It’s been 107 days since the Governor called last December’s special session declaring “timely legislative action is needed to secure the State’s fiscal health and address the shortfall in the 2011-2013 operating budget.”
We are now in day 33 of the 60 day 2012 REGULAR Session without a budget plan being introduced let alone debated. Defending the lack of action on the budget to date lawmakers have said that they need to wait until after next week’s revenue forecast to know what the parameters of the budget will be. Hopefully none of the options actually considered will include “felony” budget gimmicks such as borrowing to balance the budget.
According to the Washington State Wire, however:
“House Democrats are thinking of going into debt to help plug the big $1.5 billion hole in the state budget, a scheme that could eliminate the need for the Legislature’s much-talked-about plan to go the voters for a tax increase.
By bonding against some of the state’s big revenue streams – perhaps tobacco-settlement money and lottery revenue – majority Democrats could raise just as much cash as the governor’s half-billion-dollar proposal for a half-cent increase in the sales tax. Perhaps even more. And not only would they avoid a dicey public vote on a tax increase that might well fail, the plan also could blow all talk of big reforms this session out of the water.
Critics are aghast. They say it’s a bit like paying the grocery bill with a credit card. Eventually the bill comes due, and if the state can’t afford it now, it’s not going to be even harder paying it later. Meanwhile minority Republicans would have little leverage – the thinking is that these bonds would require only a simple majority vote.
The put-it-on-plastic solution has been rumored for days now in the hallways of the statehouse, but it went public Thursday morning when it became a leading topic of discussion at the state Labor Council’s political-endorsement convention in Olympia. Labor Council leaders said revenue bonds might be the best way to get the state over the hump, and they will be asking lawmakers to support them.
‘Ordinarily it is not the sort of thing we would be particularly in favor of, but given the depth and the magnitude of the crisis that we are having now, our folks, and I don’t just mean labor folks, are hurting,’ said Labor Council president Jeff Johnson.
House Majority Leader Pat Sullivan, D-Covington, appeared to endorse the idea in his remarks to the union delegates. ‘In the short term, revenue bonds are part of the [solution] to get us through this crisis right now, but we need progressive revenue options for the future to make sure we are not faced with the same situation in future years,’ he said.”
A similar trial balloon last year resulted in State Treasurer Jim McIntire warning lawmakers to avoid “felony gimmicks” to balance the budget:
“’I really don’t see a good rationale for the Legislature to be trying to sell junk bonds to finance operating activates for the next two years. It’s not a sustainable way to do things,’ [McIntire] said.
In 2002, the Legislature borrowed $450 million through securitization of future payments from the national settlement with tobacco companies. However Gov. Chris Gregoire, who has also criticized the non-traditional budget ideas being considered, has said that scheme will end up costing taxpayers about $1 billion in interest and principal.
‘This biennium, we’d have an extra $100 million to spend on higher education and health care if we hadn’t done (securitization) in 2002,’ the treasurer said.
Lawmakers could, conceivably, borrow further money tied to the state’s tobacco money, or seek a loan based on future revenue from liquor and lottery sales. But McIntire warned that credit rating agencies would frown on that practice.
‘Wall Street is watching,’ McIntire said. ‘To go to some kind of securitization scheme at this point is really kind of a very bad signal to send to the investor community.’”
Two of the big three national credit rating companies are already spooked by the state’s budget outlook resulting in their downgrading the state’s debt rating outlook to “negative” last month.
The last thing we need to have happen is for even more time to be wasted floating and polling “felony” budget gimmicks. It is past time to move forward with a truly balanced and sustainable state budget. The tough choices won’t get any easier with time but that amount of savings lost will only grow with each passing day without a solution.
[Reprinted from the Washington Policy Center blog]