The Gristle

Santacide

Tuesday, December 20, 2011

SANTACIDE: Gov. Chris Gregoire this week put her pen to $480 million in budget cuts that were approved during a breakneck legislative special session. Gimmicky fixes—which include delayed payments, cuts to state agencies and transfers—were characterized as a down payment to close a $2 billion budget gap looming next year.

The special session began Nov. 28 at the request of the governor after economic projections indicated the state was on track to spend about $1.4 billion more on programs, policies and salaries than it will collect in taxes and fees through June 30, 2013, the end of the two-year fiscal period.

Gregoire proposed some $2 billion in cuts to state programs and departments to cover the gap and create a financial cushion. She urged the Legislature to pass that amount in a supplemental budget then ask voters to approve a half-cent sales tax for the next three years to “buy back” about $500 million worth of programs.

“Facing a $2 billion deficit, state lawmakers had a formidable challenge heading into this special session,” Gregoire said. “The Legislature has been working in a bipartisan fashion to approve a package that provides a down payment toward closing our budget hole. For that, I thank them.

“I am well aware of the difficult decisions required to solve this budget crisis, and the amount of work still ahead,” she said.

The agreement “marks a down payment and fills a quarter of our projected $2 billion revenue shortfall,” state Sen. Kevin Ranker (D-40) said, admitting lawmakers did the best they could in a short period of time to craft something both houses and parties could agree on. “While we are not yet done, for the time being we have managed to avoid eliminating critical public services like the basic health plan and rollbacks in environmental priorities.

“We will return in January to continue a thoughtful dialogue on how best to solve our revenue shortfall and within that dialogue, all options must be on the table—including a discussion of new revenue, tax preference reform and additional cuts,” the Orcas Island legislator said.

Marty Brown, the director of the Office of Financial Management responsible for state budget forecasts, urged lawmakers to take action. Failing to get agreement on the full $2 billion in the special session, and waiting until the regular session begins in January, puts the state further behind, and will require more cuts in more programs, Brown said in an email to legislators that he also shared with reporters.

“Our state government spends about $41 million a day,” Brown said. “Every day that goes by, we can’t get that money back. Your state agencies need time to put into effect the policy and budget changes that affect clients and providers all over the state. Faced with all this, I do want to say that time is of the essence.

“If we go to February or later [without a completed budget] our assumed savings drop and other more difficult decisions need to be made,” Brown said.

“Difficult decisions have now been pushed into regular session set to start the second week of January,” analysts at The Washington State Budget & Policy Center agreed. “The magnitude of the remaining shortfall demands that policymakers raise new revenue to protect core public services.

“There are various options for raising revenue, but no single option is a silver bullet to getting our state out from under the effects of the recession and guaranteeing our future prosperity,” they noted. “What is required is a comprehensive approach that addresses our immediate needs and ensures our long-term stability.”

Structural changes could include the elimination of unproductive tax breaks “that have no clear purpose or that fail to achieve public goals” analysts wrote. “Notably, a tax break that mostly benefits out-of-state banks costs our state some $50 million each year in foregone resources.” Policy Center analysts also proposed a new tax on capital gains that would generate hundreds of millions of dollars in new job-creating resources.

Certainly one of the most formidable barriers to comprehensive revenue reform are the state’s voters themselves. Voters have tied the hands of legislators by requiring supermajorities to craft financial solutions, and they’ve spurned most attempts to glean new revenues—rejecting a high-earners’ income tax for education and repealing temporary taxes on candy and soda pop. The latter repeal knocked a $218 million hole in the two-year budget. Meanwhile, voters continue to impose new costs on the state, as they did when voters approved an expansion of training for long-term care workers. The measure, which passed in every county in the state in November, will cost about $18 million over the next two years but has no money allocated for the program.

That paradox has caused lawmakers in Olympia to consider an overhaul of the state’s popular initiative system, proposing that voters need to be responsible for identifying the money that will pay for the policies they approve. A bipartisan group of lawmakers proposed a constitutional amendment that would require ballot measures to have their own funding sources. Yet it seems unlikely Washington voters would agree to in any way handcuff their options in direct legislation.

The Gristle’s political prediction for 2012 is that while voters may be fearful of a radical change in the White House, they’ll express their frustration with President Obama by slashing at his coattails, perversely rejecting candidates downballot that promise him aid. That suggests even greater numbers of oppositional forces to progressive revenue reform arrayed in Olympia. Sensing that opportunity, state Republicans are likely to be especially intransigent in the coming legislative session.

Washington’s anti-tax mood is far from over.

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