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Boeing and The Budget: Will History Repeat Itself? |
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Written On: October 26, 2001 |
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They say history repeats itself. I hope not.
When Boeing laid off 19,000 workers in the early 80s, state revenues dropped by 20 percent below projected levels - equivalent to a $4.5 billion loss in the current budget.
Unfortunately, just a year earlier, Gov. Dixy Lee Ray and lawmakers had decided to spend nearly $300 million in reserves to phase in full state funding for K-12 education. They hadn't anticipated the massive Boeing layoffs or a deep national recession.
By the time Gov. Ray handed over the keys to the Governor's mansion to Republican John Spellman in 1981, the state's budget was in a crisis. After several special sessions and deep budget cuts, the Legislature not only raised taxes but also added some new ones to boot - including a temporary tax on groceries.
Fast-forward twenty years.
Boeing's September announcement that it would lay off 20,000 to 30,000 workers in its commercial airplane company - most of them in the Seattle area - sent shivers down the spines of Gov. Locke and legislators, who just weeks earlier had approved the 2001-03 budget. At the time, they couldn't have anticipated the Boeing layoffs or the national economic fallout from the September 11 terrorist attacks.
However, throughout the legislative session earlier this year, the Association of Washington Business (AWB) warned lawmakers to be careful. Don't pass a budget that exceeds the 601 spending limits or drains the reserves.
Those warnings went unheeded.
The state's new $22.8 billion state budget is balanced as required by law - technically. To meet that legal requirement, lawmakers relied on one-time revenues and dipped into the state's reserves. Their plan was that, by the end of 2003 if everything went right, there would be a scant $151 million left in reserves.
But everything is not going right and with tax collections dropping and unemployment rising, Gov. Locke estimates the state's revenue shortfall could approach $1 billion.
Gov. Locke and lawmakers say that, because both our economy and our business climate are shaky, they're focused on cutting spending rather than raising taxes. As part of an effort to save almost $600 million, the Governor has taken steps to freeze hiring and cut state agency budgets by 15 percent.
Does that mean business, which pays over half of the state and local taxes, is off the hook for new taxes? Hardly. A more likely scenario is that history will repeat itself, and the Legislature will resort to a new round of business taxes.
That would be a bad idea.
Burdening struggling employers with an even heavier load of taxes and fees would further weaken Washington's businesses and the jobs they provide.
Stay tuned!
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