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Sat., Nov. 27, 2010

Solving state’s budget crises

We are beginning to see a very slow recovery take shape in our economy. What should bother everyone is the real possibility that our state government will begin to grow at a pace that is greater than the pace of this recovery.

If we do not change our budgetary process, in all likelihood, we will endure another draconian economic downturn in the future and will face the same budgetary crisis we are facing today. It’s time for a new approach that will assist in developing reserves that will allow us to maintain required spending levels in the tough times.

At the same time, this new approach will keep spending in the good times under control and within the limited means that our limited ability to pay taxes demands. Note that I have used a word, “limited,” that is not used enough when describing government spending and taxation.

Zero-based budgeting is the key to this concept of keeping spending within the means provided by tax receipts. Simply stated, each and every government agency must justify each penny it spends.

Each year, every government agency starts from a zero base. If the agency is frugal and does not spend all the funds allocated for the year, the excess is placed into a reserve account for this agency to assist funding when revenue sources are too low to maintain basic service levels. In addition, every agency will be required to establish reserves and will be allowed to tap into the reserves only when revenues fall to a predetermined level.

That predetermined level will be based on the cost to provide basic levels of service by these state agencies. Each agency will be provided with a number that will be determined not by what they received last year, but by a realistic cost estimate for basic levels of service. In other words, spending will be provided based on what our citizens need from state government, not on what they want.

Using this basic number, each agency will provide to the governor and Legislature three proposals. One number and justification below, at and above the basic-needs funding level. The governor and Legislature will then analyze and determine the state budget for each of the spending categories based on this thoughtful and conservative spending process. This process will encourage limited spending within the limited tax revenues.

In addition to zero-based budgeting, the state must examine and establish spending priorities. It must determine which categories are the most important and allocate funds accordingly. The source of this prioritization is the state constitution. From what I have determined this document provides for three priorities: education, criminal justice (law enforcement and the courts) and infrastructure. Everything else is secondary and funding should reflect this secondary role in the budget.

Prioritizing spending is complex and very difficult. There is no way to simplify the process by ignoring the “needs” of our citizens just because they do not fit within these three categories. In order to meet as many needs as possible with our limited means, we must rethink how we deliver services to our citizens.

In my experience as a council member and mayor of the seventh-largest city in the state of Washington, I believe the private sector offers an excellent venue to keep costs at a minimum. Competing for contracts to provide services can provide a level of efficiency we have never seen at the state level. Careful and accurate cost structures must be offered by the private sector bidders and the state must be very careful to award contracts to the bidder who can provide the best and most cost-effective service. Throughout the United States there are successful models we can use to develop our unique system.

All this is an ambitious and to some degree risky new approach to state budgeting. It will require a governor and legislators with the political courage to admit we must change and are willing to accept the political consequences. They must be willing to accept that government is not responsible for providing all the wants our citizens have, but is responsible for helping provide basic needs as described in our state constitution. They can do it, no matter what political party they represent.

Richard Munson is former mayor of Spokane Valley.

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