2005 Chair's Report

As we entered 2005, members of the Washington Roundtable were cautiously optimistic about a recovering economy.  After a multi-year recession, the state had made a series of important policy changes aimed at rebuilding the economy.  Improvements included priorities-based budgeting, new investment in transportation (the first in more than a decade) and unemployment insurance reforms enacted in 2003.  Such changes built a fragile yet growing confidence among business leaders that policymakers were willing to push past the status quo and take the steps necessary to improve competitiveness.

As lawmakers returned to Olympia this year, they faced a number of challenges that served as opportunities to enhance the economic recovery or negate progress made in the last two years.  Policymakers stepped forward on one of the most critical issues, making a much-needed investment in statewide transportation.  We applaud them for understanding the urgency of this issue.

While progress on transportation was encouraging, the state lost ground in other areas.

Lawmakers balanced the 2005-07 biennial budget using nearly $500 million in new taxes combined with fund shifts, small cuts, deferral of pension obligations and a draw-down of the reserve.  While the budget avoids general tax increases, it pushes the state’s fiscal problems into the future.  The better approach would have been to take a long-term view of the entire budget (including dedicated accounts), focus on priorities and sustainability and stop borrowing from the future to pay for unsustainable spending today.

The rollback of key components of the 2003 unemployment insurance reforms was also discouraging.  While the fiscal impact on employers will be contained initially, this decision creates significant confusion about our state's commitment to keeping and attracting private sector jobs in Washington. 

Washington’s citizens should be encouraged by the recovering economy and progress on transportation.  However, policymakers must be more disciplined and resolute in protecting the recovery.  We urge lawmakers to rededicate our state to priorities-based budgeting, business climate improvements and continued progress on education reform.  These priorities are critical to employers’ ability to create jobs that lead to improved quality of life for citizens across the state. 

Sincerely,

Colin Moseley, chair

 TRANSPORTATION: Much-needed investment in our state’s future.

After years of negotiation, setbacks and incremental progress, legislators pushed past politics and partisanship this year to approve a significant investment in the state’s transportation system. This package invests in high priority projects across Washington state.

Tax votes are never easy, and the Roundtable applauds lawmakers for understanding the urgency of investing in transportation this year.  Legislation to facilitate funding at the regional level will be the next step toward addressing a severe backlog of safety and mobility projects that hinder productivity and drain our economy.

FISCAL POLICY: Budget balanced for now, but unsustainable.

Lawmakers balanced the 2005-07 biennial budget with a series of small cuts, fund shifts, deferral of pension obligations and nearly $500 million in new taxes.  This solution enabled the Legislature to avoid general tax increases; however, the budget is not sustainable.  The carry-forward (cost of maintaining services into the next biennium) is untenably large and the state is already projecting another major shortfall for the 2007-09 biennium.  The state reserve is also dangerously low and will not be sufficient in the event of a real emergency or economic downturn.

The Roundtable has repeatedly called on lawmakers to make budget sustainability a priority.  Even in a recovering economy, the state cannot rely on economic growth alone to compensate for a structural gap between revenues and spending, particularly when double-digit inflation in health care spending and deferred pension payments already weigh heavily on future budgets.  These issues must be dealt with rather than postponed.  They create uncertainty about whether or not Washington is a stable, well-managed place to do business.

Lawmakers must begin working now to address long-term fiscal challenges. They should return to the Priorities of Government framework as the best means to tie resources to priorities and improve budget sustainability.  Without such parameters, today’s fiscal problems will become tomorrow’s fiscal crises.

MAKING BUSINESS COSTS COMPETITIVE: Several missteps in 2005.

Four years ago, amidst the throws of a national recession and the loss of 100,000 jobs in Washington state, policymakers worked closely with business, labor and local leaders on a plan to improve state competitiveness.  Lawmakers put many of the recommendations of the Washington Competitiveness Council into action, making important changes to the state’s unemployment insurance and regulatory systems, investing in transportation and focusing on workforce development.  Subsequently, the state slowly dug itself out of recession and people began to go back to work. 

Now, even when employment in traditional sectors such as manufacturing hasn’t returned to pre-recession levels, there seems to be a prevailing sense in Olympia that competitiveness is no longer a problem.  A clear demonstration was the decision to rollback key provisions of the 2003 unemployment insurance reforms. Lawmakers also considered proposals to mandate paid family leave and restrict the ability of employers based here to compete globally.  The reality is that such policy changes drive up the cost of doing business here, hinder job creation and risk sending the state back down the slippery slope toward high unemployment and economic stagnation. 

Jobs are fundamental to the livelihood of Washington’s citizens and economy.  Lawmakers must refocus on making this state a cost-competitive environment for job creation. 

PUBLIC EDUCATION: Staying committed to a quality education for all students.

The Legislature upheld the state’s commitment to ensuring a quality education for all students this year by standing firm on key elements of education reform. 

Washington state has been consistent in its education reform efforts for the last 12 years.  The class of 2008 will enter its sophomore year this fall and the biggest challenges, opportunities and anxieties surrounding large-scale reform are upon us.  Lawmakers must stay true to the intent of the 1993 Education Reform Act (HB 1209) and the implementation plan passed in 2004 (HB 2195) and fend off attempts to delay or dilute reforms.  This is critical to ensuring every student receives a quality education.

The skills needed for success in work or postsecondary education exceed what the state requires of high school graduates, even with the new high school graduation requirements.  Better alignment between the K-12 and higher education systems will help articulate for students what will be required of them to succeed in college. 

HIGHER EDUCATION: Reform and accountability needed.

 The 2005-07 biennial budget establishes broad goals for performance agreements between the state and its postsecondary institutions.  However, it does not require results-based agreements that delineate the responsibilities of the state and the institutions or establish quantifiable performance measures.  This level of specificity is needed to move the state toward a reliable and consistent means for funding higher education.  The Roundtable will continue to advocate for mechanisms – such as more specific performance contracts tied to funding – that provide management flexibility for the institutions and drive improved educational opportunity, quality and results.

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