Olympia Business Watch

Senate Republicans Criticize the Budget

Sen. Joe Zarelli, the ranking Republican on the Senate Ways and Means Committee, began issuing what he calls "Budget Tidbits" in the last biennium. I find them informative - good vehicles for airing the minority perspective.

Here's his first for the 2007 session. He challenges the notion that the increased spending is required to handle a "structural deficit."

Californian Dreamin'?

California Gov. Arnold Schwarzenegger has gotten a lot of media coverage (for example, here, here, and here) for his proposed health care plan. In today's Wall Street Journal, David R. Henderson explains why it won't work. The op-ed carefully dissects the problems with many health care reform efforts.

Why doesn't increased government power tend to solve the problem of the uninsured? There are two main reasons. First, when government provides health insurance, many people who take advantage of it drop their own privately provided health insurance. In a 1996 article in the Quarterly Journal of Economics, Harvard economists David M. Cutler and Jonathan Gruber found a 50% "crowding-out effect." As the federal Medicaid program expanded, for every two people who gained insurance through Medicaid, one dropped private health insurance. Although this is a net addition of one, the costs to taxpayers are much higher than expected because now half of the newly covered, instead of paying their own way as they previously did, become wards of the state.

Second, of the 46 million or so people without health insurance at any given time, about 45% will have health insurance within four months. This is one of the main findings of a 2003 study by the Congressional Budget Office, "How Many People Lack Health Insurance and for How Long?" That shouldn't be surprising in a country where most private health insurance is employer-provided and most unemployment spells last 11 weeks or less. Solutions that involve government mandates on employers or employees will, therefore, miss connecting with about half of the people who are uninsured at a given point in time.

Read the whole thing. And then share it with your legislator.

MORE: The California Labor Federation doesn't like it. When you've got the unions and the Hoover Institution allied against you, you just may be wrong.

State of the State Roundup

This morning's coverage of Gov. Gregoire's State of the State address highlights the familiar themes - a "One Washington" pledge, a recapitulation of past accomplishments, and a restatement of her agenda (education, family wage jobs, affordable health insurance, clean environment, safety, and government accountability).

In his account the Olympian's Brad Shannon says:

  The speech offered little new but put Gregoire's dozens of legislative priorities into a single story line.

That's pretty much the view of the Seattle Times:

Past governors often used their annual speech to the Legislature as an opportunity to roll out new initiatives. But Gregoire's speech was mostly a rehash of the budget proposals she has trickled out during the past month in appearances around the state.

If a rehash, the largely Democratic audience was encouraging. Jerry Cornfield counted the applause lines:

Gregoire's 44-minute address contained no new initiatives from what she's proposed in her budget. Still, it earned her applause 36 times.

Republicans were skeptical, as Richard Roesler reports in the Spokesman-Review.

"I think tonight what we really saw was a classic speech from a big-government liberal," said Rep. Doug Ericksen, R-Bellingham. "Every solution that she offered required new government programs or massive new spending to get it accomplished."

 

Here's the story from the P-I, with Chris McGann and Melissa Santos getting the WEA reaction. The teachers' union liked it.

I look forward to these speeches, which define the governor's goals for the session. Lawmakers may ignore the message, but state government - like most large and complex organizations - tends to be driven by the vision and drive of the executive. Last night, she laid out her agenda in one, comprehensive,ambitious and expensive package.

We think her budget spends too much and saves too little, and we'd like to see the Legislature exercise more restraint. That said, we strongly support her commitment to economic competitiveness, math and science education, and global trade, which she reinforced again last night.

More: This News Tribune headline hits the mark.

Don Brunell's Weekly Column

In today's Columbian, Don Brunell's column draws important insights on forest management from the recent windstorms.

First Day of Session Coverage

The session opened yesterday, giving everyone another chance to reflect on the magnitude of the Democratic sweep.

The Seattle Times has this:

In the House, Democrats had to move furniture and staff out of their caucus room to make space for six additional members. Their GOP counterparts had room for a coffee bar.

In the Senate, Republican Leader Mike Hewitt, R-Walla Walla, said he couldn't believe how many lawmakers were crammed into the Democrats' caucus room. "It was hot and sweaty in there," he said. "They're not going to have any fun."

Other, of course, than writing the laws, as the P-I points out, after noting the ritualistic nods to bipartisanship by leaders of both parties.

Democrats not only will have total control of the state's $30 billion budget, but they will be driving the policy decisions as well.

The News Tribune and the Olympian also report on the civil, cordial, and bipartisan tone of opening day ceremonies.

The Everett Herald follows a new senator on his first day.

The Olympian's Preview

Somehow I missed this overview of the budget hassle by Brad Shannon in the Olympian. He does a good job of outlining the competing interests. AWB's views are included:

"By proposing a constitutional amendment to secure a state rainy day fund, Governor Gregoire shows her commitment to fiscal responsibility," Don Brunell, president of the 4,000-member Association of Washington Business, said in a news release.

The AWB expressed support for funding of education programs that make the state more competitive, but Brunell dubbed the budget "unsustainable."

"I'm just concerned that with this budget, the rains will come too soon," he said.

The first legislative budget hearings start this week. They may give some indication as to how solid the pledges of fiscal restraint will turn out to be.

One more thing: At last count, AWB's membership is at 6,100 plus. The shop's been growing so fast, it's hard to keep up.

TNT Legislative Preview

In this morning's TNT, Joseph Turner and Sean Cockerham preview the legislative session. Here's how they frame the budget challenge:

The state expects to collect about $32.1 billion in taxes that go into the general fund and eight other accounts that are used to pay for most state programs and services.

The governor’s two-year budget would spend $33.4 billion.

Math isn't partisan. The problem's clear regardless of who does the subtraction. But such calculations won't be popular, as Peter Callaghan points out today. He tells us how to find the "most unpopular people" in Olympia:

Just hunt down the legislators who say Gov. Chris Gregoire’s proposed budget spends too much, saves too little and is setting up the next Legislature for yet another round of budget cuts and tax increases. ...

It’s a sure recipe for social rejection – being a beware-of-tomorrow voice in a live-for-today Legislature.

It's a good column. We need to make sure those "unpopular" folks understand they have friends outside the dome.

Budget Dominates Legislative Previews

With the legislative session opening tomorrow, several Sunday papers previewed the issues. Unsurprisingly, the governor's proposed budget dominates .

In the Seattle Times, Ralph Thomas and Andrew Garber note the opportunity:

...politically, this may be the ideal time for Gregoire and Democrats to push expensive new initiatives.

... There's so much extra cash ... that Democrats can spend heavily on programs the public supports, and at the same time take good care of their political allies, including public-employee unions and human-services advocates.

And they probably can do it all without having to raise a single tax between now and the next election.

But the spending comes with foreseeable risk.

Under the governor's proposal, the state would spend about $525 million more than it would collect in taxes during the next two years.

And in the ... 2009-2011 budget cycle, state spending on existing programs would exceed tax collections by more than $1.2 billion, according to projections from Gregoire's budget office.

Even that gloomy scenario could prove optimistic, said Kriss Sjoblom, an economist with the business-backed Washington Research Council ...

"If these represent down payments on Gregoire's priorities," he said, "the risk is that the economy is going to repossess them."

The governor remains undeterred, calling the forecast of future deficits "a blunt instrument" and noting that previous forecasts were overly pessimistic, as shortfalls became surpluses.

Steve Mullin, president of the Washington Roundtable, AWB's partner in the Washington Alliance for a Competitive Economy, says it's time to be cautious.

"... our top priority for this session is budget sustainability," said Steve Mullin .... "There are a lot of legislators who have served during economic downturns. We'll be counting on them to urge caution."

The budget also figures prominently in Jerry Cornfield's legislative preview for the Everett Herald. He detects Democratic leaders' desire for restraint.

With the prospect of a $1.9 billion surplus for the next two years, many Democrats harbor thoughts of using the cash to solve problems and pursue dreams.

Party leaders insist they can moderate their members' exuberance.

There is an unmistakable and somewhat unexpected restraint in the tone of House Speaker Frank Chopp, D-Seattle, and Senate Majority Leader Lisa Brown, D-Spokane, when they talk of an agenda of education, health care, jobs and other issues.

David Ammons also reports on the prospects for restraint.  Here's a nice quote and good counsel from Rep. Dunshee.

"We didn't get a mandate, we got an opportunity," says Rep. Hans Dunshee, D-Snohomish, new vice chairman of the House budget panel. "We should always be cognizant that they can throw us out in two years. We should avoid the overreach."

Two important figures are saying the right things.

The budget writers, House Appropriations Chairwoman Helen Sommers, D-Seattle, and Senate budget Chairwoman Margarita Prentice, D-Renton, plan to put the brakes on runaway spending impulses. Sommers, in particular, talks about saving even more than the $600 million that Gregoire suggests.

Building up the savings account is a good start. Long-term sustainability, however, should be the primary objective, so the savings cushion has time to grow.

 

Budget Editorials Continue

The News Tribune today runs (by my count) its third budget editorial.

... the state budget is still job No. 1 and the truest expression of state priorities.

On that front, lawmakers must grapple with the curse of prosperity. ... lawmakers could hasten the return of tough times if they don't exercise restraint when state coffers are flush.

The TNT's editorial board says, "Early signs are not encouraging." The governor's budget spends too much and Democratic leaders are likely to spend more. Citing the WRC analysis released last week, they point out that an economic slowdown could make the deficit projections worse.

In sum,

Creating an unsustainable bow wave of future spending obligations would be irresponsible, as would refusing to address real needs. Saying no to everyone is not the answer; making tough choices about what we must do and what we can do without is the Legislature's duty.

In the TNT's Inside the Editorial page blog, David Seago writes: "We repeat a message that we're going to hammer all session long: a $1.9 billion surplus doesn't mean legislators can throw fiscal responsibility to the winds."

The Olympian also carries an editorial urging fiscal responsibility, though they set the bar mighty low.

And fiscal responsibility means creating a two-year spending plan that is close to, or even lower than, what the governor has proposed.

The countdown on the 105 day session begins tomorrow. AWB members should let their legislators know, early and often, that they want them to adopt a budget that promises financial stability in the future. It's important.

Everett Herald Backs Simple Majority

The Everett Herald endorsed a simple majority for school levies. They've thought so for a while.

Under "ideas whose time has come," put this at the top of the Legislature's agenda:

Simple majority approval for school levies.

This one may move quickly.