Dear Friends and Neighbors,
The Legislature completed its work early last Wednesday morning and hopefully state lawmakers will not return to Olympia until January 2013.
The path to final adjournment was, unfortunately, a long and winding one. In my last e-mail update, I talked about how the Legislature was unable to reach agreements on the operating budget, capital budget and reforms at the end of the regular legislative session on March 8. The governor then called a 30-day special session that began on March 12. State lawmakers finally reached consensus on the major issues on the last day of the special session last Tuesday, but moving all the bills through the legislative process spilled into the following day. This pushed the Legislature into another special session, double overtime if you will, that lasted just over seven hours.
The good news is the budgets are booked and some important reforms will be signed into law. The bad news is it has taken six special sessions in the last two years to deal with the same problem: an unsustainable operating budget. And I'm not convinced the problem is solved. I'm also disappointed that more attention was not paid to creating jobs and improving our state's business climate. Washingtonians deserve better.
Below you will find more information on the operating and capital budgets, reforms that passed, and solutions I support to strengthen our economy. I invite you to provide feedback and share your thoughts.
While the legislative sessions are over for 2012, please remember I'm your full-time state representative and stand prepared to assist you. I'm always just a phone call or e-mail way. My contact information is below.
Learning from lessons of the past
As you consider the recent budget debates it's important to keep in mind that when Olympia was dominated by one-party control, state spending grew by a whopping 33 percent from 2005 to 2008. I went back to look at some of my old news releases on the operating budget. On April 11, 2005, I said: “We started this budget process with $1.7 billion more in revenue than the last time … We're increasing state spending by over 12 percent. This lacks fiscal responsibility and is unsustainable.” On February 27, 2006, I noted: “The 2006 supplemental budget, which passed out of the House on a party-line vote, ignores a simple economic reality – our state cannot continue to outspend its revenue. Our state revenue is growing, but largely because of a hot real estate market that is bound to cool. We cannot continue to pass budgets that outpace state revenue.”
I share these quotes to emphasize that some of us in Olympia knew state spending levels were not sustainable and economic problems were on the horizon. These voices were drowned out in favor of an approach that proved to be fiscally irresponsible. Our state is still trying to dig out from this hole today.
Final agreement does not leave enough in reserves, preserves status quo
I voted against the final $31 billion operating budget for two primary reasons. First, it only leaves $319 million in reserves. When you consider $238 million of this amount is a result of a new accounting maneuver for local sales tax payments, our state's ending-fund balance is more like $81 million. This is simply not a responsible amount given the unpredictability of tax collections. I feel our state needs at least $600 million in reserves to be safe.
Secondly, for the most part, the operating budget preserves the status quo in state government. This represents a missed opportunity to truly reform Olympia in meaningful ways.
I would like to acknowledge a few good aspects of the operating budget. For example, it does not cut any spending for K-12 or higher education. The operating budget also does not raise the state sales tax – something the governor pushed for late last year. It also does not delay payments to school districts or skip a state pension payment – two proposals that were on the table in the regular legislative session.
Bipartisan reforms pass, more needed in the future
The big news of the legislative session occurred when a bipartisan group in the Senate formed a philosophical majority centered on reform-minded, responsible budgeting. This bipartisan coalition wrestled control of the budget process away from Senate Democrats and, in doing so, put forth a list of reforms it expected to be a part of negotiations moving forward. It was a strong stance that was initially rejected by House Democrats, but ultimately was successful. Three of these reforms passed and they are great examples of what can be accomplished when sides come together and negotiate in good faith. We need more of this in Olympia – especially when it comes to solutions for our economy. Below is a brief description of two of these reforms.
Using a four-year outlook for budgeting
One of the problems we have seen over the years in our budgeting process is short-sighted policy decisions. In other words, state lawmakers putting policies in place that do not take into account the costs in future budget cycles. Senate Bill 6636 will require operating budgets to balance across four years. Before being adopted by the Legislature, an operating budget must balance not only in the current two-year budget cycle – but also the next two-year cycle. I voted for this legislation because it will force state lawmakers to give greater consideration for the long-term costs of their decisions. No other state uses this budget practice and I'm proud that Washington will be a leader in this area.
State pension system reform
The down economy has adversely affected investment returns in our state pension system and we know contributions rates will rise in the future. While our system is in better shape than most states, it's still important for the Legislature to find ways to bend the cost curve. Under Senate Bill 6378, public employees hired as of May 2013 and in the Public Employees Retirement System, Teachers Retirement System or School Employees Retirement System will receive a smaller monthly benefit if they retire early. I voted for this bill because it will save public employers and taxpayers around $1.3 billion over the next 25 years and ease burdens on future operating budgets. This will ensure sustainability in the system and that promises are kept to public employees.
Improving the state's business climate
The greatest disappointment for me is the Legislature's lack of attention to job growth and the economy. At a time when so many people are out or work, or fearful they could lose their jobs, Olympia needed to do more to help small businesses and revitalize our economy. The Legislature should have used these tough economic times as a driver for solutions to improve our state's business climate.
While changes were made to our workers' compensation system last year, which should lower costs for employers, the majority party seemed content with stopping there. I continue believe there are ways to reform and lower costs in our workers' compensation and unemployment insurance systems. I also supported bills that would have reduced regulatory burdens on employers, incentivized startups, provided consistency in the permitting process, and simplified and reduced the number of tax rates for small businesses. We can, and must, do more to help employers be successful, grow and hire.