Inside Olympia

January 8, 2009

The 2009 Legislative session is set to start on next Monday the 12th and legislators are working their way to Olympia, some needing snowplows and some boats. The weather has impacted preparations a bit as members, staff and yes, even lobbyists, have not been able to get to and work at the Capitol as they usually do in the weeks before opening day.

News travels though, in these electronic times, and the old adage that “bad news travels fast” is still true. The deep national recession has hit Washington with a vengeance making budget development not only the center of attention but the driving force behind every other aspect of the coming session. States can’t print money, obviously, so the budgets must be balanced and all the spending fit within expected revenue before they can leave town.

There are three budgets that need to be written, first the “general fund” or “operating” budget, half of which is just education and the other half everything else in general government. Second the “transportation” budget which is for highway construction, maintenance and related services such as the State Patrol, and lastly the “capital” budget which is the building construction and maintenance budget. All three have different sources of revenue, for construction they use long term bonds, the gas tax can only be used for transportation, and general taxes for general government and schools.

The economy has hit all three, and hit them hard. Both sales tax and the B&O fund general government and with people not buying things those are down substantially. High gas prices cause people to drive less and since the gas tax is “per-gallon” the money for highways is down as well. Bonds are a form of borrowing so the capital budget is impacted by the slowdown of lending and the lack of ability to get credit. To put things in perspective the “general fund” budget was about $30 billion for the last two years and there is now about $6 billion less expected over the next two. A twenty percent drop.

The Governor has proposed a balanced “no-new-taxes” budget with deep cuts but even that assumes about a billion dollars of aid from the Federal government and predictably has brought several lawsuits from state employee unions. The legislature isn’t buying off on it yet, but they realize that even huge increases in sin-taxes, a perennial favorite for supposedly painless revenue, will only gain them about $500 million. This session will be the biggest nightmare in my 25 years in Olympia.

Everybody from agencies, state officials, lobbyists and interest groups have been told “don’t ask for anything that costs money, period” and even “what part of ‘no’ don’t you understand?”. Clearly expectations are low and proposals in legislation will be more form than substance. Many will have “delayed effective dates” to push implementation out to a future when the economy comes back on an even keel. Regulations that “shift” costs of “new ideas” out to the private sector will be a constant threat and although increased taxes will be the danger everyone will watch for at least the lack of money will be a good argument against any expensive new programs.

Hang onto your hats, and your wallets.