The Great Recession has brought many challenges to Washington — a steep decline in state revenues that resulted in unprecedented budget deficits and economic hardships that have swept through communities across our state.
Unfortunately, the 2011 Legislature will likely be remembered for dra
matic cuts to many of the public services that are essential to our families and communities. The reductions in funding to education and health care will have long-lasting effects. The foundations of the public structures that underpin our state’s economy and quality of life have been weakened with
each cut, resulting in fractures that will take decades to repair.
As we assess the very real and human impacts of this budget, despair is not enough. We must begin now to enact policy changes that will help us recover and ensure our state’s future growth and prosperity. Together we must pur
sue forward-looking strategies and investments that will make our state stronger, ensure a stable recovery, and prepare us for any future economic downturns.
The state budget is a reflection of our shared values and goals. The decisions made about the budget directly impact our ability to educate our children, maintain the health and well-being of our communities, and provide economic security to those in need. As we go forward we need to track the impact of the decisions we have made while charting a course toward prosperity.
Our vision includes four comprehensive values representing common ground on which Washingtonians can agree:
•Broadly available education and opportunity is fundamental to the future of our state.
•Public investments that maintain our state infrastructure and protect our natural resources create thriving communities.
•Quality of life in the state depends on healthy people and environment.
•We all need public supports and services that provide avenues to economic security.
These values should be an unwavering beacon guiding our choices as a state.
When we are thoughtful about our progress forward or the steps we have taken backward, then the choices before us are clearer. Using the value framework of education and opportunity, community, good health and prosperity, we can pursue strategies and investments that will achieve meaningful improvements. Along the way, we must measure our progress to provide us with a map of where we are and help us understand where we are headed.
If we are to be good stewards of our state then we must take a balanced approach to solving the fiscal challenges we face. While we witness a state budget that will undermine many essential public services, we continue to ignore rational changes to the revenue side of the ledger.
For example, our current state budget process fails to account for the billions of dollars spent each year on tax breaks — hundreds of special credits, exemptions, deductions and other tax preferences.
To create a more transparent and accountable state budget process, we must pursue reforms that would allow policymakers and the public to balance the costs and benefits of tax expenditures — spending in the tax code — against other important public priorities, like health care and education. Potential reforms include:
•Establish routine oversight by requiring renewal dates for all tax expenditures: Forcing tax expenditures to expire or “sunset” periodically would ensure they receive thorough and regular reviews by the Legislature — something that is missing from the current budgeting process.
•Improve fiscal management by allowing tax expenditures to be modified via a simple majority in the Legislature: The current budgeting process in our state requires tax expenditures to be modified or eliminated through a supermajority (two-thirds) vote in the Legislature, while eliminating spending on public services only requires a simple majority vote.
•Foster transparency through an executive tax expenditure budget: Requiring the governor to submit a tax expenditure budget — detailing all tax expenditures and their ongoing costs — every two years along with her budget proposal would create a more complete view of state spending during the budget process.
•Ensure tax expenditures are cost-effective by enhancing audit and review structures: Enlarging the scope of tax expenditures subject to state audits, granting greater flexibility to our existing audit agencies, and requiring the Legislature to act on tax expenditure performance evaluations would allow policymakers to weed out ineffective or obsolete tax expenditures. Some of these ideas were incorporated into bills this year. We should continue the conversation around tax break reform in order to improve our fiscal transparency.
As Washingtonians are losing health care from their employers and need to go back to community colleges to be retrained, we don’t have adequate revenue to support those activities. Each year, the cost of meeting key public priorities grows along with economic and demographic trends. The current economic downturn has taken a significant toll on revenue and will continue to do so for years to come.
To put current and future revenue into perspective, the accompanying graph shows it as a share of total personal income in the state. This is a method commonly used by economists to compare the size of government from year to year. The graph shows that even after revenue growth in Fiscal Year 2011 through Fiscal Year 2013, revenue as a share of personal income will remain far below the historical trend.
We should take the time now to ensure that our public systems are ready to support our recovery and react during any future recessions. One of the lessons we have learned from the recent downturn is the danger of instability in our fiscal systems.
One example is the Washington’s Budget Stabilization Account or “rainy day fund” (RDF). It was created to provide important protections to key public systems and services during recessions, natural disasters and other state emergencies. Due to several design flaws, our current state RDF does not adequately support education, health care and other important public priorities in times of need.
Some possible reforms to strengthen the rainy day fund include:
•Improve the adequacy of the RDF by increasing annual deposits: To increase the adequacy of the fund, the deposit rate should be increased from 1 percent (as it is currently) of general fund tax revenues to 3.5 percent of general fund revenues in order to act as an effective backstop during deep recessions.
•Foster improved access and accountability by eliminating the supermajority requirement and applying strict limitations: Washingtonians should 1) repeal the onerous supermajority (three-fifths legislative vote) requirement; and 2) stipulate that RDF funds are only to be used when tax revenues are projected to fall short of the amount needed to maintain current levels of services.
•Ensure the rainy day fund does not hinder recovery efforts by modifying deposit requirements: Suspending contributions to the RDF during economic downturns and requiring that they resume when conditions improve would prevent economically damaging deposits to the RDF in the midst of deep recessions. This could be accomplished by establishing an economic “trigger” — such as when total personal income is projected to grow by more than 11 percent in the coming fiscal year.
At many pivotal moments in our state’s history we have chosen to build a brighter future for ourselves and our children. The state budget decisions we make reflect our commitment to making that future a reality. We now have a unique opportunity to look ahead while reflecting lessons learned from the current economic downturn and the resulting harm to our communities.
Our state has tremendous resources at its disposal — hard-working people, creativity and ingenuity, and financial resources that can all be brought to bear to build a more prosperous future. Now is the time to make smart and practical choices and rebuild the path to prosperity for all Washingtonians.
Remy Trupin is the founding executive director of the Washington State Budget & Policy Center, an independent, progressive policy organization based in Seattle.
