Washington: A Balanced Budget Is No Longer Enough

Updated Jan. 11, 2012

A Seattle Times headline is perplexing. True, the headline –“Lawmakers open session, try to close $1B gap” – is a fairly accurate assessment of Washington state’s budget. Not to be laboriously repetitive, but the headline is worrisome. Once again the Legislature faces a budget crisis.

“The economy is the focal point of this year’s legislature as state lawmakers attempt to close a $1.5 billion shortfall in a $34 billion budget at the state capitol in Olympia,” blogged Don Brunell, president of the Association of Washington Business (AWB).

Mr. Brunell is known for his pragmatic reasoning.

“As they deliberate, they must be mindful that Washington is in the midst of an anemic economic recovery which is very fragile,” the AWB president added. “New costs to employers, especially those along Main Street, have a dampening effect on our ability to increase consumer confidence and bring people back to work.”

That’s my sense, too. But the Legislature routinely fails to prioritize first things first. The short-term priority is to balance the 2011-2013 budget. But as a priority, it’s secondary to a bigger quandary – government and budgeting reform, which are needed immediately, as well.

Instead, all budget discussions are about the short-term and relatively insignificant issues grab a disproportionate amount of attention.

Gov. Gregoire wants to focus on a new $3.6 billion transportation package, gay marriage, shorten the school year, abolish social services, release some prisoners before the sentences expire, and increase the state’s sales tax. House Speaker Frank Chopp, D-Seattle, also says same-sex marriage is a top priority.

A significant number of citizens wants to legalize marijuana. Some lawmakers want a statewide ban on plastic grocery bags.

Most of us in business agree education is a priority. But increasing taxes even for education isn’t productive as long as government/budgeting reform is ignored as a priority.

In addition to Mr. Brunell, another thoughtful pragmatist is Jason Mercier. Mr. Mercier is director of the Center for Government Reform of the Washington Policy Center.

Worth consideration is Mr. Mercier’s list of recommended reforms:

  • Enact a constitutional tax and spending limit (with two-thirds requirement to raise taxes) modeled after the original 1993 I-601 formula.
  • Remove as many of the restrictions on lawmakers’ ability to set spending priorities as possible (collective bargaining restrictions on compensation, federal mandates, assumption of auto-pilot budgeting on programs).
  • Reform competitive contracting. Allow agencies to make performance-based contracting more proactive (create a Competitive Contracting Council).
  • Provide the governor discretionary authority to cut spending.
  • Repeal unaffordable programs instead of suspending them.
  • Require at least a 5 percent reserve when adopting the next biennial budget.
  • Require updated four-year budget outlooks to be published after each state revenue forecast or budget adoption.
  • Require completed fiscal notes before bills can be acted on.
  • Phase in a defined-contribution retirement plan that gives state workers benefits that can never be taken away.

Amen. Yes, the Legislature should soberly balance the budget. However, unless the Legislature concomitantly reforms government and the budgeting process, uncertainty will never be alleviated for the state’s businesses and consumers.

From the Coach’s Corner, you might want to consider other public policy columns.

“There is an important sense in which government is distinctive from administration. One is perpetual, the other is temporary and changeable. A man may be loyal to his government and yet oppose the particular principles and methods of administration.”

-Abraham Lincoln

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

AWB: ESB 5566 Will Minimize Sting in Workers-Comp Rates

April 14, 2011

A bill – generally supported by employers and opposed by labor – will alleviate workers compensation rates in Washington state. At issue are reforms, especially allowing workers to receive voluntary lump-sum payments instead of pensions.

At this writing, ESB 5566 is stalled in a Washington State Legislature committee – the House Labor and Workforce Development Committee, which is chaired by Mike Sells, D-Everett.

That’s despite support from the Association of Washington Business (AWB) and former Washington and Oregon Labor & Industries Director Gary Weeks. Mr. Weeks has been quoted as saying voluntary settlements work in 44 other states and they save money – $1.2 billion by Washington L&I estimates.

“We have two weeks to go and while the prospects for passage maybe dim, it is never over until it’s over, as Yogi Berra would say,” says AWB President Don Brunell. “Keep contacting the Governor and House members.  If they say no, don’t give up because the answer is always no until it is yes.”

Mr. Brunell asserts the bill’s passage will alleviate the pain on business.

“Because without reforms such as incorporated in ESB 5566, we are likely to look at double-digit workers compensation rage increases in 2012,” he says.

“Some are saying 20 percent or higher,” he adds. “So while I know that killing voluntary settlements makes absolutely no sense, this all about politics.”

That’s my sense, too. Candidly, I’ve worked with Mr. Brunell and his fine staff in whom I have the utmost confidence.

From the Coach’s Corner, here are AWB’s tips on what you can do.

 

I cannot say that I do not disagree with you.”

– Groucho Marx

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For a complementary chat about your situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

I-1053: Critical to Washington State Businesses and Workers

 

June 10, 2010

Washington state voters face critical decision-making. The success of the state’s economy and job-creation efforts hinges largely on Initiative 1053. Proponents have been working feverishly to qualify I-1053 for the Nov. 2010 ballot. It would restore monetary protections for businesses and all other taxpayers from the perennial chicanery of the state Legislature.

It requires a two-thirds legislative vote for any new taxes. In my view, it insures a higher degree of transparency, which is constantly lacking in the Legislature.

 “Reinstating the supermajority vote for new taxes has never been more important with the very real threat of even more tax increases in the 2011 session – or earlier,” says Don Brunell, president of the Association of Washington Business, which is also known as the state’s chamber of commerce.

“This warning has been confirmed by recent news from Governor Gregoire that a special session may be necessary as the state budget may be in doubt due to lawmakers relying on federal funds that are not likely to materialize,” he adds. 

But it has not yet qualified for the ballot with enough voter signatures.

“With less than a month left to gather signatures some may wonder how many of the initiative campaigns will be successful and qualify for the ballot,” says Jason Mercier, director of the Center for Government Reform for the Washington Policy Center.

“One measure, I-1053, may benefit from news from the Office of Financial Management that the state is facing at least a $3 billion deficit in the next budget,” asserts Mr. Mercier.

“This means lawmakers’ first choice to solve the problem next year may be tax increases unless the voters re-impose for the fourth time the restriction that tax increases require a two-thirds vote,” he warns.

Fourth time? Yes, he’s right – a fourth time. For many years, I’ve been writing about legislative chicanery that has damaged commerce and taxpayers. Every time voters approve restrictions on spending, lawmakers find ways furtively and overtly to circumvent the will of voters.

In 2010, lawmakers suspended transparency provisions and the provisos of I-960, which voters passed in 2007. It mandated tax increases could only be implemented by a two-thirds supermajority vote in the Legislature or upon approval by voters. But then, after the destroying voters’ protections and refusing to require efficiencies in state government, the Legislature passed more than $800 million in additional taxes.

But there is some good news. Sixty percent of voters are in favor of the requirements of I-1053, according to the Washington Poll in May, 2010. In another Washington Poll, More Voters Say Washington State is Headed the Wrong Way.

In a sense, that’s encouraging because the Washington State Office of Financial Management echoes a dire warning about future budget issues that I’ve been giving for what seems like forever.

Its budget-writing instructions for state agencies for the 2011-13 Biennium states:

“A preliminary estimate by OFM indicates that a gap of about $3 billion between expected revenues and basic spending pressures (not including any new programs or policies) will need to be addressed to balance the budget,” according to budget instructions by the state office of financial management ( see page 7 of the document).

“Although stronger-than-predicted revenue growth would help remedy this situation, revenues would need to grow by more than 9 percent per year to make up most of the projected gap, a rate which is unlikely to be achieved,” the authors warn.

From the Coach’s Corner, for more information, here are resource links:

Association of Washington Business – www.awb.org

Washington Policy Center – www.washingtonpolicy.org

Enterprise Washington – www.enterprisewashington.org

Seattle business consultant Terry Corbell provides high-performance management services and strategies.