Future Deficits Inevitable Without Comprehensive Solution

Published July 24, 2008

Washington’s estimated $2.7 billion budget shortfall will force tough decisions to be made in the coming years, and without fiscal discipline these deficits will reoccur in larger form. To head off future deficits the state needs to take a more comprehensive approach to cutting spending.

Since Gov. Gregoire took office in 2005, the state’s general fund has increased by $8 billion. That’s a 31 percent increase in spending. Even accounting for significant population growth, such an increase in spending is unjustifiable and reckless.

Simply by cutting the “pork” outlined in the Washington Policy Center’s 2008 State Piglet Book, the state could have saved taxpayers $160 million. One example of the bizarre expenditures identified in the book: $300,000 in Medicaid checks and pension payments to dead people.

Choosing to increase taxes will not fix the fundamental budget problems, but that decision will cause Washington residents and businesses to suffer. Rather than resorting to increased taxes, the state needs to eliminate wasteful spending, enact and enforce sensible tax and spending limits, and increase partnerships with the private sector.

The documents cited below give further information on spending limits, tax reform, privatization, and related budget issues.

Ten Principles of State Fiscal Policy
This booklet provides policymakers and civic and business leaders with a highly condensed yet easy-to-read guide to state fiscal policy matters. It presents the 10 most important principles of sound fiscal policy, from “Above all else: Keep taxes low” to “Protect state employees from politics.” The booklet also contains an extensive bibliography for further research, including many links to documents available on the Web, and a directory of the Web sites of national organizations that support sound fiscal policy.

The Washington State Piglet Book: Connecting the Dots on How Government Wastes Your Money in Olympia
It is also important to see calls for tax cuts in the correct context. Lowering the tax burden does not have to mean cuts in public services. The state budget is constantly growing, and most proposals for tax relief would result only in slowing the rate of spending increase, not real-dollar cuts in current programs.

Ideas for Balancing the State Budget Without Raising Taxes
Washington legislators are faced with many tough choices. Without significant reforms, future legislatures will face similar problems. It will take leadership and innovation from the policymakers of our state to solve our fiscal problems and restore trust in state government. A conservative estimate of the savings generated by the fundamental reforms proposed in this paper offers the prospect of immediate change and long-term budget stability. Taken together, these reforms would reduce the cost of state government operations by nearly $1 billion.

Fiscal Realities for the States: Economic Causes and Effects
The economy exerts substantial influence on state and local expenditure growth, because the prices for goods and the wages for employees are to some extent beyond government control. But the local economy also shows large and fundamental effects of state-local policy decisions. Taxes, regulations, and public programs strongly affect the attractiveness of one state versus another as a location for building a business or spending personal income.

The Stewardship Project
To help with the process of building state budgets around a defined set of core governing functions, the Evergreen Freedom Foundation has updated its Stewardship Series. It asks and helps answer these questions: What is the role of government? What are the essential services government must provide to fulfill its purpose? How will we know if government is doing a good job? What should all of this cost? How will budget cuts be properly prioritized?

Reason Foundation’s Annual Privatization Report
Reason Foundation’s Annual Privatization Report finds states are increasingly partnering with the private sector to build roads and reduce traffic jams that have become one of the biggest complaints among taxpayers living in nearly every mid- to large-sized city in the country. The report analyzes the latest developments in privatization and government reform in the areas of transportation, aviation, education, local government services, telecommunications, and eminent domain.

A Decade of TABOR – Ten Years After: Analysis of the Taxpayer’s Bill of Rights
Colorado’s TABOR (Taxpayer’s Bill of Rights) is a constitutional amendment for tax-and-spending limitation. TABOR’s stated mission is to “reasonably restrain most of the growth of government.” It allows only those tax rate increases approved by voters; while fees are not directly restricted, state government spending is limited to the growth of Colorado’s population-plus-inflation in the prior year.

Nothing in this document is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartland Institute’s Web site at http://heartland.org and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute, contact Heartland Legislative Specialist John Nothdurft at 312/377-4000 or [email protected].