Budget solutions will require tough decisions and real reforms

SOME leaders in Olympia are telling Washingtonians to shoulder a higher tax burden or the most vulnerable people in our state will suffer.

This threat is built on the assumption that everything we're paying for today should be continued indefinitely, and vital government services must be delivered exactly the same way today as they were in the last century.

Focusing on new taxes as the solution, however, demonstrates an unwillingness to re-evaluate which programs are in fact core functions of government and which are low-priority spending that we've grown accustomed to but can no longer afford.

Complicating the debate is a failure to address the full budget problem. Though the current $2.6 billion deficit is capturing the headlines, the state is facing at a minimum a three-year budget problem.

According to the state's budget office, even if the cuts Gov. Chris Gregoire reluctantly requested last month are enacted, the state would still face a new $2.8 billion deficit starting in 2011.

This means officials in Olympia must enact a spending plan that not only erases the current red ink but finally puts the state on a path to a sustainable budget.

Even before the current recession, state government was badly overextended. The governor and Legislature increased spending by more than 30 percent in four short years. This structural spending problem was only made worse by the current bad economy. Last session the Legislature made a small step toward correcting this problem, but relied too heavily on one-time solutions, like federal stimulus money or tapping dedicated fund surpluses. These once-only fixes were further exposed by the weakness of the economy.

Special interests in Olympia are gearing up to tap the recession-strained wallets of families and businesses as the solution to the state's budget problems. Given the full budget problem, however, the multibillion-dollar tax increase needed to continue the current unsustainable level of spending would devastate the economic recovery and cost tens of thousands of Washingtonians their jobs. Just ask California what happens when a governor raises taxes during a recession.

Economists warn that we cannot tax our way out of this problem. Instead, state leaders must reset their spending expectations to match the new economic reality.

That means looking creatively at all the options for changing the way the state does business. Specific reforms include:

• Use the state's seldom-used competitive contracting authority enacted in 2002 to lower the cost of delivering public services. Competitive pricing would save the state 10 to 20 percent on basic operating services;

• Lower personnel costs by re-evaluating the generous compensation of state employees, including pensions and health-care benefits. Rigid collective-bargaining contracts threaten to put one of the state's main cost drivers on automatic pilot, preventing elected leaders from getting spending under control. At a minimum, no pay raises should occur while programs are being eliminated;

• Consider ending state programs not directly related to maintaining public peace, health or safety;

• Allow four-year universities to become more independent and less dependent on taxpayer subsidies, and;

• Transition state programs, boards and commissions that can be funded by user fees away from direct taxpayer support.

It is especially odd that under the governor's priorities, provisions to cut people from the Basic Health Plan were included but there was no meaningful effort to reduce the state's expensive personnel costs. Under her proposed budget, some well-paid state employees would receive raises, while other people are losing their health coverage.

To put the state on firm fiscal footing, any budget adopted must not raise taxes during a recession or result in a projected deficit in the next biennium. Olympia leaders should fund only vital core functions of government and leave low-priority (through perhaps desirable) programs for another day.

Adopting a truly balanced and sustainable budget will require tough decisions, but the level of state spending must match actual and projected revenues. This will mean that some of the programs we've grown accustomed to during good times must be eliminated. The Washington Policy Center's Policy Guide for Washington State explains how to achieve this.

Taking more money from businesses and cutting people's take-home pay with higher taxes is not the solution.

Jason Mercier is government-reform director at Washington Policy Center, an independent policy-research organization in Seattle and Olympia. (www.washingtonpolicy.org)