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Dick Davis Column: Get a Grip on State Spending |
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Written On: July/August 2005 |
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Written By: By Richard S. Davis - President, Washington Research Council |
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Back in the dot-com heyday, I read about a guy who financed his start-up by taking every credit card offer that came his way, borrowing to the hilt, and paying minimums until business took off. In those days, that passed for cleverness. More recently, I saw that the magazine that reported the story had shrunk to next to nothing, a victim of the burst bubble. No one is buying blue sky today.
No one, perhaps, except our state Legislature, which passed a budget nearly everyone agrees we cannot afford. It has to do with what budget analysts call sustainability, living within your means. If expenses consistently grow faster than revenues, the spending is unsustainable. As credit card entrepreneurs eventually learned, the plan has to come together before the bills come due.
When lawmakers passed their budget, many analysts projected a shortfall of a billion dollars or more going into the 2007 legislative session. An updated forecast came out in mid-June, adding nearly $500 million to expected revenues. That bit of good news is a reprieve, not a pardon. While it boosts the estimated beginning general fund balance to $628 million for the 2007-2009 biennium, state analysts still forecast a shortfall of around $600 million. A big 2006 supplemental budget would, of course, make everything worse.
Not even much of a reprieve, really.
This bleak analysis focuses solely on the general fund. Many of the state’s budget problems occur off center stage in dedicated accounts shakily supported by narrow and dwindling tax bases. For example, the Health Services Account relies heavily on cigarette and alcohol taxes to pay the costs of the Basic Health Plan. Those revenues grow at an average rate of 1 to 2 percent, while program costs grow by 7 to 10 percent. The new Education Legacy Trust account, created this year to fund class-size reduction and add enrollment capacity in the state colleges, faces a similar mismatch, relying as it does on cigarette and estate taxes to pay for the fresh entitlement.
Gov. Christine Gregoire and legislative leaders used the full array of fiscal maneuvers to find money, avoiding a general tax increase, but doing little to stem spending. And they still raised sin and estate taxes, buying themselves a little time while creating unrealistic expectations for future budgets.
Such fixes delay the inevitable. No imaginable revenue growth keeps pace with the Legislature’s current spending trajectory. Yet, lawmakers continue to bet on an unlikely future that involves neither a general tax increase nor sharp spending cuts.
As a fiscal Dr. Phil might say, denial is not a strategy. Shortly after she released her budget, Gov. Gregoire pledged to work toward budget sustainability. She instituted a Government Management and Accountability Program to increase productivity and accountability. And she hired Steve Hill, a former Weyerhaeuser executive and HR consultant, to get control of health care spending.
These are necessary steps. Without a doubt, the executive branch can operate more efficiently. Opportunities for competitive sourcing—involving business in delivering government services—have increased under the statute that expanded collective bargaining. Leadership from the governor’s office will make those opportunities reality.
Washington employers recognize the risks. They provide more than half the tax dollars supporting state and local government. And they suspect they’ll bear a disproportionate share of any future tax hike. Employers require the stability of a sustainable budget that protects essential public services.
The budget reprieve gives policy-makers a little more time to bring spending in line with revenues. The state has maxed out its credit card. Lawmakers have no choice but to rein in spending.
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