This year, the summertime blues come awash in red ink. High gas prices, a sluggish economy, a bearish Wall Street outlook, and the continuing credit crunch combine to take the shine off summer’s late arrival. Calling a no-travel vacation a “staycation” doesn’t make it more fun, although Washingtonians enjoy more opportunities for close-in recreation than most Americans.

For the folks charged with responsibility for managing and drafting the state budget, there’s not much getting away anyway. There’s too much work and worrying to do. On June 19 the Economic and Revenue Forecast Council adopted a new forecast for the current and next budget cycles, cutting another $170 million from estimated revenues for the combined biennia. Most observers saw that as good news, in that the reduction amounted to less than one-half of 1 percent of available revenues. Given the gloomy national picture, it could have been worse. It may be worse when the next forecast is delivered in September.

One reason for the relatively modest adjustment: The big slice had already been taken in February, when the forecast council cut $423 million from the 2007-2009 estimate. That February forecast also provided the first official estimate of revenue collections for the coming biennium — sluggish growth.

Shortfall exceeds 2.7 billion
Following the June forecast, the nonpartisan Senate Ways and Means Committee updated its six-year budget outlook for the state budget. As expected, the new fiscal picture shows maintenance-level spending exceeding revenues by $2.7 billion in the next budget cycle.

Make no mistake; red ink stained the budget long before the economy slowed. In March 2007, the members of the Coalition of Washington Business Organizations (COWBO) wrote to state senators:

“ ... the state cannot continue to spend more than it takes in. Increasing spending 15 percent while revenues grow 7.5 percent is not responsible. Coming on the heels of a 2005-2007 budget that increased Near General Fund State spending 13 percent, this budget virtually guarantees substantial shortfalls in the foreseeable future.”

Similar COWBO messages were delivered to the governor and House of Representatives during budget deliberations. At the time, press coverage of the 2007-2009 budget unfailingly carried predictions of the perils of adopting an unsustainable budget. The warnings were brushed away and critics dismissed as naysayers. There was money to spend and, regrettably, the will to spend it.

While the economic slowdown contributed to the state’s budget problems, normal revenue growth would not have been sufficient to sustain the sharp spending growth of the last four years. And it looks like we won’t see normal revenue growth for a while.

In late June, WashACE published a Competitiveness Brief that summarized the problem this way: “The [$2.7 billion] gap reflects a structural deficit that was largely put into place over the last three years as a booming economy allowed budget writers to fund programs that were not sustainable in the long run.”

Or, as it happens, in the short run, either.

AWB concerned about state spending
Granted, things will change between now and next January. There are two more revenue forecasts — in September and November — but no one’s betting on a strong revenue surge. On the other side of the fiscal equation, caseload forecasts will influence estimates of maintenance-level spending. Demands for government programs — social services, health care, education — tend be countercyclical, escalating when the economy dips. So, again, there is little reason to see the budget gap closing.

That makes the state budget a dominant concern for AWB members and others concerned about the Washington business climate. The sizeable increases in state spending did not occur by accident: Behind each appropriation stands an interest group that championed the “investment.” Ultimately, though, the adopted budgets spent too much and saved too little. Now, it’s time for restraint. Encouragingly, the governor’s office has indicated that she will be using the Priorities of Government process instituted by Gov. Gary Locke in 2002, when he faced a $2.5 billion deficit in the 2003-2005 biennium.

That’s a start. Locke recognized that tax hikes would have imposed an unacceptable drag on an economy struggling to recover from recession. A similar commitment will be necessary now. That means saying ‘no’ to the interest groups that championed the free spending of the last few years.

Businesses facing escalating costs for energy and fuel, entrepreneurs struggling with startup costs, and retailers feeling the pinch of constrained consumer spending cannot afford higher taxes. Taking more money out of consumers’ pockets will simply accelerate the economic decline.

The clearly foreseen day of reckoning has arrived. Lawmakers need to set priorities now and manage the budget within available revenues. It won’t be easy. But it can and must be done. In the coming months, as they ask for your vote, ask them how they’ll deal with the budget problem.