Friday, May 9, 2008

Washington State: It's Time to Get Off the Budget Rollercoaster

by John Barnes
Communications Director, Washington Policy Center

Some people like the thrill of rollercoasters. Our lawmakers must love it becaue the biggest rollercoaster in Washington is owned and operated by the state. It's called the budget.

Lawmakers and the governor have grown state spending by 33% in the last two budgets. Now the Senate Ways & Means Committee is projecting a $2.5 billion deficit next year and a $5.3 billion shortfall for the 2011-13 biennium. Taxpayers are getting nauseas.

As a rule of thumb, the state budget is the opposite of gravity. Gravity pulls things down, while all of the spending pressure on the state budget is upwards. That's right--the swarms of lobbyists roaming the halls of the state capitol are not there asking lawmakers to spend less money. It should come as no surprise, then, that state spending growth tends to outpace population growth and inflation.

Thanks to a strong economy, revenue has grown well beyond inflation for the past few years. Even amidst the talk of a revenue decline, it's only a cut in the rate of increase--revenue is still projected to grow beyond inflation. State lawmakers do not have a revenue problem. They have a spending problem.

Let's say I buy a lottery ticket today and win $500. Does it make sense for me to then buy a car with a $500-per-month payment? That's what lawmakers in Olympia have done in the last few years. They've used one-time revenues during boom years to make the down payments on new spending programs, with no way to make the long-term payments.

It's basic math: the bigger the budget this year, the more it costs to maintain next year. Adding to the budget only compounds that problem.

We hear a lot about a "revenue problem" (usually code talk for "we need an income tax"). But is that really the issue? The natural tendency is for government spending to grow, not shrink, and history has shown that no matter how flush with cash state coffers are, lawmakers will always push to spend more. Their appetite for spending appears insatiable, so more revenue will only lead to more spending.

Not content with a 33% increase in state spending over four years, some lawmakers and special interest groups have proposed the state spend more in the face of projected deficits caused by overspending.

Still others argue that speeding up government spending on rebuilding infrastructure will provide jobs now and help keep the economy strong. But this is an absurd argument. It's like saying burning down my neighbor's house is good for the economy because it will keep local builders in business. The only way the government can "create" a job is by taking money away from someone else.

These proposals might make for good election-year politics but they're bad policy that will only make matters worse in the long run.

House Speaker Frank Chopp has admitted that tax increases may be necessary to balance next year's state budget, which is projected to run a $2.5 billion deficit thanks to recent spending increases. Senate Majority Leader Lisa Brown is suing to overturn I-601, which was approved by voters in 1993 and requires a two-thirds vote of the legislature to raise taxes. Legislative leaders can't be any clearer that they plan to resort to tax increases to bail out their overspending.

The sound approach to the state's budget woes is a meaningful constitutional spending limit. The state's I-601 spending limit is so riddled with holes that it's now meaningless. Clearly a statutory restraint is not enough. The state needs a meaningful spending limit that makes allowances for genuine emergencies, much like the rainy day amendment that voters approved in November, but cannot be gamed and sidestepped by fund transfers and off-budget spending, as lawmakers have done over the last few years.

The real problem is on the spending side of the state's ledger, not the revenue side. Lawmakers must learn to prioritize expenditures, realizing that not every project or program (no matter how attractive) can be a priority. That's how people budget in the real world.

Unless lawmakers change the way they budget taxpayer dollars, the fundamental problem will remain and the rollercoaster ride will continue.

John Barnes is Communications Director for Washington Policy Center, a non-partisan public policy research organization in Seattle and Olympia.