Tag: Washington state budget (Page 1 of 3)

‘StopUsBeforeWeTaxAgain.com’ Website Recalls Gov. Inslee’s Campaign Promises to Oppose Taxes

Screenshot of StopUsBeforeWeTaxAgain.com website.

Screenshot of StopUsBeforeWeTaxAgain.com website.

A new website critical of Washington state Gov. Jay Inslee – ‘StopUsBeforeWeTaxAgain.com’ – launched Thursday to remind voters of the many times Inslee pledged during the 2012 campaign to oppose (and even veto) new taxes in the state budget.

“Jay Inslee was not honest with Washington voters,” the one-page site proclaims right from the top, bold text that sits above a manipulated image in which Inslee’s nose is elongated to resemble a cultural icon of dishonesty, Pinocchio.

“Taxes according to ‘Jay-nocchio’,” is stamped on the Governor’s photo, and his face is surrounded by tax-related quotes taken from public debates during last year’s gubernatorial race against former Attorney General Rob McKenna.

It is not clear who or what group paid for the website. A search through the Internet WHOIS database indicated the site’s registration has been made private.

Olympia’s Retroactive Tax ‘Twilight Zone’

Today is the last day of the 1st Special Session for lawmakers to finish work on the 2013-15 budget. So where do we stand? Here are the thoughts of House Majority Leader Rep. Sullivan (D) as quoted in The Olympian:

“We are still pretty far apart,” Sullivan said, noting that Gov. Jay Inslee had said last month that the chambers were light years apart. “I would say we are still somewhere out in space.’’

With budget negotiations apparently “Lost in Space” and a 2nd Special Session around the corner, another strange phenomenon is manifesting in Olympia – “The Twilight Zone” of retroactive tax policy.

To paraphrase one of the openings of “The Twilight Zone” – There is a fifth tax dimension beyond that which is known to man. It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science and superstition, and it lies between the pit of man’s fears and the summit of his knowledge. This is the dimension of the Olympia taxman. It is an area which we call “The Tax Twilight Zone.”

Among the various tax bills still in play is a proposed “fix” to a State Supreme Court ruling which created a hole in the state’s stand alone death tax (estate tax). Here is the history of the various court rulings and legislative response from the bill report for HB 2064.The bill being considered would not only address the Court’s ruling going forward but also make retroactive changes to the law going back to deaths since 2005.

While using death as a trigger for tax liability is poor tax policy the voters in 2006 did re-affirm the Legislature’s creation of a standalone death tax by rejecting I-920 to repeal it. Legislative Democrats have pointed to I-920’s 62% rejection in 46 of 49 legislative districts as proof of the voters’ support. Oddly enough, however, they haven’t been quick to point out I-1185’s (2/3 for taxes) 64% statewide passage last year in 45 of 49 legislative districts as also being the will of the people (that and the fact the 2/3 for taxes policy has been approved by voters five separate times while the death tax has had mixed voter response at the ballot).

That said, while voters re-affirmed the standalone death tax, it is doubtful they meant to give the Legislature a green light to embark down the road of retroactive tax changes, especially for people no longer around to defend themselves due to their death.

The Washington State Bar Association is also questioning the constitutionality of making retroactive changes to tax law. Here are the comments of Kathyrn Leathers expressing the WA Bar Association’s concerns: (Click here for video)

While the debate on whether to tax death has been recently answered by Washington voters, lawmakers should not open the door to “The Tax Twilight Zone” of retroactive tax policy. Changes to tax law should be prospective and those to be taxed should actually be around to have a voice in the process.

 

[Reposted with permission from the Washington Policy Center blog]

Comparing the Adopted House and Senate Budgets

After a historic turn of events Friday night in the Senate, two budgets have now been adopted: A House Democrat budget (supported only by Democrats with three Democrats voting no) and a Senate Republican budget (supported by all GOP Senators and three Democrat Senators).

Here is how the Seattle Times describes the events:

“The passage of a Republican budget out of the Washington State Senate with a majority of Democrats amounts to a political earthquake not seen in 25 years. Events like this do not happen without cause and cannot be talked into going away.

Democratic leaders in Olympia proclaim the budget illegitimate and say they won’t accept it. Not surprising. Friday’s insurrection was against them, and their egos are tender.

But the revolution was not undemocratic. The Senate’s majority ruled. It was simply a different majority, and on this issue it was, and is, the only majority. The 22 Republicans plus Democratic Sens. Jim Kastama, Rodney Tom and Tim Sheldon did what Senate Majority Leader Lisa Brown and her team could not do — pass a budget with 25 votes. Their work deserves the same respect as any other budget — more, if anything, for the sheer bravado.”

Here is a comparison of the House and Senate adopted budgets according to www.fiscal.wa.gov:

 

Among the major differences between the two budgets is the long-term sustainability. The House Democrat budget does not repeal I-728/732 and utilizes a $405 million K-12 apportionment and levy delay gimmick resulting in a substantial projected shortfall in the next budget. The Senate GOP budget, however, assumes full repeal of I-728/732 and does not rely on the K-12 apportionment gimmick.

According to the Office of Financial Management’s 6-yr budget outlook:

  • I-728 costs $922 million in 2013-15
  • I-732 costs $242 million in 2013-15
  • Repayment of K-12 apportionment gimmick costs $330 million in 2013-15

Along with other changes made, this means that under the provisions of the proposed 4-year balanced budget amendment (SJR 8222), the Senate GOP budget would comply with the requirements while the House Democrat budget would not.

Of concern in the Senate GOP budget is the decision to skip a pension payment. This $133 million skipped payment, however, is made within the context of the adoption of a pension reform bill (SB 6378) which closes PERS/TRS/SERS 2 pension plans to new entrants. This reform is expected to save $1 billion over the next 25-yrs.

The next step in the budget negotiations is anyone’s guess. We are in somewhat uncharted territory after the events of Friday night.

According to the Seattle Times:

“Democratic leaders on Saturday treated the GOP takeover of the Senate budget like a bad dream.

Senate Republicans, with the help of three conservative Democrats, seized control Friday and passed their own budget proposal — one far different from the majority party — by a 25-24 vote.

The GOP argues Democrats should set aside hurt feelings and negotiate a compromise. ‘It’s the responsibility of all of us to talk about how we can find a way home together,’ said Sen. Joe Zarelli, R-Ridgefield, the chief architect of the Republican budget.

Democratic leaders in the House and Senate, as well as the governor, said they’re not interested. For now, at least, they’re giving Republicans a cold shoulder and negotiating among themselves.”

The Washington State Wire reports:

“Two days after a historic rout on the Senate floor, Republican Leader Mike Hewitt says he wants to extend the olive branch to the Democrats who lost control of the chamber by a narrow 25-24 vote.

Hewitt says he will offer Senate Democratic leaders the same terms they offered to the Republicans last year, and which they appeared to abandon this session. If the Democrats still want to produce a joint Senate budget, the door is open, he says. Of course, they won’t be in the drivers’ seat anymore.

‘We’ve been wanting to work together all year long,’ Hewitt said.

Of course, it all depends on what the Democratic Caucus wants. There are some lines that can’t be crossed. But that’s pretty much the way it worked last year, back when both parties worked together on a budget but the Democrats were in charge.”

The 2012 Regular Session is scheduled to conclude this Thursday (March 8). A special session is looking all but guaranteed at this point to wrap up work on the budget.

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

State House Passes Bill Requiring 6-Year Fiscal Outlooks as Part of Public Budget Process

While not on the order of the love note Washington State Democrats delivered Monday to liberal activists, Republicans in Olympia today are taking credit for a gift of deceptive importance to the objective of righting the state’s fiscal ship.

House Bill 2607—a proposal spearheaded by House Republicans that would require the Office of Financial Management to publish a six-year budget outlook coinciding with the governor’s budget release—passed the state House by a vote of 97-1.

“This is a win for budget sustainability, transparency and accountability in our state,” said State Rep. Alexander (R-Olympia), ranking Republican on the House Ways and Means Committee and primary sponsor of the bill. “This is one of many budget reforms needed to help get Washington off the budget rollercoaster that has plagued us the past few years.”

“The spending decisions we make in the Legislature today aren’t just felt for one or two years; they impact us down the road for years to come,” Alexander continued. “Having a clear picture of what our state’s fiscal health looks like six years from now because of the decisions we make today will help hold legislators more accountable, keep the public more informed and, hopefully, lead to greater budget stability in the future.”

The benefit HB 2607 represents for taxpayers is substantially greater than simply giving state bean-counters a clearer view of the road ahead, it should be seen as a tool to prevent negative impacts to the state’s borrowing power that typically stem sloppy budgeting methods.

At the beginning of the month, State Treasurer Jim McIntire sent a letter to Gov. Christine Gregoire and the leadership of both parties in the Legislature, notifying them that although the three major credit rating agencies had affirmed Washington’s current “AA+” rating, two of the three had downgraded their outlook on the state from “stable” to “negative”.

In layman’s terms, McIntire’s letter informed state officials that Wall Street is deeply concerned about the use of sloppy budgeting and accounting tricks to artificially balance the government’s ledger. Forcing lawmakers to work from a six-year projection of revenues and spending would make the use of gimmicks to create an illusion of fiscal stability much more difficult.

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[photo credit: aufmkolk (hafoto.de)]

Is the House Considering “Felony” Budget Gimmicks to Balance the Budget?

It’s been 107 days since the Governor called last December’s special session declaring “timely legislative action is needed to secure the State’s fiscal health and address the shortfall in the 2011-2013 operating budget.”

We are now in day 33 of the 60 day 2012 REGULAR Session without a budget plan being introduced let alone debated. Defending the lack of action on the budget to date lawmakers have said that they need to wait until after next week’s revenue forecast to know what the parameters of the budget will be. Hopefully none of the options actually considered will include “felony” budget gimmicks such as borrowing to balance the budget.

According to the Washington State Wire, however:

“House Democrats are thinking of going into debt to help plug the big $1.5 billion hole in the state budget, a scheme that could eliminate the need for the Legislature’s much-talked-about plan to go the voters for a tax increase.

By bonding against some of the state’s big revenue streams – perhaps tobacco-settlement money and lottery revenue – majority Democrats could raise just as much cash as the governor’s half-billion-dollar proposal for a half-cent increase in the sales tax. Perhaps even more. And not only would they avoid a dicey public vote on a tax increase that might well fail, the plan also could blow all talk of big reforms this session out of the water.

Critics are aghast. They say it’s a bit like paying the grocery bill with a credit card. Eventually the bill comes due, and if the state can’t afford it now, it’s not going to be even harder paying it later. Meanwhile minority Republicans would have little leverage – the thinking is that these bonds would require only a simple majority vote.

The put-it-on-plastic solution has been rumored for days now in the hallways of the statehouse, but it went public Thursday morning when it became a leading topic of discussion at the state Labor Council’s political-endorsement convention in Olympia. Labor Council leaders said revenue bonds might be the best way to get the state over the hump, and they will be asking lawmakers to support them.

‘Ordinarily it is not the sort of thing we would be particularly in favor of, but given the depth and the magnitude of the crisis that we are having now, our folks, and I don’t just mean labor folks, are hurting,’ said Labor Council president Jeff Johnson.

House Majority Leader Pat Sullivan, D-Covington, appeared to endorse the idea in his remarks to the union delegates. ‘In the short term, revenue bonds are part of the [solution] to get us through this crisis right now, but we need progressive revenue options for the future to make sure we are not faced with the same situation in future years,’ he said.”

A similar trial balloon last year resulted in State Treasurer Jim McIntire warning lawmakers to avoid “felony gimmicks” to balance the budget:

“’I really don’t see a good rationale for the Legislature to be trying to sell junk bonds to finance operating activates for the next two years. It’s not a sustainable way to do things,’ [McIntire] said.

In 2002, the Legislature borrowed $450 million through securitization of future payments from the national settlement with tobacco companies. However Gov. Chris Gregoire, who has also criticized the non-traditional budget ideas being considered, has said that scheme will end up costing taxpayers about $1 billion in interest and principal.

‘This biennium, we’d have an extra $100 million to spend on higher education and health care if we hadn’t done (securitization) in 2002,’ the treasurer said.

Lawmakers could, conceivably, borrow further money tied to the state’s tobacco money, or seek a loan based on future revenue from liquor and lottery sales. But McIntire warned that credit rating agencies would frown on that practice.

‘Wall Street is watching,’ McIntire said. ‘To go to some kind of securitization scheme at this point is really kind of a very bad signal to send to the investor community.’”

Two of the big three national credit rating companies are already spooked by the state’s budget outlook resulting in their downgrading the state’s debt rating outlook to “negative” last month.

The last thing we need to have happen is for even more time to be wasted floating and polling “felony” budget gimmicks. It is past time to move forward with a truly balanced and sustainable state budget. The tough choices won’t get any easier with time but that amount of savings lost will only grow with each passing day without a solution.

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[Reprinted from the Washington Policy Center blog]

Six-Year Balanced Budget and Outlook Requirements Move to Floor Votes

The House and Senate Ways and Means Committee have advanced two bills to help policy makers focus on the long-term impact of budget decisions.

The House Ways and Means Committee advanced HB 2607: Requiring a six-year budget outlook tied to existing revenues. The Committee adopted an amendment reflecting the recommendation from my testimony that the budget outlook should be updated quarterly after the adoption of the state’s official revenue forecast.

Here is video of the Committee adoption of HB 2607: (Click here for video)

The Senate Ways and Means Committee adopted SJR 8222: Requiring six-year balanced budgets. Contrary to popular belief, lawmakers are not required to adopt a balanced budget under state law. The Governor is only required to propose one. According to the bill report for SJR 8222:

“Beginning with Fiscal Year 2014, the Legislature may not enact, nor may the Governor sign into law, a budget bill that makes appropriations from the state General Fund for that fiscal year in an amount that exceeds state General Fund Revenues, as forecast by the Economic and Revenue Forecast Council.

In addition, the Legislature may not enact, nor may the Governor sign into law, a budget bill that would require appropriations from the state General Fund to maintain current program and service levels in any of the five subsequent fiscal years in an amount that exceeds state General Fund Revenues for that fiscal year, as forecast by the Economic and Revenue Forecast Council.”

Here is video of the public hearing on SJR 8222: (Click here for video)

Next up for HB 2607 and SJR 8222 is consideration on the House and Senate floor pending approval by the Rules Committees.

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

Office of Financial Management Delivers Pessimistic Projection for More Budget Deficits

Yesterday marked the beginning of the 2012 Legislative Session. Greeting lawmakers was a presentation by the Office of Financial Management on the state’s 6-yr budget outlook. Bottom line – we’ve some serious structural problems.

Here is a presentation by Stan Marshburn (Deputy Director of OFM) discussing the projections that show multi-billion dollar deficits going forward.

Among the major contributors to the projected future deficits are Initiatives 728 and 732 (the two “free” education initiatives passed in 2000 when the state had a multi-billion dollar surplus).

Since funding was not identified for I-728/732 (other than surplus funds) when originally adopted and the measures were subsequently suspended during tough budget times, voters were asked in 2004 to approve I-884 and in 2010 to approve I-1098 to pay in-part for the policies of I-728 and I-732. Both measures were overwhelming rejected statewide.

The 6-yr budget outlook is exhibit A for those demanding long-term reforms to take center stage during the 2012 Legislative Session. While it is true there are no short-term reforms that will entirely solve the current deficit, long-term reforms are needed to help improve the budget’s sustainability and outlook.

Here are a few of the long-term reforms the Legislature should consider:

  • Enact a constitutional tax and spending limit (with two-thirds requirement to raise taxes) modeled after the original 1993 I-601 formula.
  • Remove as many of the restrictions on lawmakers’ ability to set spending priorities as possible (collective bargaining restrictions on compensation, federal mandates, assumption of auto-pilot budgeting on programs).
  • Reform competitive contracting. Allow agencies to make performance-based contracting more proactive (create a Competitive Contracting Council).
  • Provide the Governor discretionary authority to cut spending.
  • Repeal unaffordable programs instead of suspending them.
  • Require at least a 5% reserve when adopting the next biennial budget.
  • Require updated 4-yr budget outlooks to be published after each state revenue forecast or budget adoption.
  • Require completed fiscal notes before bills can be acted on.
  • Phase in a defined-contribution retirement plan that gives state workers benefits that can never be taken away.

If all the Legislature does is balance the budget for 2011-13, this session will be a failure. We need lawmakers to finally provide predictability to clients of state services, citizens and businesses by demonstrating they are putting the state’s budget roller coaster out of service. That’s where the structural reform conversation needs to focus and should go hand in hand with any short-term budget solution that is adopted.

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

Gregoire Deserves Blame for Budget Imbalance for Failing to Prioritize Spending | Guest Op-Ed

On January 9, the Washington State Legislature will come back to session. On their busy agenda is rectifying the horrendous $2 billion budget deficit that they delayed reforming in the last legislative session. While our budget crisis may seem like the fault of an ineffective legislature, the fault lies in the hands of Governor Gregoire.

To understand why Gov. Gregoire is to blame for our current predicament you must look back to the inactions of this past fall. In September, the Governor acknowledged the state had a $2 billion budget problem and stated she would call a special session at the end of November for the legislature to solve the problem. This resulted in the legislature approving a plan that made $480 million adjustments through a combination of cuts, transfers and delayed payments. The legislature delayed acting on the remaining $1.5 billion problem till January 2012. This delay violates Washington law, which requires the governor to implement across-the-board cuts if the legislature fails to act.

What this all boils down to is that due to Gov. Gregoire’s failure to lead, Washington State has ended the last three fiscal years with a deficit for the first time in history.

To remedy the current budget crisis, Gov. Gregoire must issue an immediate Executive Order for across the board cuts totaling $2 billion that would go into effect in 30 days if the legislature does not come up with equivalent savings by that time.

Governor Gregoire and the Washington state legislature also need to return to the performance based budget model that was so successful in 2003.  Performance based budgeting is based upon priority based outcome measures which are linked to the well-defined core functions of state government.

Governor Gregoire  abandoned former Governor Locke’s priority of government (POG) model which was a performance based budged in order to return to business as usual. This was a fatally flawed decision that will be felt in the taxpayers’ wallets for years to come.

The time for political promises and empty, ineffective budget ideas are over. Gov. Gregoire must take action now and begin to lead Washington State out of the red.

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[photo credit: WSDOT]

 

Concerns About Giving Enhanced Budget Powers to Governor Should Be Considered Alongside Benefits | Opinion

With the Legislature consistently showing itself willing to wait to the last moment to bring the state’s budget into balance, Washington Policy Center has proposed changing the Governor’s current across-the-board authority to respond to a deficit to discretionary authority to make surgical reductions to enact timely savings.

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.

In response to this proposal, concerns about separation of powers have been raised as well as objections to providing the Governor too much control over the budget. Similar concerns have been raised at the federal level about providing the President with line-item veto authority.

With these concerns in mind, why should the Governor be provided enhanced budget cutting authority?

It’s all about providing the right incentives. Consider the following under the discretionary budget cutting authority we’ve suggested:

  • The Governor could only cut spending, not increase.
  • The Governor can’t unilaterally raise taxes so the state’s default deficit response sans legislative action would be spending reductions, not tax increases.
  • The Governor could not zero out an agency’s budget since the authority would be restricted to cuts within a certain percentage without approval of the legislative emergency budget committee.
  • The Governor could not target political rivals since reductions in independently elected statewide officials’ budgets would require their approval or that of the legislative emergency budget committee.
  • The Governor would be directly and solely accountable to voters for any reductions made.
  • The Legislature could undo any cuts implemented by the Governor by calling itself into a special session or at the next regular session.

Most importantly, the Legislature for the most part could avoid this discretionary budget cutting authority for the Governor from ever being utilized by adopting sustainable budgets and providing a meaningful reserve fund to help the state weather all but the most extreme economic downturns.

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]

The Budget is Not the Only Thing in Deficit in Olympia – Courage Also is Lacking | Opinion

Our legislators in Olympia are facing two deficits in the special session to deal with the gap in the 2011-2013 state budget: the first is a $2 billion shortfall, and the second is a lack of courage to address it.

Already, Senate Majority Leader Lisa Brown has indicated the Legislature will spend next week piecing together a down payment of “several hundred million dollars” (reportedly about $400 million) of cuts, then adjourn until January. Although these are considered the “low hanging fruit”, the less contentious of the cuts needed, even this partial solution requires a lot of work behind closed doors. A title-only bill has been submitted, to be filled in by the Ways and Means Committee with the details of any agreement, followed by a quick discussion, vote and adjournment by the end of next week.

This has become standard practice in recent years, as legislators wait until the last moment to produce a narrowly balanced budget filled with half measures and temporary fixes, then exit Olympia quickly in the hope that no one notices. What is missing is the courage to openly and honestly address the state’s budget woes; to discuss in public the programs that need to be cut and why, to reform the programs that are routinely the source of overspending, and to rein in those programs that increase each year at an unsustainable rate.

While Gov. Christine Gregoire has challenged the Legislature to balance the budget by the end of the special session, her solution is just an example of more cowardice. She balances the budget by making unacceptable cuts to the most basic state services (a shorter school year and early release of prisoners, for example). Crying crocodile tears for the cuts she was “forced” to make, she then offers the voters a chance to buy back these cuts by voting to raise their taxes. If her scheme succeeds, it is the worse kind of crude political blackmail; if voters refuse to play (as is likely) and turn down the tax increase, she dooms the Legislature to yet another special session, another round of procrastination.

Now is the time for Washingtonians to call their representatives in Olympia and demand that they stop wasting time avoiding what must be done: produce a balanced State budget with real cuts and real reforms, one that is genuine and sustainable, and finally brings an end to the budget games.

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[photo credit: twm1340]

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