By the end of last week, many Americans had set aside for weeks or months — or longer — what used to be the routine task of monitoring their retirement investments. By Monday afternoon, many more made that same resolution after the Dow plunged more than 600 points, its worst day in three years. With stocks falling 15 percent in the past two weeks, most folks simply can no longer bear to look.
However, an out-of-sight, out-of-mind philosophy won’t work for government planners. That’s why it was encouraging to see Gov. Chris Gregoire’s aggressive strategy against the economic crisis manifest itself again just 20 minutes after the final bell sounded Monday afternoon on Wall Street.
Her memo to all state employees likely was precipitated by last week’s tailspin on Wall Street, but when it was dispatched at 1:20 p.m., the timing seemed painfully precise. Her directive to state budget Director Marty Brown was clear, “that all state agencies prepare a plan in the event that state revenues continue to decline.” Each state agency must submit plans for budget reductions of as much as to 10 percent, in 5 percent increments.
We suspect the wailing from the most provincial agency advocates will be loud and long. After all, this year, legislators already have cut state spending by more than $4 billion. But Gregoire’s mandate is necessary. In fact, as a boldly frank planner, she really had no other choice.
This doesn’t mean the budget cuts will happen; it just means the state will be ready if and when the reductions cannot be avoided. And Gregoire is not afraid to push her aggressive strategy even further. According to a story by The Seattle Times’ Jim Brunner, Gregoire “will decide whether to call for a special session after the next revenue forecast in mid-September.”
The state’s economic news is not all gloomy; it just seems that way. Gregoire wrote in the memo: “For every two steps forward in the recovery, it seems we are taking one step back. Though our revenue collections have continued to show slight improvement this biennium, our near-term outlook has weakened.” In other words, a recovery still can be expected, but because of days such as Monday and weeks such as last week, relief is more distant over the horizon.
In a separate announcement, Brown, the budget director, listed three exceptions for further reductions in spending: basic education, statewide pensions and debt service. The first is rooted in the state constitution, and the third is based on common-sense economic principles. But invoking the second exception — statewide pensions — illustrates part of what got the state of Washington to such a desperate financial condition. As long as we make promises to state workers that far exceed the expectations of private-sector workers — and as long as two-thirds or more of the state budget is considered “untouchable” — then the pain will remain predictable for state agencies and taxpayers alike.
Gregoire, who has announced she will not run for re-election next year, and other state leaders are making deft moves that could pay huge dividends far down the road. She cites a “focus on a smaller and more efficient state government.” She also noted that “we are prepared to get through this by making smart decisions early on.” If and when a recovery accelerates, a more-efficient state government can help Washington families and businesses reach unprecedented prosperity. That’s too far in the future to warrant more than a sentence or two. For now, prepare the belts for additional tightening.