Washington Roundtable Review of State Fiscal Practices Emphasizes
Need for Sustainable State Budget

SEATTLE – March 31 , 2005 – The Washington Roundtable’s newly released Fiscal Management Performance Review – which analyzes state fiscal performance against specific benchmarks – indicates that Washington’s economy is recovering and decisions in recent years to hold the line on business costs and focus on priority-based budgeting have been effective. The report cautions that budget sustainability is of great concern and lawmakers must take action to protect the economic recovery and avoid deferring costs to the future.

“We urge lawmakers to keep two things top of mind as they work on the 2005-07 budget. First, Washington needs a sustainable budget. The state cannot continue to borrow from the future and expect any result other than major shortfalls in future biennia. Second, this economy is still fragile. New mandates that drive up business costs - such as family leave or rolling back the unemployment insurance reforms – will result in higher business costs that lead to job losses and ultimately fewer tax revenues the state can use to deliver priority services,” said Steve Mullin, Washington Roundtable president.

Key findings in the report include:

• Rising health care and pension costs will result in a large carry-forward heading into the next two biennia. The report concludes there is no sustainable way to fund health care at its current growth rate. 
• Washington’s state and local tax burden is slightly less than the national average, which is a positive sign as it exceeded the national average throughout the 1990s. However, the business tax burden remains high and is not competitive with that of other states. Washington businesses currently shoulder 54 percent of the state and local tax burden.
• State reserve levels are distressingly low and are not sufficient to cover unforeseen emergencies or economic downturn. 

“There are some clear guidelines for getting a sustainable budget that promotes economic recovery: limit the carry-forward, bring tax levels in line with other states, curtail escalating costs in fast growing budget areas and rebuild the reserve. These are by no means small tasks, but they are critical to creating a solid foundation for Washington’s economy and for delivering priority state services over the long-term,” Mullin said.