Budget ideas get creative

If Washington’s budget problems get too terrible to solve, can’t the state borrow money? Or could it issue bonds against future Lottery earnings or future tobacco-lawsuit payments to the state?

Why not sell off state assets such as land? Or just leave the state budget unbalanced for a year or so – until the economy gets better and money is flowing again?

Gov. Chris Gregoire has suggested selling some state surplus lands, but she and her budget writers see the others as simply “bad ideas.” Going into debt or failing to balance a budget could risk the state’s bond rating and cut off supplies of dollars needed in the future.

But state legislators are dealing with a financial shortfall estimated at between $3.6 billion and $5.5 billion for the two-year budget that starts July 1, and they already are getting edgy about slashing health care, college or public school programs. Adding to their angst, the financial sinkhole might deepen after Thursday’s quarterly revenue forecast, which some fear could come in $2 billion short.

“We talked about how big it could be, but nobody wants to utter the word. Another $1 billion down is a possibility. It’s hard to fathom,” said Rep. Kathy Haigh, a Shelton Democrat who chairs a school-funding committee.

In the meantime, House Ways and Means Chairman Ross Hunter, D-Medina, is developing a budget proposal that goes entirely without tax increases but has some fees.

But he also said Friday that he is expecting revenues to fall between $500 million and $1.5 billion, so he cannot take a blood loyalty oath and swear that no bad ideas will be considered this year.

“The number that matters is 50 (votes). We can all stand here and say we won’t do bad ideas. But cutting kids off health care is a bad idea, too,” Hunter said. “We will build a vote that is as sustainable as I can get the votes for the budget … The plan is to roll out a budget four or five days after the forecast comes out.”

Haigh has talked publicly about one very controversial idea: selling bonds to raise operating cash. The Legislature did that in 2002 by pledging tobacco-settlement dollars the state receives each year to pay the bonds. Hunter doesn’t like going into debt to pay off current or short-term expenses. But Haigh said, “We are trying to find some ways of keeping our higher education system from sinking. It’s a large amount of money (needed), and I don’t see us raising taxes.”

Sen. Majority Leader Lisa Brown, D-Spokane, was the Senate budget writer when lawmakers agreed to pledge 29 percent of the state’s tobacco-lawsuit settlement in exchange for $450 million in cash. That instant money let Democrats lessen cuts she would have made to safety-net programs. Brown isn’t advocating tobacco bonds – or securitization, as bond markets call it – as a solution this time. She said Friday that lawmakers want to produce a balanced budget without gimmicks or borrowing.

But she did say there is interest in raising revenues – perhaps by closing tax exemptions or reducing their size. Gregoire is loudly objecting to use of the tobacco money, just as she did before. She had a personal stake, having negotiated the 46-state settlement with major tobacco firms in 1998. The Democrat also has claimed a bit inaccurately that the tobacco “securitization” didn’t work.

Claims by critics that the state got only 30 cents for every $1 of tobacco earnings it forfeited also are not quite true, according to Kim Herman, who oversees the State Tobacco Settlement Authority.

Herman said actual interest on that debt over 30 years was estimated to cost just 11 to 12 cents per dollar borrowed. He said the estimated $1 billion in overall debt payments are being made with dollars that have lost value over time due to inflation, so the state received far more than the 30 cents that Senate Republican Leader Mike Hewitt and others have cited.

Other budget ideas lawmakers could consider:

  • The 25th month. Hewitt and House Republican Leader Richard DeBolt of Chehalis both fear that Democrats will shy away from making deep enough cuts. They told reporters the majority might consider delaying state payments into the next budget cycle – after July 1, 2013.

DeBolt and Hewitt estimated the “scheme” could postpone $1.7 billion in costs.

  • Cancel worker contracts. Republican Sen. Joseph Zarelli proposed last week to reject collective-bargaining agreements with state employees. He would renegotiate the agreements and ask to raise employees’ share of health care costs to 25 percent, up from the 15 percent Gregoire has negotiated in several public-employee contracts that also include 3 percent reductions in pay and hours worked starting July 1.

Senate Ways and Means Chairman Ed Murray of Seattle has said Zarelli’s Senate Bill 5870 is not going anywhere in his committee, and Brown said a majority in the Senate opposes the idea.

source: www.thenewstribune.com

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