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Editorial: State’s fiscal choices far from easy

Sun., Aug. 24, 2014

There’s still time from legislative candidates to announce they’ve had a change of heart and no longer feel the pull of Olympia’s gloomy grey winters.

And it won’t be very nice outside, either.

OK, that’s a cheap joke, but there is little that is cheap about running state government. Recent analyses by the Washington Office of Financial Management and Washington Research Council underscore the challenges ahead for what almost certainly will be a Legislature divided into a Republican Senate and Democratic House.

But first, the good news. Recent rulings by the Washington Supreme Court in two related state pension cases will relieve taxpayers’ responsibility for as much as $10 billion in extra pension liabilities over the next 20 years. Although the state’s plans are in good shape overall, there’s still some catching up to do – to the tune of $432 million in the 2015-2017 biennium.

More optimistic revenue estimates also will be helpful, but it will not be news to anyone in Spokane that this recovery has not generated the economic momentum of prior rebounds. Washington finally has recovered all the jobs lost during the recession, but it took two years longer than normal.

As the research council points out, spending has exceeded revenues since 2005-2007, with the deficits papered over by “redirecting” $387 million from capital accounts into operating accounts, for example. That’s a bad practice, and an unsustainable one, yet the OFM forecast for the next biennium shows another $1 billion gap despite a projected $2.5 billion increase in revenues.

And the worst of it is that does not include the $1 billion to $2 billion that will be needed to satisfy the state Supreme Court that the Legislature is making “ample” provision for K-12 education. Schools, along with pension commitments, debt service and other obligations, consume almost two-thirds of the budget, meaning higher education, corrections and other segments will have to absorb any cutbacks.

Friday, the state committed $30 million to a stopgap plan addressing the unmet needs of mental health patients. The state also has newfound responsibility for home-health care worker insurance premiums.

Meanwhile, behind closed doors, Gov. Jay Inslee is negotiating contracts with employees who have not received a pay raise or cost-of-living increase since 2008. He already has said he wants to “rectify” that, but he also has directed his department heads to budget from a floor 15 percent below their current spending levels.

The OFM and research council reports did not even touch on transportation, which remains the biggest unaddressed issue facing the state.

OFM did conclude its July report by noting Washington, which in 1995 had the 11th-highest tax burden among the states based on state and local collections per $1,000 personal income, had progressed down to 35th highest by 2011.

The new Legislature will have some very difficult choices to make. As the political campaigns begin in earnest, voters should ask tough questions about how they expect Washington to meet all its obligations. Until this biennium, the answer was tuition increases at state universities.

That’s the wrong answer for the state’s middle class, and the aerospace, and information- and biotechnology industries that are the key to the state’s future.