WashACE Blog

First Reactions to Senate Budget

Here's a quick set of links to coverage of the Senate budget plan.

 

Adam Wilson takes a look at how they handle employee health insurance costs.

Good overview at Joe Turner's TNT blog.

The Washington Policy Center says "overspending catches up with lawmakers."

Curt Woodward notes that tax increases figure into the mix.

Another good overview from Rich Roesler, who get high marks for his devastating short-form reaction piece. (If you don't click any other link, click this one.)

Also, check out Brad Shannon's post with links to statements from Republican budget writers.

 

This Saturday editorial from the Daily World still seems timely. Editor Chris Rush offers this:

I'm no prophet, but I don't believe voters here on the Twin Harbors are in any sort of mood to throw more of their hard-earned wages back into the black hole of state government, especially as they witness many programs and services being eliminated.

After having failed to plan for this particular rainy day at the state level, it would be unwise for elected leaders to dig deeper into our pockets and ask us to throw more good money after bad.

Bet that's true for folks outside the Twin Harbors, too.

 

Senate Releases Budget

At 10:30 this morning, Senate Democrats released their proposed 2009-2011 budget proposal. I watched the press conference on TVW as did, I imagine, thousands of others. While not exactly 24, it had an immediacy that the budget debate has lacked through much of this legislative session. That's because we were finally seeing the numbers. (Go to the Senate Ways and Means Committee web site to download documents.)

 

Senate Majority Leader Lisa Brown said they were presenting an "honest and responsible budget that does balance our revenues and expenditures." It "does not eliminate the social safety net," she said, but does trim many social service programs. Higher education absorbs a more than $500 million hit. As well, K-12 programs that fall outside the definition of "basic education" were also cut. Initiative 728 and Initiative 732, class size reduction and cost-of-living raises for teachers, respectively, were suspended. Federal stimulus dollars were targeted to backfill much of the 728 cut. The budget summary says that "the net reduction in school district funding will average 3.5 percent."

 

As expected, there's no cost-of-living increase for any employees, and the annual "step increases" for management employees are suspended.

 

In addition to the federal stimulus money, the budget uses nearly $750 million in funds that usually go to the capital budget, $242 million in fund transfers, and $450 million in rainy day money. One analyst pegs the use of one-time money at $5 billion in total. I suspect that's about right. If so, under the slow-recovery scenario most envision, this budget still fails to come to grips with the state's need to reset spending to a sustainable level.

 

Although the Senate leaders said they had not yet decided on a tax package, most of us figure there's another shoe left to drop. Just a few minutes ago, Sen. Brown put up a post suggesting it's time to talk about an income tax. 

 

We hope to have a WashACE analysis of the budget available later this week.

Worker Privacy Act: A Wedge Between Labor and Democratic Leaders?

Last week in an apparently tense session labor leaders met with Gov. Chris Gregoire, Senate Majority Leader Lisa Brown and House Slpeaker Frank Chopp - the leaders who tabled the Worker Privacy Act after learning of an email that tied campaign contributions to legislative action. Most of the press coverage following the meeting focused on union concerns.

Joe Turner summarizes it this way on his TNT blog: "We can't get no satisfaction on Worker Privacy." Turner includes a brief statement from the Washington State Labor Council. Here's the WSLC account from their web site.

"This entire incident has severely strained labor's relationship with Democratic leaders," said WSLC President Rick Bender . "We still consider their actions to have been a dramatic over-reaction especially after the Washington State Patrol and the Public Disclosure Commission quickly determined no legal or ethical wrongdoing. Democratic leaders offered no explanation at Wednesday's meeting to counter assertions that their actions were anything but a pretext for blocking the Worker Privacy Act at the insistence of The Boeing Company.

Union considerations also factor heavily in what's being reported as an emerging split within the House Democratic Caucus.

Some members say the Democratic caucus is splitting into pro-labor and pro-business camps. Those who consider themselves more pro-labor complain that lawmakers aren't doing enough to address such issues as climate change or worker rights.

Brad Shannon has more on his blog for the Olympian.

Tight budgets factor heavily into liberal/labor unhappiness this year, as the Wall Street Journal reports.

But, Kris Tefft notes at Olympia Business Watch, labor scored two big - but we hope inconclusive - wins in the House Commerce and Labor Committee late last week.

The committee movedESSB 6035 the bill that would impose newrestrictions and regulations on trade associations that operate voluntary retrospective ratings programs in workers' comp. It thenamended and moved SSB 5963 a delicate and heavily brokeredeffort to bring the state's Unemployment Insurance tax system back into conformity with federal law.

Watch for more on this in the coming days.

Next Week is Budget Week

The Senate budget comes out Monday, with the House version scheduled for a Tuesday release. The initial releases, with no revenue package attached, suggest dire consequences, inviting interest group support for higher taxes.

 

Here's Brad Shannon's report.

Budget writers in both chambers have talked about a $9 billion budget shortfall for 2009-11. But that's a misleading term, referring to the shortfall between the hopes of continuing spending levels from 2008 and the reality of state revenues available in 2009-11.

[Sen. Rodney] Tom said earlier this week that cuts to real programs amount to about $3.7 billion to close the $9 billion gap. 

Joe Turner writes that Speaker Frank Chopp says decisions about a tax package - if any  - will be made over the next two weeks.

 

The Seattle Times reports on a possible $500 million hit for higher education, public school teacher layoffs, and other cuts.  Rich Roesler tells us Sen. Adam Kline supports new revenues, including an income tax. Clearly, Kline has company.

 

We continue to believe that, difficult as the resetting will be this session, spending must be reset to a sustainable level - a level not requiring increasing the tax burden on families and employers.

 

 

Light Blogging Ahead

I'll be away at meetings for a few days with limited opportunity to post here. Back to you soon.

Budget Rollout May Be Delayed

Andrew Garber reports that the Senate may not release its budget this week.

Sen. Rodney Tom, vice chairman of the Senate Ways and Means Committee, told me a few minutes ago that he was pretty certain the budgets would not come out this week.

However, House Majority Leader Lynn Kessler said she felt both sides were very close to an agreement and it's still possible for the budgets to be released this week.

The two chambers have been working together this year, with the House budget expected to come out a day after the Senate release. As Garber writes, by agreeing on the major cuts Democratic leaders hoped to reduce divide-and-conquer strategies from affected interest groups.

If their plans include a tax vote, Joe Turner reports time is running out.

David Ammons, spokesman for Secretary of State Sam Reed just told me the Legislature would have to decide by "early to mid-April" if it wants to put something on the June 30 ballot. (That's a Tuesday, by the way.) And they'd have to act quicker if they want a vote earlier in June.

I called Ammons because I got word that county auditors -- the local elections folks -- were being alerted to a possible special election in June.

A June vote is important if the new taxes are tied to education. The public schools put together their budgets early. August is tough. November is too late.

They should just shelve the tax hike question altogether. Don Brunell points out the budget can be balanced without new revenues.

Now is not the time to burden taxpayers with another layer of costly government programs. And this is not a problem outside our reach. We should be prioritizing within the state budget based on the income available, just as Main Street does with its books every day.

I also took a stab at putting the budget in context in this morning's TNT.

PDC Clears Union Email; Governor Says She'd Have Vetoed Gag Rule Anyway

In this morning's Everett Herald, Jerry Cornfield reports that the Public Disclosure Commission will not pursue action against the union lobbyist who sent a controversial email that got the Worker Privacy Act legislation tabled for the session. You'll remember, that's the "not another dime" email, saying no more union contributions unless lawmakers pass labor's top priority, a gag rule on employers. After learning of the email, Gov. Gregoire, Senate Majority Leader Lisa Brown, and House Speaker Frank Chopp referred the email to the Washington State Patrol and killed the bill.

The patrol determined that the email did not break the law. Now, with the PDC saying, "no foul, play on," it's back to the legislature.

This time, however, we have Gov. Gregoire's Monday statement that she would have vetoed the bill anyway. That's the right call.

Stay tuned. Somehow, it doesn't look like this is over yet.

Legislators Looking at Taxes; Gov. Gregoire Agrees They May Be Necessary

It's been no secret that lawmakers have been huddling to craft a tax package for voter approval for months. Now, with time running out on the legislative session, the release of the official March forecast, and the input of a coalition of tax-supporting interest groups, they may be ready to share their plans.

KIRO radio's Tim Haeck reports that, while legislators haven't shared their tax plans with her, Gov. Gregoire thinks new taxes are required. That's a shift in her oft-stated opposition to raising taxes during a recession, though she's generally said that if the Legislature wanted to submit a package to ther voters, they were free to do so. Here's the problem, in her view:

...Gregoire says it's a horrible time to hike property taxes or business taxes, "That leaves you with a sales tax. One of our major problems right now is a lack of consumer confidence. So people aren't buying anything so I don't know how much that really gets us?"

The tax coalition may be unraveling, as members grow frustrated with the options, according to Austin Jenkins report on Crosscut. He notes that three labor groups have left the coalition, citing opposition to tax proposals that fall most heavily on "working families."

The UFCW's frustration with the "coalition" seems to support what many in the legislature are hinting - that the leading contender for a tax hike package is a temporary increase in the state sales tax.

The Washington State Labor Council, an umbrella organization, says it left the coalition because its affiliates began bowing out and it wanted to show support for them. In an email, the Labor Council's Kathy Cummings adds her group isn't confident the tax effort will succeed.

Read Jenkins' report: It's a good summary of the challenges tax-boosters face this year.

Joe Turner has more on the governor's thinking.

The governor also allowed as to how there might be two tax-hike measures on the ballot this fall: one for the operating budget; a second one that would take the form of a bond measure that would pay for school construction and create jobs.

That timetable would not be much help to folks wanting a tax hike for the public schools. They'd need a June election to give them timely budget certainty, something House majority leader Lynne Kessler told a business group tleadership is considering.

The Senate budget should be out later this week. Sen. Rodnety Tom already warns of thousands of job cuts. Sen. Jean Kohl-Welles calls the shortfall "among the nation's most severe." She cites a recent Elway poll:

Sixty-four percent of those polled would approve a temporary 1-cent increase in the state sales tax. This could generate more than $1 billion over a two-year period.

As she writes, it's not enough to close the gap.

More to the point is Seattle Times editorial page editor James Vesely's observation that "once imposed, taxes tend to stick around."

UPDATE Andrew Garber clarifies the governor's stance on new and higher taxes.

She said that although she supports the Legislature's efforts to look at tax options, it's "an open question whether I'll support it."

Garber quotes Gregoire spokesman Pearse Edwards as saying the governor hasn't changed her position.

Revenue Growth Nearly Flat with Yesterday's Forecast

Yesterday the Economic and Revenue Forecast Council met to approve the official March forecast. This is a big deal because it sets the frame for state budget writers, telling them how much they'll have to spend in this budget cycle and the next. As expected, state forecaster Arun Raha had little good news to report.

Since our last official revenue forecast in November, the state economy has weakened considerably. The weakness in housing activity and auto sales has spread to other sectors of the state economy – non-residential construction, manufacturing, aerospace, software publishing and retail sales. Our new baseline forecast assumes that the U.S. and Washington economies will be in recession for most of this year, flattening out sometime late in the third quarter. Growth will remain flat in the first half of 2010, and improve only in the second half of the year. Job losses will continue even after the economy is in recovery.

Here are the numbers for the "near general fund state," which includes the general fund plus related accounts. For all practical purposes, this is what people mean when they say "the budget." In 2007-2009, the state will take in about $30.4 billion. For the next budget cycle, the state will take in about $30.6 billion. That's pretty flat, but negligible growth is not "no growth" and it's certainly not a $9 billion drop in revenues. Remember, the "nearly $9 billion" shortfall that some are reporting today represents the gap between available revenues and estimated expenditures, which includes the cost of operating current programs plus a number of "policy adds" like compensation increases and desired program expansions. As well, the $9 billion shortfall does not account for some $3.1 billion in federal stimulus money or any tapping of the rainy day fund.

Taking away the policy items and adding the stimulus money, the shortfall approaches $4.5 billion. (A new WashACE Competitiveness Brief to be released later today goes into this in some detail.)

Plenty of news coverage on forecast and budget predicament out today. Andrew Garber puts the shortfall in proper perspective.

If you take emergency state reserves, the federal stimulus money recently approved by Congress and some other recent belt-tightening moves into account, the real problem the Legislature has to solve is around $4 billion. That figure includes leaving several hundred million dollars in reserve.

That's still an enormous, and unprecedented, shortfall.

Agreed. But still much more manageable than the touted $9 billion.

The News Tribune reports on budget deliberations, with Joe Turner writing that the Senate may run out its budget by the end of next week. He also notes the current year deficit.

Victor Moore, budget director for Gov. Chris Gregoire said the revenue forecast puts the state back in the red and that state will have to dip into its $430 million Rainy Day savings account and use more federal stimulus money to balance the current budget, which comes to a close on June 30.

Rich Roesler writes on his Spokesman-Review blog of some of the anticipated cuts.

Brad Shannon provides useful links for folks wanting more detail.

Adam Wilson reports on the growth/decline numbers: general fund is down some, near general fund up 0.2 percent as we noted above.

And plenty of speculation about taxes, but no one is saying much definitively. Austin Jenkins finally gets his public records request answered and tells us what some legislators are considering. It doesn't add up to a lot and may not make it past the "what if" stage.

For the record, no one has specified a tax package for a public vote. Some Tacoma-area legislators are telling constituents to brace for cuts.

What we've heard is that there may be a single package, several designer packages earmarking tax hikes to specific programs, and no package. That latter option is generally seen as a bridge to tax hikes next year, when they can be passed by a simple majority vote. The thinking is that after the public experiences the so-called "all cuts" budget, they'll be more in the mood to support tax hikes. First the pain of the cuts, then the, well, pain of the tax hikes. If, as expected, education programs are among the options for a voter-approved tax package, the election would have to be held in June. You can't begin a school year without having the revenue side nailed down - a November tax increase is too late.

If voters reject a tax package, that makes it more difficult for legislators to raise taxes in the 2010 session, which might be one reason to forego the vote now and adopt a no-tax-hike budget.

Enough speculation for now. We'll know more soon.

New WashACE brief Pegs Shortfall at from $4 Billion to $6 Billion

The WashACE budget brief mentioned here is now available for downloading here (if the download doesn't work, please go here). The brief, prepared for us by the Washington Research Council, breaks down the components of the budget shortfall and assesses the deterioration of state revenues.

Read the whole thing. It provides valuable perspective on the state budget shortfall.