hard time meeting them," McAleenan said. "We believe that any moves to do that are premature, given that this is the first year that the WASL actually matters."
Rounding out the legislative agenda are environmental land use and energy issues. Among the bills that will be introduced this session are measures that would mandate recycling of electronic waste.
In the realm of land use, Gov. Gregoire may back legislation to revise the state’s Growth Management Act. The exact nature of this legislation was still to be determined at the time this article went to press.
Gov. Gregoire has also made a strong push to make the state a leader in producing biodiesel fuel. This measure could be controversial if it leads to bringing a company from outside the state to produce this resource instead of using local enterprise.
One thing that nearly all participants in the 2006 legislative session appear to agree on is the hope that it will be a quick session.
"I think it is going to be a quick session, but there are some things that are going to have to be addressed," Armstrong said. "Of course, the budget surplus is going to be the top issue. How much do we spend? How much do we give to state agencies? Keep in mind that the budget was raised 12.4 percent over the last biennial budget. How much can we put back into encouraging businesses to thrive in Washington state. That’s got to be our goal."
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