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Dear Friends and Neighbors,
Last month, the state's chief economist, Dr. Arun Raha, announced we can expect another drop in tax collections over the next biennium, creating an estimated shortfall of $1.27 billion in the 2011-13 general fund budget. In fact, the governor has suggested the shortfall is closer to $2 billion if you want to leave a reserve for future revenue forecasts. You can find more on the forecast at the Washington State Economic and Revenue Forecast Council (ERFC) Web site.
With revenues declining and no end in sight for our struggling economy, the governor recently announced she will be calling a special session starting Nov. 28, 2011 asking the Legislature to address our budget shortfall. You can read my statement on the special session “here.”
I support a special session because the longer we wait, the worse our financial situation becomes. The frustrating part is the entire House Republican Caucus voted against the budget in May because we knew it was a short-term fix and unsustainable. You can find my statement on the budget “here.” Now, here we are four months later calling a special session for that very reason.
However, we must move past the rhetoric and do some things differently with the budget. There needs to be some flexibility, prioritization of our most important issues, and elimination of programs or parts of agencies that are a drain on the budget.
We must look long-term and come up with a sustainable and fiscally responsible budget. Our economic recovery is much slower than anticipated. Unemployment remains too high, we are not generating new business in our state, and employers are not hiring. Until we see some changes in these factors the Legislature must do things differently.
When I refer to flexibility I am referring to allowing more of a safety net or rainy day fund. We are looking at a third special session in the last two years because we can't pass a sustainable budget. We haven't prepared for a struggling economy even though there are no indications of it improving. Also, everything needs to be on the table. Currently, many programs in the budget are dedicated and are off limits. That also goes for union contracts. Right now, the governor's office negotiates the contracts. The Legislature gets an up or down vote. We need to put the budgeting back in the hands of those who are elected to pass the budget.
I also question our priorities in the budget. Education and public safety took substantial cuts. We are not living up to our “paramount duty” to fund education as our state constitution tells us. The Legislature needs to re-evaluate where we are making our cuts.
Finally, we need to stop adding new programs and cut programs completely if we are not providing them the funds they need to function properly. Not only is this a waste of taxpayer dollars, but the programs end up not being effective. We have left bits and pieces of programs in place with the hope of restoring funds fully in the future. Instead of keeping these programs hanging on by a thread and lacking results or true functionality, let's eliminate them and see if their operations or services will fit with other programs already operating. Our state government has to be more efficient.
Recently, the Washington Department of Labor and Industries (L&I) announced an increase in workers' compensation rates for 2012 by an average of 2.5 percent. The agency states it needs to raise rates to restore depleted reserves in the workers' compensation system despite claiming the funds are solvent. Read the agency's press release “here.” If the funds are solvent, raising rates is unnecessary. Last session, business and labor were involved in very contentious negotiations. Despite the difficulty of the issue, they were able to reach an agreement and gain support from both sides of the aisle on a fix to the system that allows the state to offer settlements to workers.
This is supposed to be a long-term fix that lowers payout costs. Yet the department still wants to raise rates, despite their claims of solvency and a fix in place. Now is not the time to raise rates, no matter how small. Let's give the fix a chance to work. Employers that fund the system faced an average rate increase of 12 percent for 2011 and have had other substantial increases the last few years. The department shouldn't need a reminder that employers are not hiring. Our employers are struggling, unemployment remains high, and raising rates on business taxes will not help our economy or the state's financial situation.
Another announcement made this week by L&I also will have an impact on employers. The department announced Washington's minimum wage will increase from $8.67 to $9.04, a 37-cent increase. Washington state continues to have the highest minimum wage in the nation. An interesting article on the negative consequences of a high minimum wage can be found “here.” I expect the minimum wage to be a hot topic in the 2012 regular legislation session. The Washington State Wire article, “Breathtaking Increase in Minimum Wage May Fuel Legislation – Could be a Dicey Political Issue,” gives an idea of what may be discussed and the challenges surrounding the issue.
Please share this e-mail update with anyone who might be interested in keeping up on what is happening in the Legislature. Thank you for allowing me to serve you.
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