Wednesday, September 29, 2004
DON C. BRUNELL
State economists report that Washington's sizzling real estate market will pump an additional $132 million in revenues into state coffers. That's the good news.
The bad news is, that money - and more - is already spent. The week before the Revenue Forecast Council released its report, Gov. Locke reached an agreement with two state worker unions that will cost the state $170 million in higher salaries and health care costs.
And there's more to come. Labor agreements with Washington's universities and colleges and two general government unions are still to be worked out - all this against the backdrop of a budget deficit that could reach $1 billion.
To many legislators and activists, Washington's flat economy, stagnant revenues and higher spending spell "tax increase." But history teaches us that raising taxes would be exactly the wrong thing to do.
In 1993, state lawmakers, unwilling to limit spending during a recession, approved a big government-run health care system and passed a series of tax increases on business, including a whopping 80 percent increase in the Business and Occupation (B&O) tax on service businesses. The tax hike and higher regulatory burden sent a message throughout the nation that Washington was "bad for business." In the end, the massive health care program never materialized, and the Association of Washington Business succeeded in getting the B&O tax increase rolled back, putting the state on a more solid economic footing.
Now, 11 years later, we find ourselves in a similar situation, and some lawmakers will once again be tempted to raise taxes. That's a bad idea. While the rest of the nation is enjoying job growth and economic recovery, Washington's jobless rate actually increased in August to 6.2 percent, compared with 5.4 percent nationwide. This is no time to smother our state's weak recovery with a tax increase.
Rather, state lawmakers should stay with the successful Price/Priorities of Government (POG) process that helped them prioritize state spending in 2003, avoiding the need to increase taxes. POG requires legislators to do something the rest of us do every day - figure out how much money we have and make tough decisions on how to spend it. The POG process recognizes that we cannot afford to do everything, so we need to set priorities and fund the most important and efficient programs first.
The POG process efforts fit hand-in-glove with the Governor's Competitiveness Council's recommendations on how to streamline government and regulatory processes and avoid new taxes and fees.
The POG process and the Governor's Competitiveness Council recommendations have provided lawmakers with a roadmap on how to successfully navigate through hard times. They should take advantage of that map and stay on the right track.
Don C. Brunell is President of the Association of Washington Business.