Tag: special session

Washington State Legislature Sets Stage for 2012 Special Session(s)

Unless state lawmakers know something we don’t about an economic revival on the verge of sweeping Europe, today’s quick exit from Olympia without actually balancing the state’s budget sets the stage for the legislative budget can-kicking to continue deep into 2012.

Consider the following from Publicola:

“Not only did the legislature fail to pass a budget during the special session that tackles the whole $1.5 billion shortfall as the governor asked them to (the house voted 86-8 yesterday for its ‘early action’ budget which cuts about $320 million and scoops up another $100 million from other funds, but doesn’t go for Gregoire’s full-on $2 billion in cuts and half-penny sales tax increase for buy backs), but Fizz is starting to think there’s actually something to the rumors that the legislature isn’t even going to deal with the budget until mid-February.

The idea, confirmed by budget sources, is this: That’s when the next revenue forecast hits, and some key lawmakers are hoping the economy’s going to turn around—and the shortfall won’t be as bad by then.

There are, of course, two problems with that approach. 1) Time is money: Even if budget optimists are right and February’s forecast shows more revenue coming in than we’re banking on today; giving up three months’ worth of potential savings by enacting cuts now may end up canceling out any financial gain from a February uptick, and 2) What makes anyone think there’s going to be good economic news?”

As a reminder, the state’s current revenue forecast has a 40% chance that revenues will come in $2 billion lower than expected, doubling the current deficit.

In case anyone thought this warning was growing stale, just this past Monday the state’s economist cautioned:

  • “The U.S. economy continues to ‘muddle through.’ The risk of a renewed financial meltdown stemming from the European sovereign debt crisis remains high.”
  • “The risk of yet another setback remains high. The greatest threat to the U.S. economy remains the European sovereign debt crisis. If the sovereign debt crisis degenerates into a full blown banking crisis, it will spread to the United States because of our banks’ exposure to European banks. A U.S. banking crisis will push the U.S. back into recession. A secondary risk to the recovery is the political gridlock in Washington D.C. that has fiscal policy sitting it out on the sidelines. This has led to a steady erosion of both consumer and business confidence.”

The state’s opinion pages appear to be as disappointed in the Legislature’s response to the budget crisis as we are.

From the Seattle Times:

“’We’re kind of disappointed,’ said Marty Brown, the governor’s budget director, at the deficit-reduction package being chewed on this week in the Legislature. Brown’s disappointment comes with good reason. Legislators have been in Olympia two and a half weeks, and have made only those decisions that came with no pain.

Their package is $480 million. On the surface, it solves one-quarter of the budget problem. But about half of it is one-time fixes, leaving the same mess or worse a year from now.”

From the Tacoma News Tribune:

“Don’t be impressed by the $480 million lawmakers have come up with. That’s all low-hanging fruit; it includes shell games with state funds and faster grabs for the unclaimed property left behind by dead people. It includes pretending that a month of this biennium’s spending actually belongs to the next biennium’s revenues . . .

Just can’t work that quickly, some of them said. ‘Quickly’ consists of three months, if you include the time they’ve known the magnitude of the crisis – months when caucus leaders and committee chairs could have been hard at it, conferring, swapping ideas and taking public comment. And sometimes, big decisions just have to be made quickly.

Republicans, with some notable exceptions in leadership, weren’t helpful. The GOP’s political talking point was, ‘What shortfall?’

Like it or not, though, minority parties tend to make annoying and irresponsible cracks about the party in charge. It’s kind of their job. Ultimately, the people in charge must act like they’re in charge. As a group, the Legislature’s Democrats this month have acted as if the government of Washington was somebody else’s problem.”

If it took 16 days to raid dedicated accounts and push payments off into the future, how long is it going to take for lawmakers to actually balance the budget when they return in January?

Since the current situation did not provide enough urgency for lawmakers to enact meaningful and sustainable changes to state spending, the Governor should provide extra incentive by issuing an executive order with date-certain across-the-board cuts absent legislative action to help ensure this problem does not drag out till the last possible moment for action.

Short of this type of consequence hanging over lawmakers’ heads, the only thing that may save us from multiple special sessions next year is the prospect of the state’s fundraising freeze while the Legislature is in session and the impact that would have on lawmakers’ 2012 election plans.

If nothing else, the less than stellar budget response of the Legislature to-date epitomizes the need for the Governor to have discretionary budget cutting authority so that surgical reductions can be made to enact timely savings.

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[Reprinted from the Washington Policy Center blog; photo credit: jpellgen]

Legislative Foot-Dragging on Budget Makes Case for Giving Governor Enhanced Budget Tools

It’s true that it takes time to make thoughtful decisions on reducing a $32 billion state budget. It’s also true that lawmakers have known since this summer that the Governor would be calling a special session to balance the budget. Yet despite knowing what is required, the sense of urgency on display in Olympia right now is wanting, to say the least.

The Governor could have helped provide extra incentive for lawmakers to act by also ordering date certain across-the-board cuts that would take effect unless the Legislature balanced the budget itself or provided the Governor the tools to do so.

Since this type of drastic consequence isn’t hanging over lawmakers, rumors of adjourning the special session as early as next week without balancing the budget are already making the rounds in the halls of the capitol.

If lawmakers aren’t going to balance the budget before going home for the holidays they should at least provide the Governor with discretionary budget cutting authority so she can start to make immediate surgical reductions.

They could do this by amending RCW 43.88.110 (the state budget and accounting act) to provide the Governor discretionary budget cutting authority versus the current across-the-board option.

One potential way this new discretionary budget cutting authority could be structured could be something along the lines of allowing the Governor to make discretionary reductions that don’t exceed a set % (maybe between 5-10%) of an agency’s appropriations. Cuts in excess of the set % would require approval of a standing legislative emergency budget committee (made up of four corners). No reductions could be made in independently elected statewide officials’ budgets without their approval or the standing legislative committee.

All reductions made would have to be immediately reported to legislative fiscal committees and posted on OFM/fiscal.wa.gov. This type of enhanced budget cutting authority for the Governor should provide enough discretion while addressing any accountability or transparency concerns while providing budget reduction tools other than current one size fits all across-the-board cuts option.

Here is a summary of the various budget cutting authority for Governors across the country.

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[Reprinted from the Washington Policy Center blog; photo credit: beavela]

State Employee Union Special Session Wish List Would Hit Main Street Hard

Olympia can breathe a sigh of relief, our friends at the Washington Federation of State Employees have this $2 billion budget deficit thing all figured out. A friend forwarded an email where they outlined a plan that they and a few other groups had come up with. In order to stand with the 99% and stick it to that evil, greedy 1%, they developed a list of 27 tax breaks to get rid of that would raise over $2.3 billion.

Curious, I continued on to the WFSE website for the details. I imagined they would mostly be a collection of corporate tax breaks that were considered fair and reasonable when they were granted by the legislature, but are now clear evidence of nefarious corporate greed.

Surprisingly enough, the largest of the tax breaks was an item from the Economic Opportunity Institute, to raise $800 million by eliminating the “Motor vehicle fuel tax exemption”. In other words, let’s start charging sales tax on your gas purchases! Washington State already charges 37.5 cents a gallon gas tax, the 8th highest in the nation. Eliminating this tax exemption would add (depending on your local sales tax rate and the current gas price) about 30 cents a gallon to the cost of gas, hitting the 99% squarely in the pocketbook. That’ll leave a mark that won’t go way by just blaming the evil gas station owners.

The third largest of the cuts is an idea by Sightline (a progressive green think tank) to get rid of the “trade-ins to car dealerships sales tax exemption”. Currently, if you pay for part of that new car with a trade-in, you don’t have to pay sales tax on that portion. They figure to save $344 million by cutting that tax break for the “BMW set”; it seems to me that a whole lot of the middle class falls into that category.

Just these two tax breaks for add up to almost half of their proposed new revenues. Both of them hit the masses a lot harder than the 1%. They are a little more on target with the other 25 tax breaks, they focus on the bad old corporations that aren’t paying their fair share. Included is a $450 million plan by WFSE to rescind 3% of all corporate tax breaks. These are at least consistent with their effort to demonize the corporations and rich 1%, and make perfect sense as long as they stay in their fairy tale land where the rich corporations begrudgingly pay extra taxes out of their hidden secret stash of cash and never, ever include those extra taxes in the cost of the goods they produce and sell.

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photo credit: DJOtaku]

Inslee and Gregoire at Odds on Closing Tax Loopholes to Solve State Budget Crisis

[Update: Comments from WSRP Chairman Kirby Wilbur added at bottom.]

On Thursday’s announcement by Gov. Christine Gregoire of a late November special legislative session to resolve the state’s $1.5 billion budget woes, Republicans and Democrats in the Legislature traded opening statements in the press, and the candidates for governor added their own comments.

Congressman and Democratic candidate for governor Jay Inslee came out with a quick statement after the announcement, a sharp contrast to his notable silence over the past week as details of the state’s worsening revenue picture came out. Today, Inslee suggested that the Legislature should steer clear of making further cuts to education and took aim at corporate tax breaks including exemptions given to banks lending to first-time home buyers.

“There are still options for the legislature to pursue including finding savings by closing ineffective corporate tax loopholes, such as the exemption for out-of-state banks,” said Inslee.

Ironically, in coming out against the breaks, Inslee put himself at odds with Gregoire. Asked by a reporter at Thursday’s press conference to address those who support closing loopholes, Gregoire’s answer seemed to take dead aim at the congressman’s loophole-cinching solution.

“For the alleged tax loophole as has been described… there is always some advocate, there’s always some consequence and often times it’s a job that will be lost,” Gregoire said. “That may be a big answer in Washington, D.C., but we don’t do what they do.” (Video below.)

On the subject of whether taxes should be the preferred area of discussion, Inslee consulted the progressive thesaurus when advocating for focusing on taxes.

“I hope the legislature seriously addresses the questions about how we put ourselves on a long-term path to economic recovery and how to preserve priorities like education that create economic opportunity, and make responsible investments in our families and future,” Inslee said.

But selling the idea that taxes are investments requires the additional logical step of connecting government spending with a benefit of some sort, a case indirectly made more difficult because of widely-reported failures in the type of federal government investment Inslee supports. Recent revelations of billion dollar losses in failed loans to solar panel manufacturer Solyndra and Seattle’s failure to convert $20 million in federal grant funds into even 20 new jobs may spoil, in the minds of voters, the elegance of Inslee’s equation.

In contrast, Republican gubernatorial candidate Rob McKenna’s comment stuck to safer ground, praising Gregoire’s decision to call the session before January and suggesting that a diplomatic process is what Washington needs.

“No one can be pleased with the situation that our state budget is in, but I do congratulate the Governor for recognizing the need for action this year, and scheduling a special legislative session to start November 28,” McKenna said. “I look forward, as should all Washingtonians, to a speedy and bi-partisan resolution to the current challenge after legislative leaders spend the next two months negotiating with the Governor.”

The dream of a peaceful deliberation and compromise is probably dead on arrival, however, since legislators have been jockeying for the rhetorical high ground since before the state issued a newer, darker revenue forecast last week.

Even before last week’s disappointing forecast was released, State Sen. Joe Zarelli, Senate Republican leader on budget issues, had called loudly for the Governor to assemble a nine-member “Super Legislature” – not unlike the bipartisan Super Congress in the nation’s capital – to recommend budget solutions. Zarelli and State Senate Republican Leader Mike Hewitt made it clear in their joint statement they will seek a dialogue on that model and talks should begin with assessing spending priorities, not raising taxes.

“[The focus] needs to remain on figuring out which state services are priorities and how to provide those as cost-effectively as possible, because that’s how we will move our budget toward long-term sustainability,” said Zarelli and Hewitt. “We know from recent history that as soon as discussions begin about increasing revenue, all talk of reforms seems to evaporate.”

On the other side of the aisle, State Senate Majority Leader Lisa Brown (D) and State Sen. Ed Murray issued a joint statement with a blatant nod to the gun Democrats will be laying on the negotiating table.

“As legislators, we have many tools for balancing our budget,” said Brown and Murray. “Including giving the voters the option of approving new revenue to pay for the services they want.”

The option alluded to is sending a referendum to voters for tax increases, an alternative that key Democrats have floated for several weeks, despite clear signals from State Sen. Joe Zarelli (R) that a referendum should not count on support from Senate Republicans.

A tax referendum could prove to be a double-edged sword for Democrats in 2012 if voters perceive the move as a way to sidestep legislative duties by outsourcing tough political choices.

“The voters of Washington in November 2010 soundly rejected tax increases and new taxes. With a stagnant economy, there is no reason to think they have changed their minds,” Washington State Republican Party Chairman Kirby Wilbur told NW Daily Marker by email. “If the Democrats put an increase in taxes on the November 2012 ballot, I will have to reconsider my beliefs about Santa Claus. That move would guarantee a Republican statewide victory, a new governor and majorities in both houses of the Legislature.”

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[photo credit: djfrantic]

McKenna Issues Statement on Special Legislative Session

On the news that Gov. Christine Gregoire is finally calling the State Legislature back into session to tackle budget woes in the form of a $1.5 billion deficit, Republican candidate for governor Rob McKenna issued a statement, praising the incumbent Governor for taking action and suggesting that a quick and bipartisan process is what Washington needs:

“No one can be pleased with the situation that our state budget is in, but I do congratulate the Governor for recognizing the need for action this year, and scheduling a special legislative session to start November 28.  I look forward, as should all Washingtonians, to a speedy and bi-partisan resolution to the current challenge after legislative leaders spend the next two months negotiating with the Governor.”

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Gregoire Drags Feet on Calling Critical Special Session

After news of the revenue forecast’s $1.4 billion drop in revenue for the 2011-13 budget and the now $1.3 billion budget hole confronting the state—assuming use of every last red cent of reserves—Gov. Christine Gregoire promptly issued a press release where she stated that waiting until the regular legislative session in January to address the problem is not an option:

“Including today’s revenue forecast, each of the past five forecasts has reduced our budget, and in each case we’ve responded quickly and appropriately with the tools at hand and with no tax increases. The November forecast may bring more bad news so we can’t wait until the start of session in January to take action. Today’s forecast demands that we again take action.”

The most important thing the governor and legislators can do is act quickly. However, in a Seattle Times article Gov. Gregoire went on to say she doesn’t want to bring the legislature back into town for at least another two months:

“The governor said she’d want to wait to hold a special session until after the next revenue forecast in November, should the numbers get worse.”

While some delay for the purpose of planning, preparing, and considering the various policy alternatives is inevitable, waiting two months to bring the legislature back to town is unacceptable. The cuts will have to be spread over a shorter period of time.

Fear of November’s forecast shouldn’t keep elected officials from acting. If anything, fear of additional revenue losses should initiate quick and decisive action.

Gregoire has already asked her agencies to prepare for cutbacks of 5 and 10 percent, and these proposals are due back from agencies next week on Thursday the 22nd. In addition, Gregoire has the ability to reopen union contracts with state workers during periods of significant revenue shortfall—just like the period we’re currently in.

Last year, during the one-day special session held in December, the legislature and governor were able to make significant progress whittling down the budget problem. They planned, showed up, and voted on an already agreed to menu of cuts in a process that was virtually free of the political rhetoric we’ve all come to expect. The Seattle Times even titled one of their articles, State Lawmakers Skip Drama, Cut Budget By Millions.

Washington needs its governor and legislators to show up like they did last December—skip the drama, identify essential state services, prioritize the policy alternatives available, and start bailing water out of Washington’s sinking fiscal ship.

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[Reprinted from the Freedom Foundation blog; photo credit: studio08denver]

State Senate Budget Writers Begin Dialogue Ahead of Anticipated Special Session

The Chair and ranking member of the State Senate Ways and Means Committee were interviewed by TVW’s Austin Jenkins last Thursday on what the options are for lawmakers to address the estimated $1 billion plus budget deficit. Among the questions Jenkins asked Sen. Ed Murray (D) and Sen. Joe Zarelli (R) were their thoughts on our proposal to provide the Governor with discretionary budget cutting authority:

(Click here for video)

The topic of whether a tax referendum would be put on the ballot also was discussed along with how that would be received by voters in light of state revenues still projected to increase by $2.1 billion:

(Click here for video)

Jenkins also asked Murray and Zarelli if it was time to re-open the state’s union contracts:

(Click here for video)

The question of the state’s tax structure also was discussed:

(Click here for video)

On that topic, regardless of how you slice up a state’s taxes, there is no such thing as a recession proof tax structure. For budget peace of mind when the economy recovers, states need to use a “three-legged stool” of sound budgeting:

  • Meaningful spending limit to avoid overextending in the good times;
  • Protected 10% reserve account (so you don’t have to resort to tax increases or deep spending cuts in the bad times); and
  • Limiting base expenditures to core functions within the revenue forecast when in the good times

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[Reprinted from the Washington Policy Center blog; photo credit: anujraj]

Expected Tax Referendum Should Share Ballot With Constitutional Amendment for 2/3 Vote Requirement

There is universal expectation that after next Thursday’s state revenue forecast lawmakers will need to make substantial reductions to the 2011-13 budget adopted earlier this year. The Speaker of the House and the Chair of the Senate Ways and Means Committee have already stated their desire to consider tax increases next year.

According to Publicola:

“On KUOW’s ‘The Conversation’ yesterday, state House speaker Frank Chopp (D-43, Seattle) indicated that he might be open to suspending Tim Eyman’s voter-approved ‘two-thirds’ rule, I-1053, which requires a two-thirds vote of the legislature to raise taxes. The legislature can suspend any initiative two years after it passes, and in 2010, they did just that, suspending Eyman’s earlier I-960 rule to raise $771 million in revenue. Later that year, voters passed I-1053, reinstating the two-thirds rule. Next year is the first opportunity for the legislature to overturn that initiative.

Although he did not explicitly say he would support suspending I-1053, Chopp responded to host Ross Reynolds’ question about the two-thirds requirement by referring to the ‘extraordinary economic times.'”

The Seattle Times adds:

“[Sen.] Murray also noted that while he plans to work with Republicans to craft a budget as was done in the past session, he told Zarelli he wants to send voters a tax package that could bring in additional money to support state programs.

[Sen.] Zarelli said he would not support sending voters a tax package.”

If lawmakers are going to send voters a proposed tax referendum they should also put a constitutional amendment enforcing the four-time voter approved 2/3 vote requirement for tax increases on the ballot (especially since some are already talking about suspending it again and others are suing to have it overturned). The legislative vote for both measures could be clearly framed as not an endorsement of the policies but instead an opportunity for the citizens to decide.

Though not identical, this is similar to what lawmakers said they were doing in 2005 when they placed a constitutional amendment on the ballot to reduce the vote threshold needed for voter approved school levies. At the time several lawmakers said they didn’t necessarily support the policy but the voters should have the opportunity to be heard. This would provide voters the opportunity to weigh in on both proposals while finally putting to rest once and for all the debate about the 2/3 vote requirement.

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[Reprinted from the Washington Policy Center blog; photo credit: SpecialKRB]

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