Ideas for Balancing the State Budget Without Raising Taxes
2002-02
Washington state is facing a serious budget deficit during the current (2001-2003) biennium. Until early last year, state economists projected a surplus for the current budget. Those predictions are turning out to be wrong. Revenue is coming into the state treasury at a lower rate of increase than was expected.
Budget experts now predict a shortfall of between $1.25 billion and nearly $2 billion in the current biennium. While projected spending is falling short of planned levels, in real terms state government spending continues to go up. The "deficit" the legislature faces this session is the difference between the level of increase the state planned on and the level of increase it is actually collecting in taxes.
The increase in state spending reflects a long-term trend. Since 1990 General Fund spending increased more than 78%. Over the same period the number of people employed by the state rose more than 25%, from about 81,000 full time equivalent positions (FTEs) in 1990 to more than 102,000 today.
Without major reform of the state budget process, our problems will only be worse during the next biennium. The future solvency of Washington's government hinges on decisions the legislature and governor make this year.
A host of proposals designed to eliminate the budget deficit will be entertained. Research from other states shows that improving the efficiency of existing programs offers the most effective long-term solution, allowing the state to maintain service levels while holding the line on cost to taxpayers.
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In 2001-03 the amount of new tax money coming into the treasury (shaded bar) is falling short of the increase budget planners expected (solid bar).
Set a Flexible Freeze on State Hiring. Spending on the state workforce increased more than $350 million last year, to a total of more than $5 billion. Holding overall employment at current levels will help limit personnel costs while allowing the governor and legislature the flexibility to hire employees where they are most needed.
Sell the UW Metropolitan Tract. The University of Washington owns the Metro Tract, a prime retail and office property in downtown Seattle, which includes the Olympic Four Seasons Hotel and Rainier Square office complex. With funding for higher education threatened and state budget costs increasing, the state should sell the Metro Tract.
In a recent audit, the legislature found the Tract earns 50% less than other comparable properties, illustrating a common problem when government attempts to compete in the private sector. The audit valued the property at $285 million, which could offset tuition increases and soften the budget crunch.
Allow the State Auditor to Conduct Performance Audits. Last year Governor Locke vetoed a widely supported bill authorizing the state auditor to conduct three pilot audits of state agencies. Three audits are a start, but will not provide the comprehensive review state government needs. Washington residents will benefit substantially if the state auditor is permitted to evaluate the performance of state government.
Performance audits in other states have rooted out billions of dollars in waste due to inefficiency and redundancy, and have helped to restore taxpayer trust in government. Performance audits can also identify programs and services that are already provided more efficiently by the private sector.
Open State Services to Private Competition. Private companies should be allowed to compete equally with state employee groups to provide services to Washington residents. State law bans private competition for government services that are, or could be in the future, provided by government workers. Repealing the ban would allow agency managers to select the most efficient and effective method for delivering services to Washington residents.
Using a conservative estimate, the state could save nearly $350 million by opening some basic services to private competition. Some examples of state services where competition could easily help reduce cost and increase efficiency are:
Review the Need for Various Boards and Commissions. State government supports more than 440 appointed advisory boards and commissions. Taxpayers fund these organizations with general fund appropriations, industry user-fees or state government administrative support. Many state commissions are not necessary for the safety and well being of Washington citizens or were created decades ago and are no longer necessary.
Some of them include: Acupuncture Consulting Group, Bicycling Advisory Group, Board of Denture Technology, Board of Massage, Naturopathy Committee, and the State Advisory Committee.
A thorough review should be performed to determine if any state government commissions, which are a drain on scarce resources, should be eliminated. Based on a WPC review, taxpayers could save more than $28 million by eliminating unnecessary commissions.
It will take leadership and innovation from the policymakers of our state to solve our fiscal problems and restore trust in state government. Tinkering around the edges by relying on sin taxes and unstable lottery funds will simply lead us back into the same situation during the next biennium. With common sense reforms, services to state residents can be maintained at a high level, while the cost to taxpayers is reduced.
These reforms, along with additional proposals, are presented in more detail in the
Washington Policy Center Policy Brief, "Ideas for Balancing the State Budget Without Raising Taxes."