Published August 2005

Legislature finally acted,
but at what price?

We’re well into the state’s new two-year biennial budget approved by the Legislature last spring. But the budget needs to remain in the public spotlight, according to independent watch-dog groups who believe people should be reminded often of the impact of the lawmakers’ decisions on our state’s economy, tax burden and efforts to create a “business-friendly” environment. Consider these edited and paraphrased views and statements made recently by a variety of local critics.

— John Wolcott, SCBJ Editor

Writing in The Heartland Institute’s Budget & Tax News in June, Jason Mercier, a budget research analyst with the Evergreen Freedom Foundation, said Washington state Democrats exercised their complete political control by pushing through a record $26 billion budget. The legislature relied on nearly half-a-billion dollars in tax increases and one-time revenue sources and left $200 million in reserve, less than 1 percent of the total budget.

To reach $26 billion in spending, legislators resorted to creative accounting to artificially increase the spending limit formula approved by voters in a 1993 initiative. They transferred $250 million from the health services account to the general fund, then appropriated $250 million from the general fund to the violence reduction and drug enforcement account.

Then they transferred money back to the health services account. When money is transferred into the general fund and appropriated, the spending limit is raised. In this case, money was simply moved among accounts, raising the spending limit even though no more money was available.

Besides artificially increasing the spending limit approved by voters in I-601, a statutory Taxpayers’ Bill of Rights enacted in 1993, Democrats also approved a bill that redefined the remaining taxpayer protections. Approved on a strictly party-line vote, SB 6078 removed the two-thirds vote requirement for the legislature to raise taxes during the 2005-07 biennium.

The budget also redefined the spending limit growth factor to allow state spending to grow at a faster pace than previously authorized. This allowed Democrats to implement nearly half-a-billion dollars in tax increases with a simple majority vote and without any Republican support.

Supporters of the increase in the voter-approved spending limit said the move was necessary to meet the funding requirements of another voter-approved initiative to reduce class sizes in the public schools, a measure approved by voters in 2000, after former Gov. Gary Locke (D) promised the initiative would not raise taxes, Mercier wrote.

The state’s billion-dollar surplus disappeared in 2001. With I-728 causing a drain of more than $800 million from the state’s budget, Democrats voted to dedicate portions of an increased cigarette tax and new estate tax to cover part of the education cost.

According to Bob Williams, president of the Evergreen Freedom Foundation, overriding the voter-approved spending limit to fund I-728 was unnecessary. “Democrats were not prevented from raising taxes and spending at any level they want, but under the law, voters were to be given the opportunity to approve expenditures in excess of the spending limit,” Williams said. “By playing budget games, the Democrats simply denied the people their right to reaffirm that the budget actually reflects their priorities.”

Dann Mead Smith, president of the Washington Policy Center, agreed. “Simply taking more tax money from citizens won’t help, but budget reform — like spending limits, competitive bidding for government services, and legal safeguards against tax increases — would finally ease the chronic sense of crisis in state finances.”

Washington’s business community also voiced disapproval of the Democrats’ budget.

“While the U.S. Congress is eliminating the estate tax, Washington is embracing it,” said Erin Shannon of the Building Industry Association of Washington. “This will have a devastating effect on family farms and small businesses ... one more reason for family-owned businesses to stay out of Washington State.”

And the Washingtion Research Council noted that the budget signed by Gov. Christine Gregoire last month “includes a lot of spending for programs with broad public or interest group support — increased enrollment in colleges and universities, expanded health care programs, better compensation for public employees, funding a pair of popular education initiatives, and more.”

“Unfortunately, we cannot afford this level of spending on an ongoing basis,” the WRC report said. “A recovering economy gave lawmakers plenty of new general fund money to work with, nearly $1.7 billion ... Still, lawmakers raised a half-billion dollars in new taxes, manipulated the voter-approved state expenditure limit, transferred funds among dedicated accounts, dipped into reserves, punted pension obligations, and hypothesized unlikely savings to support the largest increase in state spending in a decade.

“The major consequence of this decision will be a virtually certain billion-dollar budget shortfall in 2007 ... (when) the Legislature convenes to write the (next) two-year budget. And that may be the optimistic forecast,” the research council warns.

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