2008 Chair's Report

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Washington state’s economy has been holding up better than the economies of most other states during the current downturn. However, the rate of state economic growth – robust from 2004 to 2007 – has subsided, resulting in much slower state revenue growth.

Lawmakers responded to our state’s looming fiscal troubles by approving a 2008 supplemental budget that leaves a reserve of $850 million. However, the cost of maintaining current services in the future (or bow wave) remains high and forecasters are projecting a deficit in excess of $2 billion for the next biennium. State lawmakers will have to make difficult decisions in order to craft a 2009-11 biennial budget that prioritizes services and avoids increased financial burdens on families and businesses that are already struggling.

Policymakers should be applauded for progress made in other key areas in 2008. Improvements in the K-12 system – particularly efforts to enhance recruitment and retention of math and science teachers – will help foster a highly skilled workforce for the future. Further, lawmakers implemented a statewide policy on transportation tolling and made progress in planning for the SR 520 Bridge Replacement & HOV project. Both decisions are critical to maintaining the efficient infrastructure needed to support a thriving economy.

A missed opportunity in the 2008 legislative session came when, for the second straight year, lawmakers failed to reform transportation governance in the Central Puget Sound region. Voters have continually demonstrated they want more accountability in transportation policy. That will not come without a reformed governance structure.

Strong leadership is clearly needed as we look to the future. A national economic downturn, rising prices for consumer goods and the softening of the housing market are negatively impacting Washington state. There is much work to be done to ensure our state weathers this period of economic uncertainty in a manner that improves the state’s competitive position in the global economy.

Sincerely,

Stephen P. Reynolds

Chair

2008 Roundtable policy objective: enact a supplemental budget that reduces bow wave.

Lawmakers limited new general fund spending in the 2008 supplemental budget to $209 million and left a reserve of $850 million. Nonetheless, the supplemental budget added $608 million to the bow wave heading into the 2009-11 biennium. High bow wave combined with slowing state revenue growth has produced a projected shortfall of more than $2 billion for the next biennium. A new income assistance program, paid family leave and other planned state services that are not yet funded will exacerbate the problem. 

Clearly, state lawmakers will face difficult fiscal decisions in 2009. Those decisions will come at a time when families and employers are increasingly dealing with the impacts of economic downturn and are much less willing or able to bear additional tax burden. In such an environment, it will be incumbent upon lawmakers to prioritize state services and deliver a 2009-11 biennial budget that lives within current means.

2008 Roundtable policy objective: provide every student with the opportunity to pursue post-secondary education and family wage work.

A growing body of research indicates that opportunities for family wage work will be extremely limited for students who do not have some form of education after high school. Recognizing that, Washington’s K-12 system should be designed to prepare all students – regardless of race or income – with the skills needed to begin a post-secondary education program without remediation. This year, Washington state made progress with two key actions:

• Lawmakers enhanced recruiting and retention of math and science teachers. This effort acknowledges the critically important role math and science education plays in increasing future opportunities for our children. It also takes steps to address the alarming shortage of qualified teachers in those subjects.
• Legislators tasked the State Board of Education with reviewing the high school math standards. The State Board has been effective in its work on education standards in the last year. They are well equipped to shepherd the state through the next phase of policy development.

In addition, lawmakers approved a pilot program for performance contracts in higher education. A long-held priority for the Roundtable, performance contracts will move higher education planning to more of a results-based model tied to economic and workforce needs. 

2008 Roundtable policy objective: enact a state transportation planning and investment strategy that reforms governance in the Central Puget Sound region and allows for innovative financing.

The 2008 Legislature made progress on two key elements of state transportation policy:

• Lawmakers approved a general design framework for replacement of the SR 520 Bridge by 2014. The decision to move forward with a six-lane replacement, with the potential to support additional high capacity transit expansion, addresses not only the concerns of today, but also has the potential to address future capacity needs as well.
• Policymakers established a statewide policy regarding tolling on transportation facilities. Opening new user-based revenue streams for transportation will be important given the state’s immense backlog of projects and the declining productivity of the gas tax.

Although progress was made on these two key issues, lawmakers failed to pass legislation to reform transportation governance in the Central Puget Sound region. Two years ago, Governor Gregoire appointed a commission to analyze the regional governance structures in King, Pierce, Snohomish and Kitsap Counties. Concluding that existing governance structures severely inhibit progress in the region, the commission recommended consolidation of multi-modal planning and financing authority in the region under one newly formed body. The legislature’s reluctance to enact this recommendation allows the current dysfunction to continue and hurts the region’s ability to plan and fund high priority, high impact projects.

2008 Roundtable policy objective: do not enact legislation that makes it more difficult for Washington’s employers to compete.

The legislature debated a number of issues this year that had the potential to increase regulation, raise the cost of doing business or otherwise impact the ability of employers to compete. 

• Lawmakers were right to halt negotiations on proposed legislation that would limit the ability of employers to communicate with employees on labor issues. An equitable balance in employer-employee relations must exist if any company operating in Washington state hopes to be competitive.
• The Roundtable was satisfied with the legislature’s final action in response to an effort to require employers to pay workers’ compensation benefits while a claim is on appeal. This measure will be revisited through a study of the workers’ compensation system in the next two years.
• Lawmakers directed the state Department of Ecology to begin taking steps to implement targets to reduce green house gas emissions. This effort must be carefully planned and executed to avoid unintended, negative economic consequences.
• The state unemployment insurance program has been found to be out of compliance with federal standards. The system needs to be revamped next year. This is a major issue and the state must reduce costs to maintain a competitive business climate.