In the days to come, state lawmakers will need to find ways to reduce state spending so it is aligned with incoming tax collections (revenue). The simple truth is budget writers have failed to do this since 2007. Instead of adjusting to economic realities, like families and businesses have in these tough times, the Legislature has been passing unsustainable budgets. The two-year budget, which just went into effect July 1, is already $2 billion in the red.
Instead of collaborating to reset, reform and reshape state government in meaningful ways, the governor and many in the majority party want to address the problem by raising the state sales tax to generate nearly $500 million in new revenue. They want to tie this new revenue to education, public safety and services for our most vulnerable and send it to a vote of the people in March.
I am against this approach for several reasons. First, a state sales tax increase would take more money out of people’s pockets at a time when a lack of consumer spending is hurting our economic recovery. Second, it is not a prioritized approach. For example, the governor wants to raise taxes on people who do not have jobs so 5,000 to 6,000 state employees can receive pay increases. Finally, until state government is 100% cost effective and efficient, we should not even consider asking taxpayers for more of their hard-earned money. We have a long way to go in accomplishing this goal.
As the budget debate continues, please be mindful of certain claims. For example, the governor and majority party have been claiming that $10.5 billion in budget cuts have been made since 2008. This is simply not true and the Associated Press recently destructed the argument with a story entitled: “FACT CHECK: Has Washington cut budget by $10.8B? Hardly.” In it, the reporter says, “That number is only true if you stretch the interpretation of what a budget cut is” and that “many of the hundreds of cuts Gregoire and other Democrats have tallied are simply automatic spending increases that didn’t end up happening.” More on this as we progress through this special session.
Understanding Economic Realities and Responsible Budgeting
Just after the budget was passed, I had this to say: “I feel it’s an unsustainable approach that fails to use the priorities of government model.” Unfortunately, I was right. When the governor signed the budget on June 15, she touted its $700 million in reserves as a resp0nsible amount. Just one day later, the state Economic and Revenue Forecast Council revealed these reserves had already been reduced to $163 million due to lower tax collections and changes in how our state accounts for one-time tax amnesty money. The simple truth is this: the governor and budget writers failed to understand economic realities and did not leave enough money in reserves. Unlike individuals, families and businesses that have adjusted their finances accordingly in these tough times, the governor and budget writers did not properly prioritize and align tax collections with state spending.
Addressing the Budget Problem in the Special Session
Since mid-June, the news has not improved. On September 15, a new state revenue forecast showed our economy continues to struggle and consumer confidence is not recovering. Our state economist also expressed his concern about the possibility of another recession.
Our economic and budget problems are interconnected and require immediate, corrective action. That’s why I joined others in calling for a special session prior to the regularly scheduled, 60-day legislative session that is set to begin on January 9. I’m happy that the governor agreed.
Some people have pointed out to me that special sessions cost extra money. This is correct; however, if a special session is targeted and critical work is done beforehand, it will allow the Legislature to enact reforms that would significantly reduce state spending and provide certainty to citizens and employers.
If our special session is going to be a success, there must be a clear understanding that state government simply cannot afford to do all the things it is currently doing. This means we must reset, reform and reshape state government. There must also be a realization that our fragile economy and citizens cannot endure any kind of new tax increases. There is already talk of tax increase proposals and this is simply the wrong approach.
Focusing on Job Growth and Strengthening the Economy
In addition to properly aligning tax collections with state spending, the Legislature needs to focus on job growth and strengthening the economy. While gas prices, unrest in the Middle East, disruptions to supply chains in Japan, and economic uncertainly in Europe are out of our state’s immediate control, other facets of our business climate can and must be addressed.
Last month, I talked about solutions that would streamline permitting processes, ease new rules and regulations, incentivize start ups, and lower workers’ compensation and unemployment insurance costs. These are not sound bites — there are bills that have already been introduced that could be passed in a special session. If we are going to get Washington working again, we must encourage business investment.
