No one likes getting caught doing wrong. About all you can do is ‘fess up, take your medicine and hope people don’t define you by your missteps.
Recently, Snohomish County Superior Court Judge James Allendoerfer found the 2005 Legislature guilty of exceeding the spending limit in a ruse to raise taxes. It’s like speeding through a school zone to get home quicker.
There are consequences. Most likely, the ruling will cut allowable spending by $250 million and render at least $100 million in tax hikes illegal. (The reinstated death tax that prompted the court case, however, survives on a technicality.)
While a minor fiscal matter, the affair exposes both legislative cynicism and the unintended consequences of simplistic solutions to complex problems.
Tax-and-spending limits, like campaign-spending regulations, often do more to inspire creative accounting than they do to change behavior.
When voters adopted Initiative 601, the rules looked straightforward.
General fund spending could not grow faster than population plus inflation, and tax increases that topped the limit required voter approval.
It was never that simple. A lot of spending takes place outside the general fund, in special accounts dedicated to health care and education, for example. Lawmakers routinely shuttle money from one account to the other, and each transfer affects the spending limit, thanks to a loophole created in one of many legislative amendments to the initiative over the years.
If hypocrisy is the compliment vice pays to virtue, the tortuous route lawmakers took to disguise their mischief amounts to high praise. Like daylight teetotalers denying late-night tippling, they said one thing and did another. Legislators praised, bypassed, and “strengthened” the spending limit, all the while ignoring the voters’ clear intent.
Judge Allendoerfer called them on it. He reviewed e-mail exchanges among legislative and executive branch staff members. In them, staffers can be seen doing what they do best: figuring out how to make their bosses’ plans work.
One analyst wrote a state representative, saying that “staff will be able to provide members with options to increase the limit pretty significantly – all without amending the expenditure limit statute.”
And legislators desperately wanted those options. They had two big problems.
They wanted to spend more money than the limit allowed, and their budget called for a tax increase. Since the tax hikes went over the limit, the I-601 rules required voter approval.
A three-way fund shift involving the general fund and two dedicated accounts solved their problems.
Think of it this way. Tom gives Dick $250. Dick hands it to Harry, who passes it back to Tom. No one’s any richer, but thanks to bizarre legislative scoring, Tom now appears to have $250 more to spend. Add six zeroes and you’ve got it. The quick shuffle lifted the general fund spending cap by $250 million, enough to accommodate the increased spending and avoid a public vote.
Judge Allendoerfer recognized the gimmick as the deception it was and called foul. The state could appeal the decision, but it’s hard to see any benefit to Democratic legislators from keeping the story alive. Worse, an appeal could potentially open the door to a review of the constitutionality of voter-imposed tax limits. Lawmakers could conceivably win on the law and lose on the politics. Voters like limits.
The embarrassment of getting caught may temporarily chasten legislators. But it’s clear that Washington no longer has effective budget controls.
Jason Mercier of the Evergreen Freedom Foundation, which joined several business groups in the court challenge, applauds the ruling. “The Legislature’s going to have to be honest” in its budgeting, he says, noting that lawmakers will now have to decide what to do about the illegal tax hikes and the tighter spending cap.
I’m a skeptical supporter of vehicles like I-601. By imposing fiscal discipline, they help assure stability in program funding and protection for taxpayers, at least for a while. But all such devices eventually fail, as lawmakers create ways to get around them. What’s left is often worse – a maze of fund transfers, dedicated funds and earmarked taxes that no one understands. Forget about transparency and accountability.
If voters really want conservative government, they’ll be better off electing conservatives and holding them to account.
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.
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