$1 billion plus reasons why

By Jason Mercier, Evergreen Freedom Foundation

Governor Locke recently issued Directive No. 02-03 rescinding his hiring freeze directive. The new directive seeks to eliminate an additional 400 full-time equivalent employees (FTEs) from the state’s payroll in addition to those reduced in the supplemental budget. While directives are not legally binding and an Executive Order is preferred, the governor’s actions seem to indicate that at least he sees the writing on the wall when it comes to the state’s budget deficit.

Unfortunately, in Olympia, for every positive step forward toward budget sanity, there seem to be two negative steps back.

Upon hearing of the governor’s action Senator Lisa Brown (D-Spokane), chairwoman of the Senate Ways and Means Committee, stated, "I know the budget outlook is not good right now, but I’d like to know their rationale." Remember, Sen. Brown is responsible for adding to the state’s discourse such a memorable phrase as "tobacco securitization" to the tune of $450 million.

So what is the rationale for further reducing state payroll costs? There are $1 billion plus reasons why.

Spokesman for the Office of Financial Management (OFM) Ed Penhale explained, "We are looking at an estimated deficit in the next biennium (2003-05) approaching $1 billion, and we’re concerned about that."

To understand how the state got on this path, we need look no further than the recent "action" taken with the supplemental budget. Facing a growing budget deficit, the 2002 Legislature had the opportunity to seriously address its bad habit of spending more than the state collects in revenue. As in our personal budgets, the state needs to bring expenditures in line with revenue. But some in the legislature, and especially Sen. Brown, believe instead that revenue needs to keep pace with expenditures. The English translation of the senator’s view is that the legislature will spend what it deems necessary and if the taxpayers don’t send enough money, taxes should be raised.

The state’s current budget spends $1.5 billion more than the revenue forecast for this biennium. To bridge that gap, the budget relies predominantly on one-time revenue sources, assuring that the state will be facing a built-in budget deficit next biennium (2003-05). This means one of two things: the state must cut spending or raise taxes. That is, if we can even make it until the next biennium before taking action.

The budget adopted leaves the state with just over $300 million in total reserves. One more bad revenue forecast, caseload increase, or a worse-than-usual fire season, and the state will be forced to address the budget deficit immediately.

The governor seems to realize this. Sen. Brown may see the numbers in the same way, but it is becoming apparent she interprets the events a little differently. She appears to be laying the groundwork for a budget outlook that leaves no alternative except the adoption of an income tax.

While most of us see $1 billion plus reasons why spending must be reduced now, the senator seems to see $1 billion plus reasons why we need to raise taxes.

As voters, the only question remaining is, how do you see it?

Jason Mercier is a budget research analyst for the Olympia-based Evergreen Freedom Foundation. He can be reached at (360) 956-3482 or jmercier@effwa.org.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org