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Dear Friends and Neighbors,
Last week the state's chief economist, Dr. Arun Raha, announced we can expect another $1.4 billion drop in tax collections over the next biennium, creating an estimated shortfall of $1.27 billion in the 2011-13 general fund budget. You can find more on the forecast at the Washington State Economic and Revenue Forecast Council (ERFC) website.
While we did make some difficult decisions regarding our spending last session, it was a short-term fix. We must look long-term and come up with a sustainable and fiscally responsible budget. Our economic recovery is much slower than anticipated. Unemployment remains too high, we are not generating any new business in our state, and employers are not hiring. Until we see some changes in these factors the Legislature must do things differently when it comes to the budget. We must have some flexibility, prioritize our most important issues, and eliminate programs or parts of agencies that are a drain on the budget.
When I refer to flexibility I am referring to allowing more of a safety net or rainy day fund. We are looking at our third special session over the last two years because the budget passed isn't sustainable or responsible. We aren't allowing for a struggling economy even though there are no signs things are getting better. In fact, they appear to be getting worse in some cases. We also need to be able to have everything on the table. Currently, many accounts or programs in the budget are dedicated and are off limits. That also goes for union contracts. Right now, the governor's office negotiates the contracts. The Legislature gets an up or down vote. We need to put the budgeting back in the hands of those who are elected to pass the budget.
The Legislature needs to re-examine our budget priorities. Education and public safety took substantial cuts. We are not living up to “our paramount duty” to fund education as our state constitution tells us.
Finally, we need to stop adding new programs and cut programs completely if we are not providing them the funds they need to function properly. This is a waste of taxpayer dollars and the programs lack real results. In some cases, instead of eliminating programs we cut most of them with the hope that if we leave a piece of it in place, we might be able to fully-fund it again in the near future. The programs end up not being effective.
Despite the projected drop in revenue, we are still expected to bring in an additional $2.1 billion more this biennium. That is 7 percent growth. There are elected officials who are already working on revenue options such as tax and fee increases. We have some difficult decisions to make, but additional revenue options are unproductive. You cannot take more money out of people's pockets when our unemployment rate remains high and employers are struggling. The Legislature already drastically increased fees, including licensing and the Discovery Pass, which is having a negative effect on small business across Washington.
Special Session?
I expect us to be called into a special session before the 2012 Legislative Session, but when that will be has yet to be determined. Here are some quotes from the governor and legislative budget leaders on when that may take place:
Gov. Gregoire: “If the November forecast further erodes our revenues, we need to be ready to act and act quickly.”
Sen. Ed Murray: “We don't need to come in here and sit, because I think that sort of sends the message that we saw back in D.C.,” said Senate Ways and Means Chairman Ed Murray, D-Seattle. “So we are going to act, we're going to do the responsible thing, and we're going to take some time to get it right.”
Rep. Gary Alexander: (Ranking minority member on House Ways and Means Committee): “The sooner we act, the better,” Alexander said. “The state spends about $40 million a day, so each day we wait only adds to the problem…”
Rep. Ed Orcutt: (Chair of Economic Revenue Forecast Council): “We need to take action immediately. We're only an eighth of the way through the biennium – with several more revenue forecasts to go – and we already have a significant budget shortfall. We can't wait around until the 2012 legislative session, or even worse, after next spring's revenue forecast, to take action…”
Rep. Ross Hunter: (Chair of House Ways and Means Committee): “Rep. Hunter said he also likes the idea of taking early action to reduce spending, but Hunter said there are practicalities to overcome.”
Sen. Joe Zarelli: (Ranking minority member on Senate Ways and Means Committee): “In the past I have been a proponent of convening the Legislature for special sessions to address known budget shortfalls . . . My thinking was that when you know you have a problem, waiting will only delay savings and make the ultimate choices that much harder. A special session is not the answer this time, however. While the above rationale still holds, the fact is that with a budget problem of this scope the Legislature could not hope to quickly reach agreement on more than a small portion of the deficit.”
Initiatives
Washington has no statewide elections this year and only one legislative race is on the ballot – a special election the Vancouver area. However, citizens will be voting November on some very important initiatives. Here is an overview:
Initiative Measure No. 1125 concerns state expenditures on transportation. This measure would prohibit the use of motor vehicle fund revenue and vehicle toll revenue for non-transportation purposes. It would require road and bridge tolls be set by the Legislature and be project-specific.
Initiative No. 1163 concerns long-term care (LTC) workers and services for elderly and disabled people. Requires training, background checks and certification for LTC workers that were originally established by Initiative 1029 which passed in 2008 to begin January 7, 2012, with the exception of community residential providers which would be delayed until January 1, 2016. The net General-Fund State cost of this proposed measure is $17.75 million in the 2011-13 biennium.
Initiative Measure No. 1183 concerns liquor: beer, wine, and spirits (hard liquor). This measure would close state liquor stores and sell their assets, license private parties to sell and distribute spirits, set license fees based on sales, regulate licensees, and change regulation of wine distribution. This is different than the initiative that was on the ballot last year. It no longer allows sales in stores under 10,000 square feet.
Senate Joint Resolution 8205 would repeal article VI, section 1A of the Washington Constitution. This amendment would remove an inoperative provision from the state constitution regarding the length of time a voter must reside in Washington to vote for president and vice-president.
Senate Joint Resolution 8206 is a proposed constitutional amendment by the Legislature concerning the budget stabilization account. This amendment would require the Legislature to transfer additional moneys to the budget stabilization account in each biennium in which the state has received “extraordinar
y revenue growth,” as defined, with certain limitations.
You can read more about the initiatives at the Secretary of State's webpage right “here.” If you have any questions please do not hesitate to contact me. I would be happy to provide any background information or clarification you may need.
Workers' Compensation
Late yesterday the Washington Department of Labor and Industries announced an increase in workers' compensation rates for 2012 by an average of 2.5 percent. The agency apparently feels it needs to raise rates to restore depleted reserves in the workers' compensation system. I do not believe this is necessary. Funds in the system are adequate and this sends the wrong message. After very contentious negotiations last session we were able to get business, labor and legislators from both sides of the aisle to reach agreement on a fix to the system that allows the state to offer settlements to workers. This would lower payout costs and provide a long-term fix.
The department originally proposed rates increases of 4 to 8 percent. However, I believe they settled on the lower rate increase after I and House Republican leadership strongly expressed our concerns. Employers that fund the system faced an average rate increase of 12 percent for 2011 and have had other substantial increases the last few years. The department shouldn't need a reminder that employers are not hiring, many are struggling and our unemployment rate remains high. Raising rates on business taxes does not help the situation.
Please share this e-mail update with anyone who might be interested in keeping up on what is happening in the Legislature. Thank you for allowing me to serve you.
Sincerely,
Cary Condotta
