Despite today’s reduced revenue forecast for the state
budget, Washington’s chief economist Arun Raha said it “seems very
likely” that the recession ended in the third quarter of 2009. That doesn’t
necessarily mean things are on the upswing, only that things have stopped
heading south.
Speaking of heading south, the $238 million reduced forecast
leaves the current budget in the red by about $185 million—even including the
state’s rainy day account. At today’s revenue meeting, one reporter questioned
the governor’s budget director Victor Moore, of the state’s Office of Financial
Management (OFM), about whether the governor planned to issue any spending cuts
or savings directives to state agencies immediately, given that the state’s Budget and
Accounting Act
requires executive action when a cash deficit is projected.
Moore said he believes the law requires the Governor to take
action only if she anticipates that the state’s budget will end in the red. “We
don’t anticipate that we’ll end in a negative position.” OFM is making a legal
argument (which EFF disagrees with), but from a policy standpoint it has no
legs. By failing to correct the budget’s imbalance sooner rather than later,
the executive branch and policymakers are hoping they can just ride the rest of
the downturn out until people begin to spend more (and the state’s revenue
forecast is adjusted correspondingly upward).
This strategy exacerbates the potential for even bigger
budget problems. Moore tacitly admitted as much in a press release today.
“When you add the revenue loss we’ve experienced plus
some additional costs we’ve incurred, we may face a billion dollar shortfall or
more in the coming session.” Yet rather than start dealing with the
problem now, the governor is electing to allow the problem to fester until the
2010 session. The reality of this decision is that a larger deficit on the
heels of what was perceived as an “all-cuts budget” (a misleading claim,
considering $590
million worth of tax and fee increases were passed in 2009) gives the
legislature more political cover to push for tax increases. After all, it’s an
easier sell to point out the concentrated groups of state beneficiaries that
have been hurt by existing cuts, arguing that it is time for taxpayers to step
up and carry some of the pain. As budget problems worsen, the prospect for tax
hikes improves.
To the governor’s credit, she has acknowledged that budget
cuts will be needed in the 2010 supplemental budget, and eschewed talk of tax
increases in lieu of budget cuts. “The shortfalls in
the last two forecasts necessitate more spending cuts, as do the lawsuits that
have restricted our ability to implement reductions,” she said in a statement.
Still, as we pointed
out earlier this year, the legislature has directed the executive branch to
make across-the-board cuts if a cash deficit is projected at any time
during a fiscal period. For the first time, the state is facing a negative
reserve balance, not just a
negative ending balance. If the Budget and Accounting Act ever applies, the
time is now. It seems silly that the executive branch would throw it back into
the lap of the legislature by taking the position that the current balance
sheet doesn’t matter because there are two legislative sessions to go before
the budget period ends. The legislative branch has directed the
executive branch how to respond when something like this happens—and it isn’t hurry
up and wait.
If the governor’s office is going
to ignore the law, then we might as well dispense with all the pomp and
circumstance involved in revenue forecasts because OFM’s position is that
balance sheets don’t matter until we say they do—and that isn’t until the end
of the budget period.
By the
way, the reduced revenue forecast comes on the heels of Governor Gregoire’s call
for a second stimulusfor the next budget (2011-13) because she
doesn’t know how the state will make up the $4.5 billion in stimulus money the
state is using to balance the current budget. Good question. Got bow wave?Stimulus
is just a nice word for ringing taxpayers out again.
Balance Sheet September 2009 (in millions)
Current Revenue Totals: $29,601.1
Total Resources: $30,488.0
Expenditures: $30,918.1
Projected General Fund Ending Balance: -$430.1
Total Reserves (General Fund plus Budget Stabilization): -$184.9
RJ Moeller said on Sep 18 2009 at 1:51pm Hey I found your blog today linked from Human Events. I really like what I see. I'll be sure to regularly stop in.
I am a 26 year old grad student from Chicago and I have a humble little blog of my own (A Voice in the Wilderness) and here's my latest piece:
rjmoeller.com...et-it-obama/
Keep up the good work. Thanks and God bless!
-RJM
bob romeo said on Sep 24 2009 at 4:21pm hi Lynn, i have seen you on glenn beck's program,it is so great to see someone from the great northwestbeing involved in trying to save AMERICA.iwish i had the fortitude and drive of the people who are in your league.i live in florida(melbourne)and there seems to be no org.that i can go to participate in.iwould like to get GLEN to come to fl.to talk to people,he is a GREAT inspiration.thanks,bob romeo
bromeo54@aol.com
