Site hosted by Build your free website today!

House GOP Update 2/22/2002

  House Highlights

Legislative Update, February 22, 2002

Reality reared its head this week in Olympia, and it was ugly. The governor's Forecast Council reported that revenue projections for the state had dropped by nearly a quarter of a billion dollars. The following day, the caseload report, which measures costs for low-income programs, schools and prisons, indicated that spending in those areas will be $120-150 million more than expected. Combining the two numbers means the state budget deficit is about $1.7 billion and may likely end up closer to $2 billion. In a letter to the governor, the state treasurer warned that Washington will run out of money on November 19th if nothing changes. Meanwhile, unemployment rose nearly a full percentage point to 8.2 percent and House Democrats unveiled their statewide transportation funding package. The deadline passed for bills to be approved in their House of origin and, after persistent Republican pressure, the full House approved a Senate bill eliminating the local transit portion of license tab fees.

The budget hole keeps getting deeper. Governor Locke's response to the worsening budget situation was too little and much too late. Last summer, the governor vetoed a Republican amendment to the original budget bill that forced him to first make across-the-board spending cuts, then spend reserve funds, in the event of a projected cash deficit. That would have exposed the state's cash flow problem last summer.

By August, the state treasurer had warned the governor that the state was running a negative cash balance of $99 million. By the middle of February, the negative balance had ballooned to $813 million, prompting the treasurer's most recent warning letter.

The governor ordered a flexible hiring freeze and placed limits on travel and spending on new equipment and machinery. He told a news conference that he might ask the Legislature to rescind scheduled pay increases for state employees and teachers, prompting a predictable response from the organizations representing them.

He also said he is considering an across-the-board spending cutback of 5 to 6 percent on top of the cutbacks he ordered back in December when revenue forecasts indicated a looming budget shortfall of $1.25 billion.

Now, however, the deficit is getting close to the $2 billion mark and the longer House and Senate Democrats wait to make their new budget proposals, the deeper the hole will be.

The governor blames September 11th and the national recession for the state's predicament and points out accurately that about 40 other states are facing budget problems as well. But as the state treasurer made clear in his letter to the governor this week, the governor knew in August that the state was running in the red. Even worse, like everyone else, he knew a year ago that the state's economy was slumping badly. It wasn't strong enough to produce the revenue he wanted to spend, a point made repeatedly by House Republicans.

We argued then that the budget was not sustainable, and contained too many accounting tricks and questionable revenue sources to be realistic. Unfortunately, our warnings were ignored. Certainly, the national recession has hurt Washington's economy, but by all indications, the national economy is rebounding nicely, leaving Washington and Oregon behind. Even the governor's own economist said this week that it will be two years before the level of economic activity in Washington returns to the level it was at during the first quarter of 2001.

Proposals for higher taxes have new life. The budget news stunted some business on the House floor this week. Nevertheless, House Democrats continued to pass legislation that will spend more money if those bills become law. Meanwhile, our state's bureaucracy has continued to grow under the Locke administration, adding 1,000 jobs in the last quarter of 2001.

In fact, state and local governments are one of few sectors of our economy to show job growth in 2001. Everything else fell. Manufacturing, construction and warehousing all dropped by more than ten percent. Overall, Washington had a net loss of 65,000 jobs last year. The mix of jobs in the state also is evolving rapidly. It wasn't all that long ago that about 40 percent of all jobs were in manufacturing. Today, less than ten percent are and that figure continues to fall.

Even with businesses closing and jobs being eliminated, Democrats are speaking more loudly than before about raising taxes. Gov. Locke says he doesn't want to try to balance the budget with a general tax increase, but his fellow travelers in the Democrat caucus are talking about increasing the sales tax and perhaps imposing a state income tax for the first time. They also continue to speak loudly of closing "loopholes," which is Democrat-speak for raising taxes on employers, nonprofit organizations, organ donations, cemeteries and even churches.

House Democrats unveil their statewide transportation funding package. House Democrats proposed to raise the gas tax by 8 cents a gallon over a two year period, increase the sales tax on vehicle purchases by eight-tenths of 1 percent (also over two years) and to increase the gross vehicle weight fee that truckers pay by 20 percent. The total package is designed to raise $5.6 billion over ten years, only $3.7 billion of which is aimed at improving major roadways in the state.

Their proposal also creates a new Transportation Accountability Board, which is supposed to be an oversight watchdog on how the new money is to be spent. However, most of the membership would be appointed by the governor to watch the governor, and is really nothing more than an attempt to pay lip service to the idea of accountability while adding another layer of bureaucracy that the state can do without.

The only good thing to come out of the plan is that it is to be put before the voters (perhaps on June 20) so that the taxpayers can make the decision as to whether or not they think it is a good idea.

There is nothing in the proposal to address Republican concerns about permit streamlining, more efficiency, higher performance levels, privatization of highway rest areas or opening up HOV lanes to all traffic on weekends. All of those things have been critical element to gaining Republican support for a funding package.

I-695 - at last - becomes a reality. House Democrats finally allowed a vote to eliminate the local transit portion of the motor vehicle tax this week and, with unanimous Republican support, Senate Bill 6036 passed the House 77-21. The Senate approved the bill last year, but it died in the House when the Democrat leadership refused to call it up for a vote. The Senate approved the bill again during this session, but House Democrats continued to stall the matter. Earlier this month, the Washington Supreme Court ruled the local transit agencies were still entitled to their portion of the MVET. This would cost the owner of a $20,000 vehicle $145 a year. Since the state has not been collecting the MVET, it threatened to blow another $760 million hole into the state's budget.

House approval of the bill takes care of that problem. It goes on to the governor, who says he will sign it.