Ending the Spending Crisis: Structural Reforms for a Sustainable State Budget

Introduction

A combination of past spending increases and a historic economic downturn has left lawmakers in Olympia facing difficult choices to reset state government. Though tax revenues dropped substantially for the 2009-11 budget, they are projected to increase by $4.5 billion for the 2011-13 budget. While this should be cause for relief, lawmakers for years have been spending more than taxpayers provided, creating a structural budget gap that now threatens important public programs. This past overspending was unsustainable on its own, but was exacerbated by the “great recession.”

Despite the spending reductions being made, lawmakers will inevitably face the same budget problems in the future unless structural budget reforms are adopted that set the budget on a long-term sustainable course.

Among the changes needed:

• A constitutional tax and spending limit
• An enhanced rainy-day account
• Legislative control over state employee compensation policy
• Proactive competitive contracting
• Performance-based budgeting

Key Findings

1. Though tax revenues dropped substantially for the 2009-11 budget, they are projected to increase by $4.5 billion for the 2011-13 budget.
2. Lawmakers for years have been spending more than taxpayers provided,  creating a structural budget gap that now threatens important public programs.
3. This past overspending was unsustainable on its own, but was exacerbated by the “great recession.”
4. If all the legislature does this session is balance the budget through tough cuts  without making necessary structural reforms, we will be doomed to repeat the budget crisis again in the near future.
5. Lawmakers should not only balance the budget, but should enact: a constitutional tax and spending limit; an enhanced rainy-day account; restore state employee compensation decisions to the legislature; authorize proactive competitive contracting; and utilize performance-based budgeting.
6. Implementing these reforms will help get the state off the boom-and-bust spending roller coaster, protect taxpayers, and creating a structural framework that puts state spending on a sustainable path.

Read the full Policy Brief here [1].