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Dick Davis Column: Lawmakers face a rough budget ride |
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Written On: November/December 2006 |
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Written By: By Richard S. Davis - President, Washington Research Council |
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Election day divides the political season. Before the votes are cast, we’re like schoolyard captains choosing our teams. When balloting ends, one team takes the field with more players, more momentum, and a bigger payroll. They also get to write the rules.
And the budget.
Former Sen. Harold Hochstatter once quipped, "Being in the minority is like falling off your horse and catching your foot in the stirrup. You are present for lots of action, but can’t affect the outcome." Sometimes, though, the guy in the saddle has all he can do just to hang on. And at the end of the ride, he’ll be judged on his performance.
While no one in either party wants to stifle economic growth, major Democratic constituencies — public employees, labor unions, and social service advocates — will be promoting an agenda that threatens business by destabilizing the fiscal environment. Bolstered by a temporary budget reserve, the lobby for increased spending couches its demand in the noisome question: "If not now, when?"
With nearly two billion dollars in reserves, the right answer — we don’t have the money — will be a tough sell. Budget writers are in the position of a guy who suddenly receives an unexpected inheritance. The windfall is nice and there’s plenty that he can do with it: Take the family to Disneyland, fix the roof, pay off the credit cards, or buy down the mortgage. What he shouldn’t do is use the money for a down payment on a second home. One-time windfalls don’t justify long-term commitments. The short-lived surplus doesn’t either.
We’ve been here before. Those of us with long memories recall 1993, the year lawmakers increased business taxes to balance the budget. Although the shortfall turned out to be smaller than anticipated, it took years to peel back the taxes. Not coincidentally, 1993 was also the year that voters passed the Initiative 601 spending limit. It was an unusual instance of business tax hikes sparking a grassroots taxpayer response.
The picture for next year differs in particulars, but is similar in its ramifications. There’s enough money to increase spending substantially, but not sustainably. Even if lawmakers simply maintain current spending levels, a bleak fiscal future of shortfalls, tax hikes, and budget cuts is clearly foreseeable.
New spending initiatives would compound existing problems, plunging the state into fiscal distress as early as 2009. Although that’s conveniently after the next general election, it’s foolish to plant fiscal land mines in fields you know you’re going to cross.
Yet there’s a lot of pressure to do just that. The recommendations of Washington Learns, Gov. Christine Gregoire’s select committee to transform education, will not come cheap. Hefty price tags can also be expected to accompany recommendations to increase access to health care, clean up Puget Sound, and create the "Next Washington" — her ambitious workforce and economic development plan.
Recession-induced restraint in 2001 resulted in belt tightening, but little structural change in state spending. When the economy rebounded, restraint receded. The basic challenge remains. Medicaid and other health care programs, including public employee health insurance, devour an increasing share of state dollars and squeeze out other priorities. The Legislature is not powerless. State policies can be changed, but lawmakers face unpalatable choices, possibly including benefit cuts, tighter eligibility standards, and less generous programs for state workers.
Gov. Gregoire has acted to increase fiscal discipline and performance. She has added the Government Management, Accountability and Performance program to the Priorities of Government budget process. The two data-hungry systems will soon be informed by performance audits. The payoffs from such efforts, however, will be long term and will not result in immediate savings that can be applied to bolster education, infrastructure, or workforce development. Committing to new spending on the strength of unrealized prospective savings would undermine the accountability effort and weaken the state’s financial management.
In mid-December, the governor will release her proposed 2007-2009 budget. The temptation to leverage the surplus to increase spending on her top priorities must be moderated by a tough-minded appreciation of the state’s current budget imbalance. She and legislative leaders must then keep a tight grip on the state’s fiscal reins.
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