Washington Needs Soul-Searching in Public Policy, Budgeting – and Action
Sept. 16, 2010
So now we have further confirmation that Washington state is long overdue in launching a prudent approach to public policy and budgeting. Officially, the state forecasts another $1.4 billion shortfall until June, 2013. That means red ink totaling at least $4.5 billion.
“The governor has already responded to this forecast by authorizing across-the-board cuts, but that simply isn’t the most thoughtful approach available,” said state Sen. Joseph Zarelli, R-Ridgefield, in a press release.
“On one hand she says she wants the next state budget to reflect the priorities of government and Washington values; on the other hand she has ordered cuts to the current budget that allow little if any consideration for priorities and values,” he added.
Sen. Zarelli also raised the salient question:
“What sense does it make to cut services for our most vulnerable citizens by the same percentage as the state’s efforts to promote tourism?”
His suggested alternative to across-the-board cuts?
“It would be better for the Legislature to convene for a short special session, because we can do things the governor can’t. We can make policy and structural changes that would focus the available revenue on the most essential services, and leave enough in reserve to get the state through June, when the biennium ends. We can also adopt reforms that would help when it’s time to write the 2009-11 budget,” wrote Sen. Zarelli.
To more than 50,000 state workers, he e-mailed this request:
“We hope you will take the time, either at work or at home, to submit your savings ideas here. Your ideas will be routed directly to us.”
How does the Office of Financial Management explain the budget shortfall?
“Revenue for the current budget period, 2009-11, is projected to decrease $770 million, resulting in total projected General Fund revenue for the biennium of $28.5 billion. Revenue for the next budget period, 2011-13, is projected to decrease $669 million, resulting in total projected General Fund revenue for that biennium of $33.4 billion.
‘With this drop in revenue, our current budget is now projected to be in the red,’ said Marty Brown, director of OFM. ‘We will enact cuts to address this problem while we look for ways to transform the budget and address shortfalls for the next budget period.’
The forecast projects an ending fund deficit for 2009-11 of $516 million, which includes $4 million in the rainy-day fund.”
Ouch, but it’s not surprising news. As a business-performance consultant, the state’s dubious policymaking and budgeting have been frequent topics here.
What is shocking has been the state’s lack of transparency in budgeting and that many elected officials — excluding State Auditor Brian Sonntag – have been late to the solution process and have not solved these predicted and lingering problems. That’s inadvisable public policy and budgeting.
“Despite still projecting revenue growth of nearly $5 billion between 2009-11 and 2011-13, a budget shortfall exceeding $4.5 billion is projected for the next budget due to a structural spending imbalance and the carry forward costs of programs in the current budget,” said Jason Mercier, the director of the Center for Government Reform at the Washington Policy Center.
“This budget crisis makes it imperative for legislative leaders to bring lawmakers back to Olympia to solve this problem in a thoughtful way,” said Mr. Mercier. “Failing to do their job until the 2011 session convenes in January would be the ultimate abdication of their legislative responsibility to balance the budget.
“If lawmakers continue to refuse to balance the budget they should at least call a short special session to change state law to allow the Governor to make discretionary and rational cuts while leaving up to a one percent reserve,” Mr. Mercier concluded.
Well said, as usual. Actually, Mr. Mercier and Sen. Zarelli have long expressed their public policy and budgetary concerns.
Since 2001, The Biz Coach column, at three Seattle media Web sites, has warned that Washington state’s economy has been too valuable and/or too-fragile to gamble with costly unknowns.
This Web site was launched July 29, 2009. You’ll find countless archived Biz Coach public policy columns with warnings and solutions including, the initial column, Analysis: Steps for Economic Success in Washington State. Not to be gauche, the column’s ideas are valid today. It’s past time to reboot – before it’s too late.
From the Coach’s Corner, for more background information and sound ideas, here are four resource links:
- The state’s revenue forecast
- State Auditor Brian Sonntag’s performance audit work plan
- www.washingtonpolicy.org
- www.washingtonpolicy.org/blog
Washington Think Tank Says Reliance on Sin Taxes Won’t Work
Jan. 29, 2010
Washington Policy Center (WPC) concludes Washington state lawmakers, who are struggling to solve a $2.6 billion deficit, will not sustain a balanced budget by relying on sin taxes.
WPC, www.washingtonpolicy.org, draws these conclusions:
- Sin tax increases are not a viable long-term budget solution.
- Other states have failed to solve long-term issues with sin taxes.
- Washington netted $2.5 million less in tobacco tax revenue than anticipated in this decade.
- Society’s problems are not alleviated and taxes on sin products encourage black market smuggling.
The conclusions are contained a paper authored by WPC’s Paul Guppy, vice president for research, and Betsy Hansen, a research assistant.
In considering sin-tax increases, lawmakers ostensibly have two motivations: They want revenue and they desire to change consumer behavior. That includes drinking, smoking, and overeating.
The authors state a past tobacco tax increase yielded $2.5 million less than anticipated because cigarette sales have decreased 1-2 percent a year. That’s after the state established the third-highest cigarette tax in the nation. Smokers have been buying their cigarettes from Indian smoke shops or from out-of-state.
Lawmakers in other states have been unsuccessful after raising sin taxes, according to the study:
“Ten states increased cigarette taxes: Arkansas (new rate of $1.15), Florida ($1.34), Hawaii ($2.60), Kentucky($0.60), Mississippi ($0.68), New Jersey ($2.70), New Hampshire ($1.78), Rhode Island ($3.46), Vermont ($2.24) and Wisconsin ($2.52). New York and New Jersey hiked taxes on alcoholic beverages.”
The Tax Foundation found that in most cases, state lawmakers’ plans failed to achieve either of the goals advanced to justify excise tax increases. The tax increases did not significantly change peoples’ behavior, and they failed to generate the new revenues their sponsors predicted.
The shortfall in expected revenue, combined with chronic overspending, contributes to unsustainable budgets and contributes to an ongoing sense of crisis in state finances.”
WPC points out that a new federal law was enacted in Feb. 2009. It raised the price per carton by $6.16. The goal is to fund the State Children’s Health Insurance Program (SCHIP) for four million kids.
However, the results have opposite of what was expected, according to the study:
“Public revenues, businesses and consumers are affected at both the state and local levels. As the federal increase affects the retail price of tobacco products and consumption shifts, states with already high cigarette taxes collect less revenue for themselves.
Businesses experienced a fall in demand for their goods and smokers feel policymakers are unfairly punishing them for engaging in politically unpopularbehavior.”
The revenue shortfall for fiscal year will total $2.3 billion.
WPC believes Washington state coffers are expected to suffer, as well:
“Combined with a high federal levy, Washington state’s high cigarette tax creates a strong incentive for consumers to engage in systematic tax avoidance, through increased internet purchases, out-of-state trading, and black market sales. For example, Washington’s state cigarette tax is nearly 20 percent higher than Idaho’s state tax, and more than 70 percent higher than Oregon’s state tax.”
Let’s hope for government reform so that lawmakers aren’t tempted to scurry around for superficial means to balance the budget. At stake are economic and political liberty.
From the Coach’s Corner, for common-sense efficiencies in Washington state, here are other recent columns:
Government’s Reliance on Huge Tax Increases Reaches Absurdity
Study: Tax Increases Threaten More Job Losses in Washington
Washington State Senators Claim Income Tax Is ‘Fiscal Reform’
Will Government Policies Ever Promote Economic And Political Liberty?
Do Washington’s Budget Woes Warrant Government Reform?
