For many years I have been sounding the alarm that our state budget is not sustainable. State govenment spending increased 33 percent from 2004 to 2008; 2-1/2 times more than collected in revenue. It’s easy to see why that doesn’t pencil out.
After we began the legislative session in January, Senate Republicans, along with a group of moderate Democrats, came together to form a coalition of legislators pushing for major, long-lasting reforms that will make our state budget more sustainable over the long term. We were advocating for “reforms before revenue” – in other words, look to long-term structural reforms before even looking to new revenue sources.
Here are some of the reforms we were able to get passed this year:
Taking a longer view on state budgets. Today state government balances its budget based on a two-year model. One of the reform passed this year will require budget writers to look ahead four years rather than two. This change, the first of its kind in the nation, will provide more stability, predictability and transparency in state budgeting. It will also prevent future Legislatures from adopting budgeting gimmicks that create built-in debt, such as pushing today’s payments into the next biennium or adopting “feel-good” legislation without identifying how to pay for it.
Addressing our long-term pension liabilities. State employee pensions are one of state government’s biggest cost drivers. This year we passed legislation that will make changes to pensions for future state employees hired after May 2013. This change will not affect any current state employees. Under the measure, future employees will still be able to retire early after 30 years of service, but at a reduced benefit of 5 percent per year before age 65. This reform will save public employers and taxpayers $1.3 billion over the next 25 years and bring state employee retirement options closer to those offered by many private-sector employers. The reform also reduces the level of assumed rate of return over time, providing greater certainty that pension funding assumptions will match actual investment returns.
Reducing our state’s debt. Like many people, I am concerned about the issue of growing government debt at the state and national levels. According to national credit-rating agency Moody’s, Washington’s debt is the eighth-highest per capita in the nation. One of the major reforms passed this year is a constitutional amendment that will reduce our state’s debt limit from 9 to 8 percent over time. Because this is a constitutional amendment, it will go before voters in November.
Easing future financial liability by eliminating unfunded laws. In 2000 voters passed Initiative 728, related to class sizes. Although the Legislature has not funded the measure in the past several budgets, it remains on the books as a liability on our balance sheet. The Legislature passed a bipartisan measure this year that repeals the requirement to provide funding for this initiative. It also creates a task force to begin immediately working on how to address the recent state Supreme Court ruling on basic-education funding.
Working toward more affordable health insurance coverage for school employees. Many school employees have told me that their health insurance premiums have become unaffordable. And no wonder – some of them are paying up to $1,500 a month for coverage. Compare that with state employees, who pay at most just under $300 a month. There was a proposal before the Legislature this year to bring those costs down by moving the state’s 295 school districts into an insurance pool, like the one we have for other state employees. The measure as passed did not create the pool, but it did do something very significant: require transparency around how those health care dollars are being spent. This new transparency will help us make more informed decisions about the financial stability of the system as a whole and help us find ways to make premiums more affordable for school employees.
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