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October 25, 2011

Dear Friends and Neighbors,

I hope you had a great summer and are now enjoying what our fall season has to offer.

Since the end of the special session in May, I have been busy meeting with constituents to discuss the challenges facing our communities as our economy continues to struggle. Now that the governor has called another 30-day special session to address the state budget shortfall, I’m convinced the single most important thing we must do to get Washington working again is to commit to a job-creating, pro-economic growth legislative agenda. In my comments below, I briefly discuss how we arrived at our budget crisis, how we can rectify it, and what we can do to strengthen our economy and help get Washingtonians back to work.

As always, I value your input and ideas. Please do not hesitate to contact me to share your views or if I can ever be of assistance. I have provided my contact information below.

Special session to address state budget shortfall

The governor called a 30-day special session to address the $1.27 billion state budget shortfall. By the time the Legislature convenes on Nov. 28, the size of the problem could be closer to $2 billion.

How is it that our state’s two-year budget, which went into effect July 1, is already so deep into the red? The short answer is budget writers failed to understand economic (tax collections) realities and did not leave enough money in reserves. Here’s a timeline that shows how the problem evolved:

• January through April | Budget writers fail to come to an agreement during the 105-day legislative session. A 30-day special session is called.
• End of May | On the last days of the special session, budget writers finally agree on a state spending plan.
• June 15 | The governor signs the state budget and highlights that it has $700 million in reserves.
• June 16 | The state revenue forecast reveals budget reserves are down to $163 million due to lower revenue and changes in how the state accounts for one-time tax amnesty dollars.
• Aug. 8 | The governor orders state agency directors to prepare for spending reductions up to 10 percent ($1.7 billion).
• Sept. 15 | The state revenue forecast reveals the state budget is facing a $1.27 billion shortfall.
• Sept. 22| The governor calls a 30-day special session to begin Nov. 28.

Properly aligning state spending with tax collections

As I consider solutions and enter the special session, I approach them with an understanding that families and businesses have sacrificed and adjusted to economic realities. It’s time for state government to do the same. This means properly aligning state spending with tax collections.

Lawmakers must realize our state simply cannot afford to do all of the things it’s currently doing. While the decisions ahead will not be easy, they are absolutely necessary. These decisions will require setting priorities – which I continue to believe are K-12 education, public safety and protecting our most vulnerable populations – and embracing real reforms. Here are the types of reform proposals that may be on the table for the Legislature to consider:

• Eliminate state printing functions.
• Require more furlough for state employees.
• Stop providing health care services for non-citizens.
• Reduce the number of exempt, non-teaching faculty positions in higher education.
• End the remaining components of the state General Assistance-Unemployable program.

New tax increases: the wrong approach

One option that should not be on the table is new tax increases. There is already talk of such proposals, including a state sales tax increase. This is the wrong approach. A Feb. 12, 2010, study by the Evergreen Freedom Foundation determined that for every 1 percent increase in the state’s sales tax, approximately 19,000 jobs would be lost due to business volume reductions or closures that result in layoffs.

Our fragile economy cannot endure tax increases. With consumer confidence and employer uncertainty being primary contributors to our economic woes, the last thing we should do is add to these problems. Until state government is 100 percent efficient, cost-effective and accountable, the Legislature should not even consider asking taxpayers for more of their hard-earned money.

Strengthening our economy, creating jobs 

While the state budget is a front-and-center issue, so should economic growth and private-sector job creation. If we can strengthen our economy, we can create jobs and generate more tax collections to pay for the priorities of state government.

Our state’s chief economist said that high gas prices, political unrest in the Middle East, disruptions to supply chains in Japan, and economic uncertainty in Europe continue to adversely affect our state economy. By in large, these variables are out of our immediate control. However, there are other elements that impact our state’s business climate that can be addressed – things such as permitting processes, energy costs, growth-management restrictions, workers’ compensation costs, and rules and regulations.

Earlier this year, the Legislature passed important workers’ compensation reforms that should lower costs to employers. Below are five more solutions I support. I’m not suggesting these ideas would solve all of our economic problems, but they would be a big step in the right direction and signal to entrepreneurs and investors that our state is open for business.

• Incentivize start-up businesses | House Bill 1672
  In uncertain times especially, entrepreneurs need assurance. This
  would double the small-business tax credit to encourage economic investment and job creation.
• Require permit decisions within 90 days | House Bill 1961
  This says that if a state agency cannot make a permit decision within 90 days, then that permit is granted. This would eliminate bureaucratic delays and provide certainty to employers.
• Reclassify hydropower as renewable energy | House Bill 1125
  Our state, internally, does not recognize hydropower as a renewable source. But when we sell our relatively inexpensive hydropower to states like California, it does qualify. Hydropower is clearly a renewable source and our state should maximize its competitive advantage through its abundance of hydropower, which translates in our ability to provide affordable, clean energy for employers, citizens and communities.
• Place a moratorium on new state agency rule making | House Bill 1156
  At the urging of House Republicans in November 2010, the governor enacted a one-year state agency rule-making moratorium through executive order. She recently extended this moratorium by another year. This would suspend state agency rule-making until July 1, 2014, or until the state experienced three consecutive quarterly revenue collections above the official forecast.
• Suspend state growth-management requirements in counties with significant and persistent unemployment | House Bill 1592
  Many of our hardest hit economies around the state are in rural areas. This would lift burdens on many communities and knock down a barrier to much-needed economic development.

Sincerely,

Jay Rodne