Balancing act

The Senate's proposed budget is scary—but consider the alternatives.

WHEN THE 2001 legislative session began, leaders of both parties predicted a bruising, drawn-out battle to come up with a balanced budget, as required by state law.

So far, it hasn't played out that way. There has been plenty of partisan contention over peripheral issues, from siting a power plant at Sumas to funding a second suspension bridge for Tacoma. But the budget barely registered on the screen until the last days of March, when the Senate Ways and Means Committee unveiled a $22.8 billion operating budget for the biennium, which the full chamber passed virtually unamended and handed off to the House.

Ways and Means is stacked (12-9) in favor of Democrats, but the Dems hold only a one-seat lead on the floor, which makes the budget's passage by a lopsided 30-17 pretty remarkable. Even more remarkable is the calm reaction to its passage from nearly all parties. Humanitarian agencies praised it, despite its failure to restore many of the draconian cuts to health-and-human-services programs in Gov. Gary Locke's budget draft. Gov. Locke praised it, despite cuts for his pet education programs.

Most remarkable of all is the temperate reaction by Republicans in both houses. Ranking Ways and Means Republican Dino Rossi of suburban King County issued some pro forma warnings of fiscal irresponsibility and higher taxes when pressed by reporters but issued no formal statement at all.

Ditto in the House; Appropriations Committee co-chair Barry Sehlin of Oak Harbor responded to reporters' questions, but Republican leader Clyde Ballard, a hair-trigger hand with a partisan press release, has maintained strict radio silence.

The only probing questions advanced so far about the Senate budget have come from outside the Legislature, from voices at two extremes of the political spectrum. What's disturbing is that though the ideologies differ, the message is the same.

The very day the Senate passed its budget, the right-wing Evergreen Freedom Foundation called it "unsustainable," and made a good case for its adjective of choice. The predicated "balance" in the Senate budget is based on two things: very shaky revenue forecasts and very creative accounting games.

The forecast, from the office of state economist Chang Mook Sohn, predicts that the state will collect revenues of $22.2 billion over the biennium. The accounting wizardry is devoted to covering the $600 million (or $1.1 billion, if you include initiative-mandated raises for teachers) gap.

Cash from the successful suit against the tobacco companies accounts for about 20 percent of the shortfall; drawing down the state's "rainy-day" cash reserve by $350 million gets us within $250 million of balance. But that $250 million is produced by tinkering with the funding of one of the state's pension funds: the Law Enforcement Officers and Firefighters Fund (LEOFF).

LEOFF prospered during the bull markets of the 1990s. By some deft twitches of administrative law, its "surplus assets" (monies not required to cover the state's future pension obligations) can be made available for a one-time patch for the general fund. To keep police and fire departments quiet while the magic is worked, the plan involves presenting each beneficiary their own chunk of the boodle: a chunk that could amount to a cool $10,000 apiece when the last number's crunched.

It sounds like a win-win situation, till you look at the small print. Christopher Haugen, a budget analyst at the UW's Daniel Evans School of Public Affairs, has looked, and doesn't like what he sees. "The last good figures we have for the value of LEOFF date back to December 31, 1999. Since then, the stock market has tanked, and we have no way of knowing how much of a hit LEOFF has taken. Now, LEOFF is just one of three pension funds the state is responsible for funding; and the two others, TRS 1 [teachers] and PERS 1 [other public employees] are not only much larger, they were underfunded at the end of '99 to the tune of a billion and a half, which is half a billion more than LEOFF's supposed surplus." Question: Is it responsible accounting to move lucky money from a pension fund to the general fund when other pension funds are deep in the hole?

Haugen also has problems with the revenue estimate on which the Senate budget's balance is based. "The state economist's office ran an economic projection two weeks before it ran the revenue projection. The economic forecast was much more pessimistic. I don't know Chang Mook Sohn's reasons for ignoring his own office's economic projection when he made his rosy revenue forecast; I hope he's got more to go on than a hunch."

We all had better hope so. The last time Sohn took a flyer on a hunch, back in 1993, he erred wildly in the other direction, projecting far less income than the state ended up receiving. The result: a draconian state budget, which led to large surpluses, which encouraged tax cuts, which, along with economically irresponsible wild-ass initiatives like 601, 698, and 728, inexorably led to the current state fiscal crisis.

Despite the compunction of left and right, there's a fair chance that the Senate budget will stand up to most of what House conservatives can throw at it. It's a kind of balance-of-terror budget, stuffed with painful cuts but larded with small concessions. The overall message to anyone who might try to rock the boat is: Don't. You might gain a little if you do; you sure won't gain a lot, and someone else might get the little you've been offered if you try.

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