OK Left / Right / Middle who gives a crap. What the hell is the D plan as to common sense? It simply looks like barrow / redirect and let the next guy figure it out. What am I missing here?




OLYMPIA, Feb. 21.—House Democrats announced their new budget strategy Tuesday, and it’s starting to look quite a bit like an old one – a budget gimmick known as the “25th month” that makes old-timers shudder in horror.

To get themselves out of a billion-dollar budget hole, House Democrats are proposing a spending plan that would shunt some $405 million in expenditures to the next budget, in 2013-15. That seems to end all talk of going to voters for a sales tax increase this spring, which until now has been the leading gameplan under consideration by the Legislature.

But the new borrowing plan basically means that the Legislature next year would have $405 million less to spend – and if times are as tight next year as they are today, the 2013 Legislature might have to do the same thing again.

And there’s plenty of reason to think it could happen. Lawmakers did the same thing last year, too. To pay back the last loan, the House budget plan would take out another one – and borrowing would quadruple. In a back-door way, the House budget plan is starting to mirror the notorious ‘70s-vintage budget-balancing strategy that brought the state to the brink of default, forced the state to seek bridge loans from Wall Street, and took a full 16 years to wipe off the books.

The strategy, known as the “25th month,” is sort of a payday loan that only lawmakers can sign for, requiring future Legislatures to pay back the money at the same time that they are scrambling to meet current expenses. If they don’t have the money, they have to do it again, and again, and again. That’s what happened the last time. It should be noted that the House Democrats’ plan doesn’t go quite as far as the gimmick that got the state in hot water back in 1971. It generates about a third of the amount that would be generated by a full-bore 25th-month strategy.

Yet lawmakers certainly seem to be heading in that direction. Already they have approved one bill that borrows from the next budget to make the current one whole, delaying a $49 million payment to school districts for school bus depreciation. Now the House plan brings total borrowing to $454 million.
And it points to an emerging pattern. Projections indicate the state will be in deep trouble next year as well, perhaps running $2 billion short, raising the prospect that lawmakers would not only have to borrow again to cover the new loan but get in even deeper. For now, however, House Ways and Means Chairman Ross Hunter says it seems the best way to balance the state’s recession-battered budget without making deep cuts in state programs. “We thought it was a better set of choices than other choices,” he said.

Added state Rep. Jeannie Darneille, D-Tacoma, “It doesn’t hurt anybody.”



Tactic is at Core of Spending Plan



The Senate is expected to release a budget proposal of its own next week, and because minority Republicans are at the table it likely will look substantially different. Republicans have traditionally taken a dim view of such borrowing strategies. And it could set up a battle over the amount that lawmakers leave in reserve – House Democrats would leave unspent about a half-billion dollars in projected revenue, to provide a cushion against emergencies.

The budget proposal released they released Tuesday relies heavily on the deferred expenses. Lawmakers are scrambling to rewrite the $32 billion budget for 2011-13 that they passed last year, when economic recovery seemed just around the corner. Turned out they were basing it on overly optimistic tax-revenue forecasts. Later forecasts showed the state’s estimates were about $1.8 billion off.

It is difficult to describe the scope of the current problem with precision, because lawmakers closed part of the gap during their December special session, new forecasts have given them more money to play with, and everything depends on how they leave in the bank. But in round numbers, most lawmakers describe the problem in the billion-dollar range.

That means that the House plan solves about 40 percent of the remaining problem by shunting some of the state's expenses to the next biennium, rather than by making cuts.

The House does it by delaying payments that are supposed to be made to school districts toward the end of the current budget period. Some “apportionment” payments to school districts are delayed from June 2013 to July 2013, which places them in the next budget period. Likewise, levy equalization payments for May and June 2013 also would be delayed.

That amounts to $405 million. Add to that the school-bus depreciation bill that has already been signed into law and the total comes to $454 million.
Lawmakers did the same thing in the last budget, shunting about $115 million in school-district payments from 2009-11 to 2011-13. So all told the borrowing under the House plan increases 394 percent.




Better Than Alternative



At a news conference Tuesday, Hunter said the tactic is necessary in order to stave off big cuts and leave an adequate reserve.

“Would I prefer not to do that? Absolutely. But I prefer it over the other set of choices that we are presented with, which otherwise we would have done. Would you completely eliminate large swaths of your safety net and think that actually results in a healthier state, rather than shifting the date of a payment by three or four days? I think we are okay. I think it is the right set of choices.”

Overall, House Democrats would cut about a half-billion dollars from existing state programs – substantially less than the other proposals that have been seen so far.

Unlike the budget proposed by Gov. Christine Gregoire last year, the House Democratic budget preserves the Basic Health Plan, the state’s subsidized health-insurance program for the working poor, and the “Disability Lifeline,” which provides medical assistance and housing vouchers for disabled adults. It rejects another Gregoire proposal for early prisoner release.

And unlike a budget plan released by House Republicans last week, requiring that state employees take 24 unpaid furlough days, this one leaves state-employee compensation intact. Also left intact is the Puget Sound Partnership, the Puget-Sound cleanup agency for which the Republicans had proposed eliminating state funding.

The House plan also would give local governments the ability to raise taxes on their own, with up to a tenth-of-a-cent sales tax increase in the state’s seven largest counties, and two-tenths of a cent elsewhere. The taxes could be imposed by city councils and county commissioners, without a vote of the people.



A Notorious Strategy



The House plan recalls the way lawmakers dealt with a similar budget crisis some 41 years ago, back when Republican Dan Evans was governor.

To prevent huge cuts during the “Boeing Bust,” lawmakers essentially rewrote the calendar and added the revenue from July 1973 to the 1971-73 budget period, which ended on June 30. The 25th-month strategy worked in the short term, but when it came time to write the next budget, lawmakers had to cover 24 months with only 23 months of revenue.

So they borrowed from the future again, and again, and again, to the detriment of the state’s bond rating. While lawmakers said repeatedly that fixing the problem was a top priority, pressing needs kept prompting them to push it off to the future. And when the economy tanked again in 1981, the state found itself in a massive cash-flow problem, and was required to borrow to make ends meet. The same happened again in 1983. It wasn’t until the economy was going gangbusters in 1987 that lawmakers made the final payment to end a problem that had been created 16 years before. At the time, they vowed never again.

By doing the same thing to the tune of $400 million in this budget, lawmakers would be creeping toward the same level. Based on projections released last week by the state Economic and Revenue Forecast Council, the state expects to get $1.35 billion each month during the 2013-15 budget period. So if the school-bus payment is added to the House plan, that represents precisely 33.6 percent of a full 25th month.

The idea drives more fiscally-conservative Republicans crazy. Gary Alexander, House Republican point-man on the budget, said Democrats are venturing into the realm of irresponsibility to save the Basic Health Plan and the Disability Lifeline, “two programs [that] simply no longer fit into the long-term future of our state.

“Frankly, with all due respect to the House Ways and Means chairman, this budget kicks two cans down the road. One, it shifts education apportionment payments into the next biennium, making it the responsibility of future legislatures to deal with. And two, it makes severe reductions to local governments, but then allows local governments to buy back those cuts.
“It looks a little like they are trying to do an end-run around the two-thirds vote requirement for raising taxes at the state level.”

Yep, it's tactical borrowing and kicking the can down the road, so to speak. Tactical because they are betting on the come, that the economy will pick up enough by the end of the biennium and that revenues will offset the shortfall. It's easier than solving problems.

Sg

It is also tactical because they are betting they will be out of office and will not have to deal with whatever problems arise later on.

Leap month

Well a little more ( well a lot ) on this. I was not aware of the history of this concept and the mess it caused before. Interesting that it was a Gov Evans legacy ( so to speak ) and now the Demo's charge right out there with the same thing.



OLYMPIA, Feb. 23.—A new House spending plan that gobbles up a big chunk of the next budget to balance the current one flabbergasts those who remember the last time the Legislature did it. Among those who lived through that crisis, the very suggestion seems almost to bring on a case of post-traumatic stress disorder.

But memories are short in the state Legislature, and now House Democrats are contemplating doing it again.

The House budget proposal, released Tuesday by Ways and Means chairman Ross Hunter, is built on the idea that the state would snatch more than $400 million from next year’s tax revenues to help plug a billion-dollar hole in the current state budget. That would save some of the Legislature’s highest profile programs, among them the Basic Health Plan and the “Disability Lifeline,” which provides housing vouchers and medical assistance for disabled adults.

Here’s the trouble. It is the same basic idea as a budgeting strategy that got the state in deep trouble 41 years ago. The so-called “25th month” put the state in a cash crunch for the next 16 years, brought the state to the brink of default and forced taxpayers to spend millions. And those were just the most obvious effects.

Former Senate Majority Leader Dan McDonald, the onetime Republican budget-writer who spent years trying to fix the problem the last time, says he is astounded anyone would think it is a good idea to do it again. “Everybody’s got their problems, but you know, Hunter is a bright guy, and I am just surprised that he was willing to do this,” he said.

Yet it has been 25 years since lawmakers declared “never again.” Continents have shifted, empires have risen and fallen, and four entire Star Trek series have run their course. Only two of the Legislature’s 147 members were in office when the fix was made, and none remain from the time when it started. And so it is left to the elders to remind a new generation what a horrible long-term mess was created by a decision that seemed like such a good idea at the time.



New Strategy Backs Into 25th Month



The House Democrats’ budget strategy is a little different than the one implemented by Republican Gov. Dan Evans and the 1971 Legislature. But the effect is the same – it’s still a multi-million dollar payday loan. Then as now, lawmakers were facing a big shortfall – this one brought on by the “Boeing Bust.” To prevent deep cuts to state programs, Evans suggested that the Legislature basically reinvent the calendar. It tacked the revenue from July 1973 onto the 1971-73 budget period, which ended June 30.

With 25 months of tax revenue, the 1971 Legislature did just fine. But that left the 1973 Legislature to cover 24 months with 23 months of revenue. So it did the same thing again with July 1975. And so on, and so on. Took years to clean it up.

The House Democrats’ plan this year presents the same scenario, but it sort of backs into it. Last year lawmakers balanced the 2009-11 budget by delaying $115 million in state payments to school districts by a single day. That kicked the expense into 2011-13.

What it meant was that this year’s Legislature had $115 million less to spend. The problem certainly didn’t go away – money is still short. So under the House plan, the state would take out a new loan to cover the old one and get in deeper.

Already lawmakers have passed a bill that delays a $49 million school-bus depreciation payment to school districts until the next budget. Hunter’s plan expands the borrowing dramatically. He would delay another $405 million in school district payments that are scheduled to be made in May and June 2013.

That’s a total $454 million – one-third of the amount that would be raised by a true 25th-month strategy. In 2013-15, the state expects to take in $1.35 billion a month. So you might say Hunter’s plan represents only 10 days of a full 25th month.

But here’s the thing. Next time around, the state won’t have the money to pay off that loan, either. Another big shortfall is coming, especially if lawmakers don’t make big cuts now. The Office of Financial Management puts next year’s shortfall at $900 million, Senate Ways and Means staff figures it at $2 billion, and the difference is simply that the legislative estimate includes a few things that OFM leaves out. Shortfalls are expected to increase as time goes on, because spending plans remain out of whack with tax revenue.

What it means is that not only would the state have to take out another loan next year to cover this one, odds are the amount would keep getting larger. So this could be the start of something big.

“What the House budget shows is that the momentum right now is to paper over our budget problem and to get us out of Olympia by March 8,” says state Sen. Jim Kastama, D-Puyallup. “However, there still remains the issue in the next session, when we come back with a $2 billion shortfall from day one. Everyone recognizes this. So this is nothing more than a Band-Aid.”

Kastama is pushing a constitutional amendment that would require the Legislature to adopt a balanced budget, without using tricks. It has passed the Senate, but given what the House has proposed, final approval may be in doubt.



Lesson From History



McDonald can’t help but groan when he hears what the Legislature is contemplating. He’s been out of the picture since he stepped down in 2002, but during a 24-year career, much of it spent as a lead budget-writer for House and Senate Republicans, ending the 25th month was one of his biggest crusades.

After lawmakers took out that loan in 1971, subsequent legislatures kept finding new things that required spending, and they couldn’t muster the discipline to pay it off. “Nobody ever thinks they have enough money,” McDonald said. “So they kept kicking the can down the road.”

Because of it, the next time the economy tanked, in 1981, the state found itself in a terrible cash-flow crunch. It didn’t have enough money to pay its bills. At the brink of default, the governor’s office and lawmakers rushed to Wall Street to ask for a loan. “I remember going back as part of a bipartisan group to New York City and Wall Street and say a mea culpa, and ask them to be kind to us,” McDonald said. “It wasn’t a fun experience.”

The state got its $300 million loan, all right. But bond houses, which had been chiding the state for its budgeting practices for years, decided it was all just too much, and slashed the state’s bond rating. Taxpayers paid millions in higher interest rates as a result.

The state had to do the same thing again in 1983.



Frustrated a Governor’s Plans



Those were the obvious results. But there was another worth noting. By the mid-eighties, lawmakers had a bellyful, and they started taking steps to pay the darn thing off, making partial payments in each budget. In 1987, they bought off the final 10 days.

It might be argued that the final payment came at a cost to a Democratic governor. In 1987, Gov. Booth Gardner was proposing a half-billion-dollar expansion of the sales tax to professional services, to pay for social-service programs and a teacher pay raise – the so-called “Children’s Initiative.” It finally got shot down, just barely, when three Senate Democrats bolted and voted with minority Republicans. That allowed McDonald to write the budget.

The tax was the problem. But if the goal really was to provide money for children, and not just to expand the tax base, the millions of dollars that were spent that year to pay off the loan could have paid for at least some of those programs. Instead, it went to plug a hole that was then 16 years old.

“1981-82 was really a tough period of time,” McDonald says. “Maybe the toughest, maybe even tougher than it is now, and it was exacerbated by the fact that you had this 25th month hanging around your neck, and that’s why it was so important to us to eliminate it when we could. It’s an interesting sidelight, we weren’t in the majority in 1987 – we wrote the budget with a coalition of people, [current Lt. Gov.] Brad Owen being one of them, all 24 Republicans and three Democrats, and we still made that a priority, and we got it passed.”



Would Violate Standard



McDonald isn’t the only one who remembers the mess the last time. State Rep. Gary Alexander, R-Olympia, now the lead House Republican budget-writer, was first elected in 1996, long after the problem was solved. But he has spent his career in state-government budgeting, starting at the Office of Financial Management in 1973. “Dan Evans was a great governor, but I can tell you that a part of his legacy was the 25th month,” he says. “The media got more and more onto it every year, that we had failed to solve the problem. It got more and more attention – and I think the same issue will happen here.”

Alexander notes that the national Government Finance Officers’ Association is considering a new standard to measure the financial health of state and local governments. Among the criteria that would be used to measure the sustainability of a budget would be whether obligations are being pushed out to the future. Hunter’s plan would flunk, he says.

“We were told the 25th month would never happen again. We were told [last year’s delayed payment] was just a one-time deal, it would never happen again. So I guess the question now is what’s never?”



Now Up to Senate



Now it’s all up to the majority Senate Democrats, who will release a budget proposal of their own next week. Until then it is unclear whether Hunter’s idea will prevail. There’s a bit of wiggle room in his plan – he leaves $504 million in projected revenue unspent, in case of emergency.

If you leave a reserve that’s bigger than the loan, that might be good enough, says Senate Majority Leader Lisa Brown, D-Spokane. Another idea under consideration would be to permanently shift the dates of those school-district payments from June to July. “If you leave enough in the ending fund balance to make the payment, or if you make it a permanent shift of when you make the payment, it’s really just a one-time cash infusion,” she says.

There’s a problem with that, of course. Those ending fund balances have proven important over the last three years – the sluggish economy and lagging tax revenue have wiped out every dollar the Legislature has set aside, and then some. So it’s a gamble. And if the Legislature permanently changes the dates when payments are made, it might not technically be a “gimmick” anymore, but the effect will still be the same – the Legislature will be kicking big current expenses to the next budget, in perpetuity.

McDonald says it’s really a choice between reforms and cuts now and a budget trick that became one of the biggest nightmares the state has faced.
“They are going to have to make their decisions,” he says. “I am not there anymore, and I don’t envy their position. But it took us a very long time, 16 years, to undo it, and it was an albatross around our neck the entire time. Be careful.”

MORE as this is interesting as it will have the potential of dodging taxes or like years ago sending us down the crapper. One way or another it will effect all of us.

By Erik Smith

Staff writer/ Washington State Wire



OLYMPIA, Feb. 25.—A Democrat-controlled House committee passed a budget bill Saturday that at the very least promises a roiling debate on the House floor, perhaps as soon as Monday, because of a budget-balancing trick that shunts a big portion of this year’s billion-dollar shortfall onto next year’s Legislature.

But it appears the real battle is going to come in the Senate, where Ways and Means Chairman Ed Murray, D-Seattle, has finally confirmed what legislative leaders have been hinting at for days. The Senate Democrats are going to be writing a budget of their own, without help from the minority Republicans. And that means that the faction of middle-of-the-road Democrats in the Senate who call themselves the Roadkill Caucus are going to play the decisive role in determining how this year’s budget debate plays out. They have the votes to swing things either way.

Murray, speaking to a reporter for the News Tribune in Tacoma, said Friday that Republicans and Democrats are just too far apart. He said Republicans haven’t been interested in the Democratic plan that he will be unveiling Tuesday, and the Democrats haven’t been much interested in the plan the Republicans have presented. “I’m not sure they have the votes for their own proposal,” he said.

And so ends a year of bipartisanship that last time around resulted in a budget-cutting scheme that passed with votes from both sides – a necessity last year because the majority Democrats could not unite. Will they stand together this time? Don’t be so sure. Prominent moderate Democrats in the Senate have been hinting that they will withhold votes on the budget unless the Legislature makes an effort this year toward bringing state spending into line with tax revenues. But there also are signs that more liberal members of their caucus are fighting back in a way they didn’t last session.



Showdown Possible in Senate



What happened is that pressure for big reforms evaporated over the last week when a pair of positive forecasts, on tax revenue and caseloads, dumped $400 million into the Legislature’s lap. Suddenly it became possible for majority Democrats to write a budget without counting on a tax increase. Until that point the general gameplan was that voters would seek voter approval for the governor’s proposal, a half-billion-dollar sales tax increase, or something like it.

In return for their votes, moderate Senate Democrats were demanding that the Legislature make controversial big-picture decisions to reduce state spending in future years. In that they had support from Senate Republicans.

But what a difference $400 million makes! Not only did House Ways and Means Chairman Ross Hunter, D-Medina, ditch the idea of a tax increase when he released his budget proposal last week, he went the opposite direction. His budget avoids some tough cuts by shunting $405 million in current state expenses into the next budget.

No telling what the Senate Democratic leaders will propose. But they are considering something like it, by making the shift permanent. That leaves it to the four or perhaps six Senate Democrats who sit in the middle to decide whether they will buck their caucus, demand that Republicans remain at the table to negotiate a bipartisan budget, and vote no until that happens.

“I think at this point everything is in question regarding that,” state Sen. Jim Kastama, D-Puyallup, said last week. Kastama, a prominent member of the Roadkill faction, said that the House budget proposal threw all talk of long-term reform out the window. “I think at one time the idea was that there would be balance if there was revenue. I think that again they forgot the overall focus was on sustainability.”



Kick the Can



The possible standoff over the budget was set in motion Saturday as the House Ways and Means Committee approved its version of the budget, House Bill 2129, on a party-line vote of 16-11. The bill delays payments to school districts for “apportionment,” which are the primary means by which the state funds K-12 programs, and for levy equalization payments to school districts. Most of that money would be held up for a single day, but by making the payment on July 1, 2013, the first day of the next budget, the House Democrats would make the shortage of money a problem for next year’s Legislature to deal with. Next year's legislature isn't expected to have the money, either.

Critics say it reeks of irresponsibility.
“I was a boy when I learned how to play a game called ‘kick the can,’ ” said state Rep. Gary Alexander, R-Olympia. “But I didn’t expect to be playing it as an adult in the state Legislature. That’s what this budget does – kick the can.”

House Ways and Means Chairman Ross Hunter, D-Medina, said it was the best way to balance the state’s needs against its cash shortage. Lawmakers are rewriting the 2011-13 budget they passed last year, when they relied on overly optimistic forecasts for tax revenue.

“This is a reasonable way to move forward in difficult economic times,” he said. “We are responding to historic inter-biennial declines in revenue. We were fortunate in the last week to get some good economic news, but this is still a budget that makes significant reductions in areas we care about.”

Perhaps the most important element of the debate is that the budget-balancing tactic – essentially a payday loan that the next Legislature must pay – allows Democrats to preserve the Basic Health Plan, the state’s subsidized health insurance program for the working poor, and the “Disability Lifeline,” which provides housing vouchers and medical assistance for unemployable adults.

Referring to the Basic Health Plan, Hunter said, “Making a decision that 50,000 people would no longer have access to affordable health care is a difficult decision for me to make. We have tried very hard to structure a budget to not make that decision.”

Republicans say it’s a decision that ought to be made. They also would place a greater priority on education, public safety and programs for the elderly and disabled, and they would reduce spending on environmental programs. As is traditional, they offered a series of amendments in committee that enacted their proposals, and as expected, the Democrats voted every one of them down. In the House, Republicans are at a 56-42 disadvantage, and have little opportunity for leverage.



Breakdown in the Backroom



Things are different in the Senate, where Democrats have a more modest 27-22 majority. Until this point, Republicans and Democrats in the Senate have been talking about working together this year as they did last year. But there have been rumblings for the last couple of weeks that all is not peaceful, and that more liberal members aren’t going to let the Roadkillers have their way without a fight.

An internal debate among Senate Democrats over education reform measures two weeks ago provoked a remarkable standoff that shut down a Senate committee and resulted in a stormy closed-door caucus meeting. Roadkillers were hoping to pass a charter-school and teacher-evaluation bills that were favored by business and education reform groups, but are opposed by the state’s largest teachers’ union, the Washington Education Association. What eventually passed the Senate was a weakened compromise on teacher evaluations; charter schools appear to be a dead issue.

Senate Majority Leader Lisa Brown, D-Spokane, chose interesting words two weeks ago as she insisted Senate Democrats will pursue reform measures this session.

“I know that it tends to get framed as if our arms are being twisted by four members of our caucus ...[but] the reform agenda started before Roadkill and it will go on after Roadkill.”

Yet as recently as Thursday Brown was saying that Democrats were continuing to negotiate a budget with Republicans: “As far as I know, we are still talking, so we will see how that pans out next week.”

The signal from Murray on the budget the following day is the strongest indication yet that the “middle way” has broken down.



What Was the Fight About?



At this point, Republicans and Democrats in the Senate haven’t revealed competing budget proposals, and so it is difficult to say precisely where their negotiations failed. But in a meeting with reporters last week, Senate Minority Leader Mike Hewitt said the Republicans were insisting on a big reserve – some $800 million – and no budget gimmicks.
Hewitt said Republicans are counting on the Roadkillers to remain firm. “This is the way we are working over here and trying to get a responsible budget out of here,” he said.