March 9, 2012 in City

Both sides guilty of budget-balancing gimmickry

By The Spokesman-Review
 

Amid all the talk of gimmicks wafting out of Olympia these days, it’s important to remember that everybody hates them.

Everybody loves sound budgeting, everybody hates a gimmick, and everybody has a big but.

It would be nice to be less cynical about this. To say that the Republicans – who are hip deep in what may turn out to be the cleverest political coup in years – are opposing the Democrats’ favored stopgap measure on principle. As they say they are.

We must balance the budget in the proper way, they insist. We cannot resort to unsustainable accounting tricks, they insist. We have for too long taken one-time shortcuts, raided this fund to pay for that, spent the rainy day money, moved around the figures on the ledger – it’s time to budget honestly.

“We’re still firm on sticking with our principles,” said Sen. Joe Zarelli, the Republican budget writer.

Of course, he’s proposing a trick of his own.

Meanwhile, everybody’s big buts – the places where they’re willing to bend and the places where they aren’t – are driving the Legislature into extra innings.

I’ve been struggling to understand the GOP’s latest passion for accounting purity – what Zarelli might call a principle – in the context of the current situation. After billions and billions in cuts to state services, Republicans have drawn a line in the sand over $322 million in payments to school districts. Democrats want to delay the payments by a day, pushing them forward into the next fiscal year.

It’s a one-time move, meant to prevent more cuts, and it would simply push the payment of those funds forward one fiscal year from here on out.

Not an ideal fiscal move, certainly. But if you believe in the potential of government – the principle of not harming people simply to advance a fetish over the ledger – it’s worth considering. The move would involve about 1 percent of the budget; it doesn’t seem like the budgetary Alamo.

Republicans say it is. That we need to balance the budget in a sustainable way, not push our debts forward. We must be fiscally pure.

Except when it comes to pension reform. Senate Republicans are proposing a package of changes in pensions for state employees, which would reduce benefits and save money. Included in the proposal is a little short-term budget candy – a skipped payment into the pension funds in 2013.

Of course, skipped payments from the state into pension plans is one of those kick-the-can- down-the-road moves that everybody is supposed to deplore. It’s not sustainable, is it, to skip payments?

Smarter people than me see these gimmicks as potentially costly in the long run. Ratings agencies have recently downgraded the state’s outlook from stable to negative. The possibility of a bump down in the bond ratings has many concerned. Grant Forsyth, an economics professor at Eastern Washington University and a member of the governor’s Council of Economic Advisers, said that one factor, among many, that bond ratings agencies will consider is the number of one-time tricks the state uses to plug budget holes.

“The signal this is sending is … the state has not fully dealt with its financial problems,” Forsyth said. “I think the ratings agencies are watching very carefully to see, from this point forward, how the state manages its money.”

That doesn’t mean any single budget item will make or break us. If we see a recovery and a surge in state revenues, that will be a bigger factor than any budgetary nut or bolt. Moody’s Investors Service, in its outlook March 1, lists “increased reliance on one-time budget solutions” as one factor that could make the state’s bond rating go down. Top of that list: “Delayed or muted recovery.”

Moody’s analysis is complex and multifaceted. It downgraded the state’s outlook in January from stable to negative, emphasizing “revenue falloff” to the state as a result of the recession and economic weakness. Moody’s also credits Washington with positive, institutionalized budgeting procedures, and notes that our reliance on a sales tax has made us more susceptible to the recession and perhaps slower to recover than other states.

Interestingly, given the GOP’s pension reform push, Moody’s describes the state’s pension funding as “healthy” and its retiree health insurance liability as “modest.”

In other words, there’s so much involved here that drawing any single line item in the sand seems preposterously arbitrary or cynically stubborn. It seems less like a principle than a strategic maneuver. A tactic.

A gimmick.

Shawn Vestal can be reached at (509) 459-5431 or shawnv@ spokesman.com. Follow him on Twitter at vestal13.


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