Avoid California's failure and focus on job creation

LOOK south. That's my advice to state lawmakers as the Legislature convenes.

Across the border in Oregon, unemployment is running above 11 percent and the state is torn by tax-rollback referendums.

Look beyond to California, a state captured in the stranglehold of its voter-initiative industry, interest — group politics, ideology-driven anti-growth policies and a reckless, short-term approach to budgeting. How dire are politics there? A debate soon to be held in New York City will argue this proposition: California is the first failed state.

Washington lawmakers can avoid Oregon's and California's self-inflicted wounds. The carnage is there for all to see — and heed. Our state's policymakers have governed more responsibly than their counterparts to the south, adopting a budget last year without job-killing taxes and rejecting several egregiously anti-growth proposals from the controlling party's base constituencies. And Washington voters have helped by rejecting initiatives like I-1033, which would have made it harder for lawmakers to responsibly address our state's problems.

Nonetheless, the budget-crippling impacts of the recession were exacerbated by earlier decisions to make long-term spending commitments far in excess of any reasonable estimate of long-term revenue growth, and our lawmakers will continue to be tested. Projections indicate a yawning gap between anticipated revenue and the anticipated costs as far as the eye can see. The most important thing lawmakers can do to restore our state's economic health is to prioritize job creation.

Filling a $2.6 billion hole in the state budget is a daunting task. A clear demonstration of fiscal restraint and a decisive, long-range strategy to create jobs is needed. New jobs means businesses are investing and more consumers are employed with money to spend. Job creation is the only way to spur growth that will generate state revenue over the long term.

Washington has lost one out of 18 jobs during the recession, according to a Nov. 17 report from the Washington Employment Security Department. A closer look reveals one in 14 in the private sector. That's offset by much smaller losses in the public sector — one in 38 in state government and one in 55 in local government. Our state will have large deficits until those numbers appreciatively improve. The Legislature must:

• Budget for the long-term; it is clear that the state's fiscal problems will linger beyond the next two-year budget cycle;

• Prioritize state programs that stimulate job creation, including our higher-education and K-12 education systems and transportation infrastructure;

• Give employers incentives to create jobs, in particular through overdue reforms to the state's workers' compensation system; and,

• Resist long-term funding commitments based on one-time funding "bubbles" such as the unsustainable real-estate tax surge of the middle-2000s or more recent infusions of federal stimulus money.

Tempting as it might be to balance the state's budget with significant tax increases, the employers I represent urge restraint. Now is not the time to stifle job creation. Businesses can send money to the state in the form of higher taxes or invest it in the form of new jobs. California's experience is applicable here. (Don't forget that the aerospace industry was one of the first to flee that state.)

And yet ...

There's talk of tax increases on employers that would be piled on top of the significant hikes in unemployment insurance and workers' compensation rates set to take effect in 2010. Rallying recently on the steps of the state Capitol, dozens of interest groups called for higher taxes to "solve" the state's budget mess. A hint of California is in the air.

Perhaps lawmakers will find increasing taxes on employers the course of least resistance, easier than the types of dramatic steps being made every day by businesses across our state to reduce costs and preserve jobs.

We have it within our means to insure that what is happening in Oregon and California does not happen here.

Steve Mullin is president of the Washington Roundtable, a nonprofit public-policy analysis and advocacy organization representing major private-sector employers in Washington state. (www.waroundtable.com)