Changing the world, one little kid at a time!
Michael Lewis (Liar’s Poker…) has a great op-ed in the New York Times this week about the total lack of adult supervision in the other Washington and the culture that makes getting along with Wall Street more important than actually regulating them. It’s awful to think that this kind of behavior is what has caused the budget disaster we face in Washington, and the impact it will have on kids, seniors, and our entire safety net.
http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html
This year will be particularly difficult due to the national economic disaster. Unlike the federal government, Washington is required to have a balanced budget. Our budget situation is dire, and will require dramatic measures.
I try to be organized about how I approach a legislative session, particularly one as difficult as this is likely to be. It’s easy to lose track of where you are and what you want to get done. While there are lots of small items I’m working on, these five rise to the level of weekly review.
First, we have to deal with the budget problem. This is both a tactical problem of responding to the national economic disaster and a strategic opportunity to re-focus state government on what it’s good at and get it out of the business of things it’s not good at. This budget will be incredibly painful, and will hurt a lot of the people I came to Olympia to champion, but we will do what we have to do to have a sound financial footing for the state. We will come out with a leaner government focused very carefully on our priorities. We’ll prioritize the parts of the budget that are investments in the future like education, and we’ll try our best to preserve the safety net for the most vulnerable: seniors, at-risk kids, and those who are displaced by the crazy national economy through no fault of their own.
Second, we have to deal with one of the strategic priorities for the state: education funding. Our constitution is very clear that education is our paramount duty. I’ve been working with a bipartisan group of legislators for the last 18 months to pull together a plan that changes our current system from an opaque, confusing, overly complex and inadequate set of formulas to one that is much more transparent and simple — a system that clearly delineates what we need to fund and how we should do it. This will be my major policy effort this year.
Third, it’s not often that you get a chance to play an important role in one of the pivotal moments in American History. This year is one of those — America has the opportunity to shift our economy to be much less dependent on foreign oil and at the same time shift to an economy that doesn’t contribute to the global warming problem. States have a responsibility to be part of the solution. Washington will have an opportunity this year to be part of the Western Climate Initiative, a joint effort of the major states in the west and big chunks of Canada. Doing a “Cap and Trade” system right is an opportunity for major changes in energy use and climate change, but is also an opportunity for one of the biggest transfers of wealth from consumers to polluters in history if done wrong. Getting the details right on this is crucial, and I’ll be following it closely.
Fourth, we are in the middle of a set of transportation decisions that are crucial for our district: the 520 bridge plan, how tolling will work, the viaduct, and keeping the focus on 405 work. We have to make sure that decisions on the Seattle side don’t push up the costs (and thus the tolls) beyond what we can afford, and we need to get it done. Now that Sound Transit Phase 2 has been approved we need to make sure it makes sense for the Eastside. I’ll be pushing for them to start over here with the section from Bellevue to Redmond. This enables us to link up with the BNSF line north through Redmond, avoiding the difficult Kirkland route, and will help drive the redevelopment of the Bel-Red corridor. More on this in the next update.
Finally, there are a number of wonky tax policy efforts I’ve been working on for a few years that will come to fruition this year. It’s not an optimal time to make changes in the tax code, but we should do these anyway. As more and more of the products we buy become digital, the tax code needs to grow and change to reflect this and to maintain fairness across different means of distribution. I’ve spent 18 months leading a joint effort with the business community to change the tax policy here and expect to pass a relatively non-controversial bill this year, even though it’s a pretty big change.
At the time I write this the national economy is in free-fall, with banks and other businesses failing right and left. The car companies may be next. So far the two biggest employers in WA — Boeing and Microsoft — are still in good shape, but there are concerns if the overall economy is in a funk.
The federal government does not seem to have even the faintest connection between tax receipts and expenditures. They are spending a trillion here, a trillion there, everywhere a trillion. My calculator doesn’t go this high. With a trillion dollars you could give every high school student in America a full-ride four year scholarship, or you could pave the entire interstate highway system with gold. Someone actually figured this out.
Like both my family and yours, Washington state does not have this freedom. We have to balance our budget. The decline in consumer confidence has devastated our sales tax receipts, and the housing meltdown has had a huge impact on our real estate excise tax receipts.
The current forecast predicts a $5.1 billion difference between expected revenue and “planned” expenditures. What is included in the “planned” expenditures trend is open to lots of interpretation, so you will hear lots of different numbers around this. All of them are probably reasonable interpretations, and ALL show that we have a horrendous problem. We could have dealt with the $2-3 billion shortfall we expected with relatively little pain, but this much larger shortfall will require major surgery.
Washington does a 2-year budget, so the biennial numbers tend to mask important things. The budget in the second year of a biennium is usually larger than the first year. The forecast for the first year of the next biennium (fiscal year 2010) actually declines about 4.5% from the last year of the current biennium. This is not a common occurrence, and is significantly worse than the short recession we faced in 2001-2003.
Governor Gregoire’s budget proposes pretty drastic cuts in many key services. Overall I like her prioritization choices, though I’m unhappy about the level of cuts in some areas I care about a lot. (This is not unique to me – everyone hates their stuff to be cut and wants everyone else to take all the pain.) My biggest concern is that I fear she has understated the problem pretty significantly.
First, her budget assumes $1.1 billion in federal largess. I hope the federal governemnt realizes that the states can be part of the solution for the economic stimulus, but I worry about depending on a particular level of funding. If we get none, or if we don’t know how much we get we will have to cut another $1.1 billion. Second, there is an assumption of a change in the pension actuarial system that “discovers” $400 million in money we don’t need to contribute to the pension system. I was opposed to this change in 2003 and am opposed to it now. I think it adds significant risk in the out years that I don’t want us to take. Lastly, I think we need at least $1 billion in an “ending fund balance,” the money we leave in the bottom of our checking account if things don’t turn out how we plan. This is a judgement call, and I am very concerned on the downside.
We’ll look at all of this as we write our version of the budget, and we’ll benefit from knowing more about the federal intentions.
We will come out of this with a significantly leaner government. I hope that it will be one that tries to do fewer things well, rather than one that insists on doing many things poorly. I will work on this.