Governor, legislators face tough math assignment in crippled budget

In another Groundhog Day news conference last week, Gov. Chris Gregoire unveiled budget options she hates.

Gregoire, who came into office as the economy gained momentum in 2004, has spent her second term dismantling the work of her first. A big-government Democrat, she takes no joy in subtraction.

Yet, she understands the math. The economy, under the most optimistic growth scenarios, will not grow fast enough to fill much of the $2 billion budget shortfall. Tax increases, should voters accede to them, won’t produce enough money in the short term to head off the cuts she’s proposing.

Lawmakers will first have to balance the budget without new money. Then, they’ll try to convince a skeptical public to support higher taxes to buy back the highest-priority programs.

Gregoire will release her formal budget plan in a few weeks, in time for the special session beginning Nov. 28.

“Options are limited,” she says.

Gregoire identified examples of cuts she’s likely to recommend: Eliminate the Basic Health Plan and medical services for people enrolled in the Disability Lifeline, slice another 15 percent in state funding for colleges and universities, reduce supervision for released offenders, and halve subsidies to property-poor school districts.

That amounts to about one-quarter of the solution to a $2 billion shortfall. Much more is under consideration, including larger public school class sizes, fewer state dollars for cities and counties, and a shorter school year. It’s a post-Halloween parade of horribles, most of which have been discussed at one time or another during this long season of retrenchment and discontent.

Those who say Gregoire is setting us up for a tax increase are right. She says so, announcing that she’s now ready to endorse new revenues. That does not mean she’s bluffing about the choices. Without more money, many of these cuts are unavoidable.

But if the cuts are real, so is the need for structural change.

The reform agenda is as familiar as are the pleas for more money: Expand outsourcing and privatization, amend or suspend collective bargaining agreements during fiscal crises, use Medicaid waivers to control health care costs, eliminate low-priority programs.

And lawmakers must simultaneously promote economic growth preserving investment in education and transportation, providing regulatory relief and maintaining effective tax incentives.

Such strategies, while essential elements of preparing for a sustainable recovery, won’t close this year’s budget gap.

Here’s some more math: 50 + 25 + 1. Any budget solution will require 50 votes in the House, 25 in the Senate and the signature of the governor. Democrats control the House by 56-42 and the Senate by 27-22. Conservative Democrats in both chambers tip the balance. While some Republicans may support a tax package, they’re unlikely to provide the decisive votes.

Deft leadership and smart negotiations will be required to craft a cut-and-tax plan that can pass both chambers. And the calculations don’t end there.

While Occupiers claim to represent “the 99 percent,” the 64 percent of the state’s voters who supported Initiative 1053 last November framed this year’s budget deliberations. The initiative requires a two-thirds legislative supermajority for tax increases or a vote of the people. There aren’t the votes in Olympia, so any tax hike will require voter approval.

Washington voters have traditionally kept a tight hand on the revenue reins. That means any tax package sent to the voters will be designed to grab the elusive-yet-required 50 percent plus one.

We’ll see more attacks on tax incentives, often simply driven by anti-business pique. The critics typically overstate the revenue potential by failing to recognize that repeal of certain incentives may also drive jobs and economic activity out of state. There may be some cash pickup, but there’s no untapped treasure trove.

A one-cent bump in the sales tax raises about $1 billion annually, but it’s a tough sell. Besides, the Occupiers and their allies reserve their enthusiasm for raising taxes on other people.

The unions have complicated things for lawmakers by drawing a hard line. When Gregoire asked them to renegotiate health care benefits – state workers still pay much less than their private-sector counterparts – they refused.

When the public is asked to approve higher taxes, voters remembering the rebuff may also refuse.

Bainbridge Island resident Richard S. Davis is president of the Washington Research Council. Email him at rsdavis@simeonpartners.com.