In Our View: Budget Tunnel Is Still Dark

New economic forecast shows encouraging signs; more reforms needed

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Any light that Washingtonians detect at the end of the state government’s budget tunnel should be seen only as a fickle flicker. A decline in the worsening of economic times does not constitute a recovery, and legislators now must maintain a steady devotion to reforms — certainly before any new revenue — that can advance the state through the recession tunnel and toward a sustainable light.

Thursday morning, the state’s Economic and Revenue Forecast Council projected about $96 million in extra revenue and about $340 million in state services savings as more Washingtonians rely on federal services rather than those provided by the state.

This means the earlier projected budget deficit of about $2 billion is now about $1.1 billion, which includes about $600 million that legislators properly believe should be stored as reserves, protection against any future economic downturns.

Granted, there are many encouraging signs in the state’s economy. Job growth has been healthier than expected, thanks to large gains in Boeing manufacturing (11,500 jobs have been created in the aerospace industry since May 2010) and in the software industry. There have been advances in exports.

Yes, the state budget is in much better shape than it was last fall when the Legislature was staring at a projected deficit almost twice as big as the current challenge. Legislators trimmed about $478 million during a special session late last year, and Thursday’s brighter economic forecast is leading many observers in Olympia to predict an on-time adjournment in three weeks of the current legislative session. And as Gov. Chris Gregoire pointed out, since late 2007, 27 of 32 forecasts through three biennia have been negative. So we’ll take Thursday’s positive news for precisely what it is.

But let’s hold off on the parade and keep the confetti bags zipped a little longer. Steve Lerch, the state’s interim chief economist, said there is “still lots of uncertainty out there. Growth is slow. Unemployment is, unfortunately, very high.”

Gregoire said, “We’re not out of the woods yet, and solving the budget problem remains a significant and daunting task.” One member of the Economic and Revenue Forecast Council, state Rep. Ed Orcutt, R-Kalama, says the state is only “treading water” in its efforts to stabilize the budget. Orcutt points to “several bills still on the table that would bring more stability and certainty to employers … .”

He’s right, and we understand the Legislature’s collective instinct to keep the budget’s head above water. More reforms are the best strategy, not only for the short term but for creating a lasting, sustainable budget. And one of the most powerful reforms is being promoted by Senate Republican budget leader Joseph Zarelli of Ridgefield. His Senate Bill 6378 would impact no current state employees (we wish it would, but remember, this is politics and Zarelli understands reality). Under Zarelli’s plan, future teachers, classified school staff, some law enforcement staff and local and state government employees from the state’s “Plan 2” retirement plan would be enrolled in a hybrid plan, with certain elements resembling a 401(k) plan.

This would mean a gradual conversion from a defined benefits retirement plan to a defined contributions program, the retirement savings device that’s common in the private sector. State worker unions and many Democrats oppose Zarelli’s bill, but it’s the kind of common-sense reform that can help turn a flicker into a flame, and lead us out of this economic tunnel.