2005 POLICY HIGHLIGHTER

December 21, 2005

Gregoire supplemental ends charade of state spending limit

By Jason Mercier

On December 20, 2005, Governor Christine Gregoire unveiled her 2006 supplemental budget that included $503 million in new spending. Though she claims the budget reflects fiscal restraint, it exceeds the I-601 spending limit (adopted November 21, 2005) by $914 million and forecasted revenue by nearly $120 million (not including $591 million in appropriations to new accounts). If the governor's supplemental is adopted, the Office of Financial Management projects a $1.7 billion deficit by the 2009-11 biennium.

2006 Supplemental Budget Outlook
(All dollars in millions)

11/21/05 adopted I-601 limit* $26,133
Gregoire 2005-07 expenditures $27,047
Difference $914

*Exceeds original 2005-07 limit by more than $1 billion

November 2005 revenue forecast $26,335.7
Gregoire 2005-07 expenditures* $26,455.4
Difference $119.7

*Does not include $591 million in planned appropriations to new accounts


OFM 2009-11 Budget Outlook Based on Gregoire Supplemental
(All dollars in millions)

Forecasted revenue* $31,735
Forecasted expenditures $33,457
Difference $1,722

*Assumes five percent annual growth after 2007


Not only is the governor's supplemental proposal fiscally unsustainable, some of her "targeted investments" call into question her commitment to Priorities of Government (POG) budgeting. POG is based on all potential activities being weighed against each other to create a buy list of programs to purchase within forecasted revenue, based on meaningful performance outcomes. This means that as new priorities are added to the buy list, others fall off. Also, a supplemental budget is supposed to address unforeseen emergency spending. With that in mind, consider some of the non-advertised supplemental expenditures:

  • State Boeing director (Aerospace Industry Outreach): $416,000 to fund a new state position within the Department of Community, Trade, and Economic Development (CTED) to assist with the requirements of former Governor Locke's contract with Boeing.

  • Lease payment for Boeing training center (Employment Resource Center): $1,600,000 for CTED to pay the lease costs associated with the training center promised to Boeing by Locke.

  • Discrimination against non-union state workers (Pay Raise Deferment Project): $7,400,000 to pay for the "significant time and resources" necessary for the Department of Personnel to implement the legislature's four month pay increase delay for nonunion state workers.

  • Illegal alien nursing home services (Loss of Alien Emergency Medical Program Eligibility): $971,000 for the Department of Social and Health Services (DSHS) to hold "harmless" 34 illegal aliens who will no longer be eligible for federal funding due to "increased scrutiny on service eligibility" by the federal government.

  • Increased workers' compensation costs for DSHS employees (L&I Rate Adjustments): $1,008,000 for adjustments to workers' compensation charges due to DSHS' past claim history.

  • Medicaid-type health care for children of illegal aliens (Children's Health Program): $3,473,000 for DSHS to provide "Medicaid look-alike health coverage to children who, because of immigration status or immigration-related waiting periods, are not eligible for Medicaid."

  • Incarceration costs of housing illegal aliens (State Criminal Alien Assistance Program): $977,000 for the Department of Corrections to offset the reduction in federal funds for the "incarceration costs related to aliens who have been convicted of violating state laws."

  • Creation of "Policy Consensus Center": $200,000 for the Office of Financial Management to contract with Washington State University and the University of Washington to develop a center to "act as a neutral source of expertise in order to improve the availability and quality of voluntary collaborative approaches to policy development and multi-party disputes."

I-601 Shenanigans
Not withstanding the fact the legislature artificially increased the state's spending limit by more than $1 billion last session, the governor's budget further utilizes budget gimmicks to get around the limit adopted this past November.

Instead of placing all the revenue left over following her $503 million spending increase in the state's restricted emergency reserve fund (2/3 legislative vote necessary for use), the governor creates two new accounts. The new accounts—Economic Stability Account (ESA) and the Pension Funding Stabilization Account (PFSA)—then receive appropriations of $464 million (ESA) and $176 million (PFSA) from the General Fund State (GFS). The governor then appropriates $49 million from the new PFSA to pay for pension costs in various agencies.

The governor then uses sections 903 and 904 of her supplemental appropriation bill to amend I-601.

Section 903 specifies that the GFS appropriations to the ESA and PFSA are to be used to calculate the state's fiscal growth factor under I-601 (increase the spending limit). However, Section 904 states that the appropriations from the GFS to these accounts "are not to be included in the calculation of expenditures from the state general fund for the purpose of determining whether expenditures exceed the expenditure limit."

The amendment of I-601 by Section 903 uses the $640 million in appropriations to these new accounts to artificially increase the spending limit. Then, the I-601 changes in Section 904 attempt to prevent these expenditures from counting against the spending limit. This is blatant disregard for the people's desire to limit state spending.

Conclusion
The governor's 2006 supplemental budget is not fiscally sustainable, does not follow the principles of POG, and exceeds the voter-approved I-601 spending limit. The state's fiscal health now rests on the legislature's ability to produce and adopt a responsible, prioritized budget not held together by accounting gimmicks.

Additional Information
Gregoire’s budget drives another nail into the coffin of priority-based budgeting
Transparent and accountable budget within reach

 

Jason Mercier serves as a voting member on the American Legislative Exchange Council’s Tax and Fiscal Policy Task Force and is often consulted by media outlets and legislative staff for issue briefs and policy analysis. He is the author or co-author of numerous policy highlighters and in-brief reports. His editorials have appeared in newspapers and magazines including The Washington Post and on FoxNews.com. Jason served on the board of the Washington Coalition for Open Government (2005-06) and remains a liaison for the board. He is a contributing editor of Heartland’s Budget & Tax News. Jason served as an advisor to the 2002 Washington State Tax Structure Committee. He received a B.A. in Political Science from Washington State University.


Contact: Jason Mercier | Director, Economic Policy Center | (360) 956-3482

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