Governor provides lawmakers with budget recommendations

Although the state's economy is beginning to show some signs of improvement as taxpayers are currently projected to provide approximately $2 billion more in revenue for the current budget than the last, state officials are still faced with the need to close a multi-billion dollar budget deficit.

Governor Gregoire today presented the Legislature with a list of options of how to balance the budget during a special session set to begin on November 28.

The Governor's budget reduction suggestions are available here.

Responding to the cries from stakeholders that business tax exemptions should be closed instead of making budget cuts, the Association of Washington Business wrote on its blog: 

Critics attacked the governor's proposal, saying it should have included options for new taxes in addition to proposed cuts. Gregoire said she will turn her attention to revenue next, but she correctly noted that despite showing some signs of life, consumers and businesses both remain nervous about the economy.

"We need to restore consumer confidence so they will spend," she said. "We need to restore business confidence so they will hire."

Gary Chandler, AWB's vice president of government affairs, sympathized with the difficult choices facing lawmakers, telling KUOW's Ross Reynolds this afternoon that small businesses -- which make up 85 percent of AWB's membership -- have been going through similar scenarios the last few years.

Chandler also repeated AWB's long-held position that tax incentives should be reviewed for their effectiveness, a point that AWB President Don Brunell also noted last week in a column.

Lawmakers should once again audit tax incentives, Brunell wrote. "Those that don’t pay for themselves, attract new investments or create or preserve jobs should be eliminated."

But Chandler cautioned lawmakers to make sure that cutting an exemption won't put more people on the unemployment line.

Here are the current recommendations from the state's Citizen Commission for Performance Measurement of Tax Preferences.

The question lawmakers will face when they return next month is which budget strategy will have the biggest impact on the state's economy: implementing budget cuts or resorting to multi-billion dollar tax hikes.

Back in 2009, 32 economists signed an open letter to state elected officials warning that tax increases during a recession will damage Washington’s economy and hamper economic recovery.

It is likely the same holds true today especially as we teeter on the edge of a double dip recession.

As noted by Rep. Hunter after the Governor's press conference, structural reforms are needed - the state can no longer do everything it is currently doing.

Here are some ideas for structural budget reforms that we provided the Governor earlier this month.