If lawmakers can’t control spending, voters likely will

If this is the boom, prepare for the bust. The surge in state revenues produced by a strong national economy has revived taxpayer efforts to control spending by initiative. Voters in at least a half dozen states are anticipating some form of spending limit on their ballot this year.

Washingtonians will want to keep a close eye on Oregon’s effort, Measure 48, dubbed the Rainy Day Amendment by its sponsors. The proposed constitutional amendment would limit growth in state spending to the increase in population plus inflation – roughly the same limit Washington voters adopted in 1993 when they passed Initiative 601.

According to Matt Evans, spokesman for the campaign, backers want to avoid the familiar boom-and-bust cycle: large spending increases when the economy is hot, followed by shortfalls and crises when it cools. He recalls that in 2001, when the economy tanked “there was nothing in the cupboard.”

“They’ll spend every penny available,” he says of lawmakers, “but (with the amendment) some pennies won’t be available and they’ll be forced to save … “

It’s an argument that will resonate here, as state spending continues to grow at an unsustainable pace. While the Democrat-controlled Legislature squirreled some money away for next year, lawmakers also boosted spending by more than a half billion dollars in the supplemental budget without adequately funding the state’s pension obligation. When they adjourned last spring, even with the savings set aside, the cost of ongoing programs in the coming budget cycle exceeded revenue projections by nearly three-quarters of a billion. You might call that “spending every penny available” and betting on a bailout.

This time, at least for now, the gamble paid off. The June revenue forecast, which added nearly a billion dollars to the state’s estimated tax take through the next biennium, erased the near-term problem. While spending is still expected to exceed revenues, new projections show that the windfall dollars could carry the state for several years – that is in the unlikely event that lawmakers don’t indulge in a spate of new spending or the economy suddenly sags.

But with plenty of cash on hand, special interests will demand their due. From higher pay and better benefits to more money for a host of good and not-so-good causes, the 2007 legislative session is sizing up to be a demand-side romp.

Spending limits work by making it more difficult for lawmakers to overcommit during the good years. Unsustainable spending increases guarantee tough choices in the future – choices that often include tax increases. Enter the tight spending cap.

Typically, the state economy grows faster than population plus inflation. That means that, over time, the limit shrinks government as a share of the economy. Countering that effect is the reason the Democratic majority in the 2005 Washington Legislature replaced the I-601 limit with one based on economic growth.

The population-inflation limit is a defining feature of the Taxpayers Bill of Rights (TABOR) pioneered in Colorado in 1992 and suspended temporarily by voters in 2005. The Colorado measure applies to state and local government, requires that surpluses be refunded to taxpayers, limits both revenues and spending, and makes tax hikes subject to a public vote. And it has taken on national symbolic importance.

Critics, like the liberal D.C.-based Center for Budget and Policy Priorities, hope to capitalize on the Colorado time-out by labeling most of current ballot initiatives “TABORs,” although none precisely mirrors the Colorado law. Many of the state efforts have, however, incorporated key TABOR provisions, such as requiring voter approval for tax hikes and the population-inflation spending cap. Several have ties to Americans for Limited Government (ALG), a conservative political operation out of Chicago. ALG funded most of the signature gathering in Oregon, but had nothing to do with drafting Measure 48.

Oregon’s Evans makes the case for the more restrictive limit. “Limiting the size of government is a core conservative economic principle,” he says.

Many voters feel bypassed by the recovery and anxious about the future. They’re likely to support these initiatives as a defensive measure, despite – maybe because of – heavy interest group spending against them. If our Legislature fails to control spending next session, voters here will know what they have to do.

Richard S. Davis, president of the Washington Research Council, writes every other Wednesday. His columns do not necessarily reflect the views of the council. Write Davis at rsdavis@researchcouncil.org or Washington Research Council, 108 S. Washington St., Suite 406, Seattle, WA 98104-3408.