House budget lacks fiscal discipline
Successful budget prioritization by Senate and Governor ignored

As their recently unveiled 2003-05 budget proposal shows, House Democrats want to spend nearly $1 billion (all funds) more than their counterparts in the Senate, and they want 959 more full-time equivalent employees on the state payroll than senators do. They’re $730 million short of being able to afford this, so they plan to raise taxes to make up the difference.

The House Democrat plan has a few shortcomings that need to be addressed.

Economy recovers faster without tax increases
Unfortunately, it seems these legislators have forgotten an important history lesson: Raising tax rates during a recession doesn’t mean you’ll collect increased tax revenues.

Fiscal analyst Steve Moore, in an October 2002 study for the bipartisan American Legislative Exchange Council (ALEC), wrote: "In sum, the fiscal lessons of the 1990s confirm nearly two decades of academic research. State tax policies can have a profound impact on the relative economic performance of the states. States with low and falling tax burdens—especially falling income tax burdens—outperform states with high and rising tax burdens. Most importantly, however, states that attempt to balance their budgets with higher tax rates are likely to lose jobs and businesses and thus create even larger long-term structural deficits."

Unsustainable spending increases
The cost-of-living increases for teachers, home health care workers and state employees included in the House Democrat budget are unsustainable. Implementing the House plan would spend $844 million more than the state is forecasted to collect in 2003-05 general fund revenue. They plan to provide one year of pay raises with two years worth of tax increases, with no guarantee of continued funding after that time for the next biennium. The result will be a deficit bow wave—a bigger problem in the future. It seems House Democrats are riding on the unsubstantiated hope that state revenues will increase enough by then to cover these new, built-in costs.

For the children?
House Democrats claim they’ve written a budget "for the children." But the true beneficiaries are political special interests—mostly labor unions demanding significant pay increases for their members. Children are not unaffected by the budget: The state’s poorest families will be hardest hit by the new sales and "sin" taxes—even though many have recently lost an income or been forced to tighten their belts. And who buys the most candy and gum—two items that would now be taxed under the House plan?

Responsible tax plan or shell game?
House Democrats want colleagues to vote on their spending plan before approving the necessary tax increases to pay for it. House leaders know full well they don’t have the votes required for the tax increases, but they hope to find the necessary money after committing themselves to increased spending. While also claiming the taxes they plan to raise will be dedicated, they fail to mention that the funds instead will be used to backfill revenues being transferred to the general fund to pay for other non-priorities (We will release more details on this shortly).

Alternatives
Members of the House have two budgets to choose from that are balanced without new taxes. Rather than push the state into a costly special session and guarantee slower economic recovery, lawmakers would be wise to follow the lead of Governor Locke and the Senate and adopt a no-new-taxes budget prioritized within the state’s existing and forecasted revenue.

2003-05 Budget Comparisons
(Dollars in millions)
Forecasted revenue: $22,452

• House spends $314 million more than the Governor’s general fund budget and $491 million more than the Senate’s.
  
  
• House spends $652 million more in total expenditures than the Governor and $972 million more than the Senate.
  
  
• House funds 966 more full-time public employees than the Governor and 959 more than the Senate.
  

Prepared by Bob Williams, President and Senior Research Analyst (360) 956-3482

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