WashACE Blog

"Washington Economy Among Nation's Best, But Budget Problems Persist"

The state's economy grew 4.3 percent in 2007. As Seattle P-I reporter Dan Richman reports, that's good, but it's been better.

Washington's 2007 growth rate -- better than its 2006 growth rate of 3.5 percent, but down from 2005's 5.1 percent -- tied with that of the District of Columbia for the third-highest in the nation.

We'll have to grow a lot faster than that to overcome the projected $2.5 billion shortfall the nonpartisan Senate Ways and Means Committee identifies for the coming biennium. And lately, reports of budget crunches abound, with the state's largest county facing a $70 million shortfall.

Rising gas prices are adding to the budget challenges facing state and local government. So the $7 a barrel jump in oil prices suggests that the projected shortfalls may be understated.

And if that's not enough to cause concern, Rep. Dave Quall offers a Seattle Times op-ed calling for substantial increases in education spending.

In the upcoming 2009 legislative session, we must update our definition of "basic education," figure out what it will cost (it will be an enormous number), and come up with a completely new funding system to make it happen.

A completely new funding system? However you slice it, that means either an increase in existing taxes or a new tax (income?). With a predicted multibillion dollar hole in the state budget and cash-strapped taxpayers dealing with increases in the cost of, well, everything (mortgages, rents, food, gas), where's that coming from? Businesses here also see the cost of everything increasing, including one of the nation's highest tax burdens. And, as Quall notes, it's not as if the state hasn't been stepping up education funding.

More than 40 percent of our state budget goes to K-12 education. That's more than any other state program. In the past two years alone, legislators invested $1 billion additional dollars in K-12 education.

So, add "an enormous number" to $2.5 billion shortfall and you get a tax hike the likes of which we've never seen before. If that's what lawmakers are proposing, it's time to be clear about it.

Enough Talk About Climate Change to Fill Trial Balloon

Yesterday, the U.S. Senate took up the Lieberman-Warner Climate Security Act of 2007. The "Director's Blog" at the Congressional Budget Office reports on the cost. Here's the April 10 estimate on the bill.

CBO estimates that enacting S. 2191 as it was ordered reported would increase revenues by about $1.2 trillion over the 2009-2018 period. Over that period, we estimate that direct spending from distributing those proceeds would also total about $1.2 trillion, but more than the revenues. ... In addition, assuming appropriation of the necessary amounts, CBO estimates that implementing S. 2191 would increase discretionary spending by about $4 billion under the original legislation and about $80 billion under the amended version over the 2009-2018 period.

Big numbers to fight over. But no one expects anything to happen soon. Not the supporters at Global Warming is Real (with lots of nice Green links). Not the critics at this Wall Street Journal blog,which provides a nicely condensed outline of what to watch.

The stakes are high. Our state legislature recently passed a major climate change bill that sets the stage for a cap-and-trade program. In today's Wall Street Journal Robert Reich, who likes cap-and-trade and agrees with most of the world that the Lieberman-Warner bill is going nowhere, outlines how Senators Obama and McCain agree and differ on the issue.

The Heritage Foundation calls Lieberman-Warner a solution worse than the problem.

The Seattle Times editorializes that legislation is overdue, but they acknowledge the effects

High in the senators' consideration should be how to minimize the inevitable increase in costs not just in energy but in goods and services because of higher energy costs? or at least to spread the burden fairly.

Although details matter mightily, the public generally supports action to address climate change, without bothering much with the details. For businesses in our state, this is a critical competitiveness issue. While the trial balloons may just be filling with hot air now, eventually they may reach liftoff.

Here's my take on gas prices and climate change in today's column in The Herald.