How can Olympia solve its budget problems?
December 5, 2008 · Updated 12:06 PM
State finances are in shambles. Olympia leaders have racked up a $5.1 billion deficit and unlike Wall Street, Congress is not going to bail them out.
How did we get in this mess? It is not for lack of money.
Tax revenues have increased each budget cycle, and today the people of Washington send more money to Olympia than ever before.
The cause of the deficit is overspending. Tax revenues estimates for the next budget are up — but state elected leaders have been boosting spending even faster.
Permanent spending is up 33 percent in four years, and this does not count new entitlements due to kick in next year.
Some people are pushing to raise the combined sales tax, which already approaches 9 percent (when the sales tax started it was 2 percent.)
Boosting taxes to get out of the deficit is wrongheaded for three reasons.
First, it is not fair for state leaders to turn to working citizens and businesses that already shoulder a heavy tax burden and make them pay even more to fix Olympia’s budget mess.
Second, tax increases depress economic growth, so raising the sales tax would only make a dire situation worse.
Third, it doesn’t make sense to reward the very Olympia leaders who created the deficit by letting them ratchet up the state’s financial commitments.
If we raise taxes lawmakers and the governor would say to themselves, “Wow, we spent all the money people pay in taxes and what happens — they send us more money!”
Some lawmakers want to spend the rainy day fund, but this would only solve a fraction of the deficit and lock in permanent future spending.
The Legislature would have to come up with the same dollars again and again in every budget indefinitely into the future.
If raising taxes or spending reserves won’t solve the deficit then we face painful budget cuts, right? Wrong. Since Olympia lawmakers will have $1.4 billion more to spend next year compared to the current budget, they simply need to become better managers of the money we already send them.
Here are a few constructive ideas to get them started.
• Slow down the rate of spending growth. If Olympia limits the rise in spending to $30 billion in the next budget, up from the current $29 billion, there will be no deficit.
• Eliminate the new entitlement that will send a check from the state treasury to everyone in the state below a certain income level.
• Eliminate the $160 million in wasteful budget items identified in the Washington State Piglet Book.
• Ask state workers to contribute 16 percent to the cost of their health benefits, as was standard four years ago, instead of the current 12 percent. They would still get a great deal - the average in the private sector is 28 percent.
• Use the Priorities of Government process to slow down the rise in low-priority spending.
Each year state agencies rank their programs by importance: one-third top priority, one-third mid-priority and one-third low priority, but lawmakers usually ignore their recommendations.
• Delay implementation of the new all-day kindergarten entitlement.
• Delay implementation of the new family leave entitlement.
If lawmakers and the governor set firm priorities within a rising budget — and after all, that is their job - they can solve the deficit without raising taxes.
They would not have to cut programs and could direct targeted spending increases to where they are needed most.
Of course, if Olympia had not cranked up permanent spending by more than $8.5 billion over the last two budgets, we wouldn’t face this problem in the first place.
A final thought: Since tax revenues are constantly rising, wouldn’t it be a pleasant change if leaders in Olympia, instead of turning to us for more money, would say “thank you” for what we already send them?
Paul Guppy is vice president for research at the Washington Policy Center.