There is no way to sugarcoat this: this is the worst biennial budget we have ever seen. The state continues to spend too much, tax too much and go into too much debt.
Gov. Christine Gregoire has repeatedly delayed meaningful action to solve the 2009-11 budget deficit. Her failure jeopardizes the state's credit rating.
Gov. Gregoire's recent budget proposals are too little, too late. Her public frustration at the legislature's failure to propose a supplemental budget that closes the entire deficit rings hollow, as she herself has failed to use the tools at her disposal to force the issue. These tools are across-the-board cuts and the renegotiation of collective bargaining agreements. She is the state's executive--in other words, the boss. She can compel action on the budget deficit.
But, the governor continues to wait on the legislative majority, rather than showing the real leadership Washington needs.
With a 16 percent increase in projected revenue for the next biennium, there would be no incoming deficit if the governor and legislature had balanced the current budget without accounting gimmicks.
Gov. Gregoire has failed to balance the budget and thus is in violation of the state's Budget and Accounting Act.
She has failed to support the state auditor's report, which would save up to $347 million by consolidating K-12 health care purchasing.
She has failed to introduce legislation to correct the unsustainable workers' compensation program.
She has failed to address the serious problems identified in the state's annual Consolidated Annual Financial Report, which was released by her budget director in November.
She has failed to obtain meaningful concessions from the state employee unions. The governor's budget director argued the state employee contracts were not economically sustainable. Gov. Gregoire declared an emergency and re-opened the union contracts and asked for employees to raise their healthcare contributions from 12 percent to 26 percent. Several weeks later the union and the state settled at 15 percent. That level is still economically unsustainable. The state is paying for part of its operating expenses by draining insurance reserves, pushing the deficit off to the future.
Gov. Gregoire and the legislative, leadership have repeatedly worsened the state's projected budget deficit with their budget games and gimmicks. The original 2009-11 budget passed by the legislature and approved by the governor was balanced by using $3 billion in one-time federal stimulus money, which has left a glaring hole in the next budget. They also raided $252 million from dedicated accounts (which turned out to be just the beginning of the fund raiding game), causing the Washington State Liquor Board to raise the state's liquor mark-up from 32.9 percent to 52 percent.
The fun doesn't stop there. They transferred $445 million from the state's rainy day account, raided $777 million from the capital budget, raised nearly $500 million in new taxes and fees (mostly fees) and took $448 million from the state pension system. The pension move was particularly egregious as the manner in which it was raided lowered the contributions by local government and state and local employees, creating an additional $1.2 billion hole in the pension system.
In December, Gov. Gregoire permitted the legislature to address only $590 million of the deficit, leaving roughly $600 million still to be addressed. The supplemental budget passed by legislators in February reduced the deficit to $240 million, but one-third of the "fix" was a $125 million raid on dedicated accounts.
To make matters worse, the governor has proposed yet another accounting gimmick to "solve" the remaining deficit. By delaying payments to school districts from June 30 to July 1, the state can "save" $250 million in the current budget. Of course, not only are no savings achieved with this tactic, but it actually worsens the 2011-13 budget problem.
Washington is suffering under a deficit nurtured by a culture of incompetence, indolence and irresponsibility. Gov. Gregoire has failed to demonstrate the leadership this state needs. Let's hope the governor acts before the state's credit rating is lowered.
- Bob Williams is co-founder and senior fellow at the Freedom Foundation. Amber Gunn is the economic policy director for the Freedom Foundation.