Gov. Gregoire hints that enough pain is enough; we need to look at raising taxes or closing loopholes too. A veteran legislative budget writer suggests some smart ways to go about it, and warns of hurdles that could trip up the effort.
This state’s 2011-13 operating budget is already $2 billion out of balance. Once again Gov. Chris Gregoire will propose a severe package of spending cuts. But she now acknowledges that it may be less painful to seek more revenues than to make further cuts. At an October 27 press conference announcing a menu of new cutting options, she indicated that her next effort will be to decide “whether we want to go there” — to ask the voters to approve tax increases.
The governor will announce her all-cuts supplemental budget soon after the next revenue forecast, due November 17, and deliver it to legislators who will convene in special session on November 28. Revenues are expected to continue their downward slide, so Gregoire has detailed a range of potential cuts totaling $3.8 billion. The $2 billion in cuts legislators eventually settle on would come from the $8.7 billion worth of programs that are not protected by the state constitution, federal restrictions, or other barriers — 23 percent of the total.
These cuts would come on top of about $10 billion already slashed in the last three years, including major cuts to K-12 and higher education and to a broad range of health and social services. The cuts in higher ed led to large tuition increases. State employees took a 3 percent pay cut and had to pay a larger share of their health costs.
Few programs are spared in the governor’s new budget proposals. State universities and colleges would take another 15 percent, $166-million hit. Both the Disability Lifeline medical program ($110 million) and Basic Health Plan ($48 million) would be eliminated entirely. The Corrections Department would have to release some offenders early and reduce the time that others are kept under parole supervision. Planned increases in community mental health services would be postponed. Poorer school districts would lose half their levy-equalization funds, and local governments would see less revenue sharing. State employees would be asked to cover an even larger share of their health care.
No wonder the governor is eyeing tax increases as a partial alternative. At her press conference, she refused to be pinned down as to whether she will recommend a “balanced” approach combining cuts and revenues but said that all four legislative caucuses “have given me suggestions.” She herself has instructed the Department of Revenue to look at all revenue options, and she will identify programs she would save if revenue is available.
What this means in politically divided Olympia is unclear. The problem lies in the Senate, where a small number of conservative Democrats have joined Republicans in a “Roadkill” caucus that was played a key role in blocking the repeal of various tax breaks in the last session. The only bright spot for revenues in that session was a procedural move by House Democrats to prepare for a court challenge of Initiative 1053, which requires a two-thirds vote in both houses to approve any new tax or repeal any tax break. Otherwise, simple majorities can refer a tax measure to voters. (That challenge is now underway.)
Party lines are already being drawn. Some Democrats insist that revenues be on the table. Sen. Ed Murray (D-Seattle), who chairs the Ways and Means Committee, thinks voters should get the chance to decide. At an October 14 panel on the future of higher education, he denounced business opposition to new taxes for anything except transportation: “In every attempt to get new revenue, business is in our way.” Meawhile, the ranking Republican on the committee, Sen. Joe Zarelli (R-Ridgefield), has been equally outspoken in opposing any tax increase, whether temporary or long-term.
Besides this partisan wrangling, several wild cards complicate the budget process:
- Timing the vote is tricky. A ballot measure offered at a special election in early 2012 would provide revenue for just part of the biennium’s first year. The later the vote, the deeper the cuts needed in the second year.
- There's little precedent for special state-wide referendum vote, and election costs could prove controversial. All but one 51 previous referendum bills have gone on the November general ballot. And Paul Allen paid the $4 million cost of that one exception, the 1997 vote on a new football/soccer stadium.
- Competing priorities could make budgeting decisions much more contentious. The Seattle Times, joined by such corporate powerhouses as Kemper Development, Microsoft, Safeco, and Davis Wright Tremaine, has announced a "Greater Good Campaign" to seek “a stable source of funding for higher education and a position as a top priority in the state budget.” But the effort apparently will promote only the four-year colleges, not the community and technical colleges that prepare students for the jobs that are available. The Times and its supporters say the legislature has “mistreated” the public universities, cutting them disproportionately compared to social services. Watch out for a nasty fight between folks who should be working together to find new revenues for all essential programs.
- Federal deficit and debt decisions also loom. Almost half the state operating budget comes from federal sources. That could shrink if the congressional "super committee” co-chaired by Sen. Senator Patty Murray achieves its daunting task of cutting at least $1.2 trillion from the federal budget. Even if it fails, cuts totaling that amount will be taken equally from defense and domestic programs. Gregoire worries that defense cuts would clobber state revenues, given the large concentration of military facilities in Washington.
- A legal cloud hangs over state budget cuts. Marty Brown, the governor’s budget director, has counted 17 lawsuits and more than 100 unfair labor practice complaints over previous cuts, which blocked $800 million in budget reductions. Legal challenges have led the governor to propose eliminating whole programs rather than waiting to see partial cuts reversed by the courts.
- And if the Eurozone's debt crisis isn't speedily resolved, it will undermine the U.S. economy and our prospects.
Against this cloudy picture, some hopeful prospects beckon. More short-term federal funding will be forthcoming if President Obama’s jobs bill passes. Much of this new stimulus funding would go to capital projects such as community college facilities, but this would free up tax revenue for operating expenses. When legislators convene at month’s end they may take a hard look at the many tax breaks with questionable benefits, or consider placing a temporary surtax on some activities, as in previous recessionary periods. If they do their work diligently, a significant share of the spending cuts can be avoided.
All this suggests the need for a thorough, candid review of state priorities and funding needs — and of the structural inadequacy and unfairness of our current tax system. It’s been ten years since a committee chaired by Bill Gates, Sr. did the last comprehensive review.
The special session won't allow time for that. But the 2012 regular session, which Governor Gregoire believes should focus on job creation, could begin to address a wider “greater good" agenda for the state — one that's built on an equitable tax system, that adequately funds education and other vital services, and that helps grow the new economy.
