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Dear Friends and Neighbors,

Several days ago, the governor held a news conference to say she is calling lawmakers back to Olympia for a special session beginning Nov. 28. This action is in response to the state quarterly revenue forecast, which was released Sept. 15. The state’s chief economist, Dr. Arun Raha, said unemployment remains high and consumer confidence is at an all-time low. As a result, people are not spending money. What this means is that the state is expected to take in $1.4 billion less than projected in June. As a result, the state budget is back in the red by $1.27 billion – and that shortfall may reach nearly $2 billion by the time the Legislature convenes in special session in November.

We need a sustainable budget that reflects the condition of our economy

Last May, I voted against a two-year state operating budget that spends $32.2 billion. I voted “no” because it spends too much money, is unsustainable, and fails to set the correct spending priorities. When the governor signed the budget into law, a paltry $163 million remained in savings. The Legislature had appropriated the rest for spending. I have been concerned, given our state’s uncertain economy, such a small amount would not be sufficient to cover future dips in upcoming revenue forecasts.

My other concern is that the Legislature has not adjusted state spending to the realities of the economy. Since the financial crisis occurred at the end of 2008, most families and employers have had to face hard realities. They’ve had to sit down and work out their budgets, prioritizing their “needs” from their “wants.” People have lost their jobs. In many cases, two-income families are down to only one income, and in the worst of cases, they have no jobs at all. More than 321,000 people in Washington are unemployed and seeking work. Many workers who have been fortunate enough to keep their jobs have found their hours cut or their wages reduced. And businesses have been forced to make the hard choices that would keep them operating. Those who were reluctant to do so now find themselves out of business. Yet, the Legislature continues to overspend as if our state economy is breezing along. And that is what has led the state budget into deep trouble.

Tax increases – the WRONG response

There are some in the majority party who continue to be in denial of this overspending problem. They are looking at ways to “increase revenue” (that’s Olympia double speak for raising taxes). An Associated Press article on Sept. 27 reported that “Democratic officials have been quietly exploring the logistics of a special election in February that could ask state voters to raise taxes to help fill another budget shortfall.” (See that story here.)

That’s a terrible idea, say most economists who believe tax increases could cost more jobs and push Washington into a deeper recession.

Others say, “close tax loopholes.” That’s another way of raising taxes – eliminating the tax incentives that have brought jobs to Washington state. Here’s what Gov. Chris Gregoire said about this:

“For the alleged tax loophole … there is always some consequence and often times it’s a job that will be lost. Sure, everything is on the table, but I don’t want anybody to think that’s the answer to the problem. Anytime I’ve ever asked for a tax incentive, it’s to create jobs. So you have to ask yourself, are you going to take away that tax incentive and are you willing to live with the consequence of possibly cutting those jobs?”

Last November, voters rejected an income tax initiative, approved a referendum that repealed tax increases on soda, bottled water, and other food products, and said yes to an initiative requiring a two-thirds vote of the Legislature to raise taxes. The message was clear that citizens are strongly against tax increases – especially in this uncertain economy. I think it’s pretty clear that tax increases are the wrong response for Washington state.

A SPENDING problem, not a revenue problem

Here’s the bottom line: We don’t have a revenue problem. We have a SPENDING problem.

Look at the chart at right and you will see incoming revenues are UP over last year. The problem is the Legislature has not adjusted its spending to the realities of the economy, nor has it set priorities of spending in the budget. It continues to OVERSPEND.

I agree with the governor’s decision to call a special session. It costs nearly $44 million a day to operate the state. Every day we delay action means a deeper budget hole and will make it more difficult to respond. The governor chose Nov. 28 because it comes after the next revenue forecast, which is Nov. 17. Nevertheless, we need to have budget writers working NOW to provide a plan to re-adjust spending so that when lawmakers arrive for the special session they can take immediate action. We should prioritize the “needs” from the “wants” in the state budget. In my view, that means funding education, public safety and protection of the state’s most vulnerable population. After that, we should review all non-essential programs to determine where reductions can be made to bring spending in line with revenues.

The real solution: Let’s get Washington working again!

We can cut and patch the budget, but it won’t fix the problem. Tax increas
es won’t fix the problem either. The ultimate solution to the budget crisis is to get Washington working again. When people have jobs, they spend money, which in turn provides the tax revenue to support services in the state budget.

My House Republican colleagues and I have a plan that would eliminate many of the financial and regulatory burdens that stand in the way of private-sector job creation. Click here to read our jobs plan.

Setting spending priorities in the budget, providing policies that incentivize job creation, and standing firm against tax increases are the appropriate ways we should address this budget crisis – both in the coming special session and when the Legislature convenes in regular session Jan. 9.

I welcome your thoughts, comments and suggestions.

Thank you for the honor of allowing me to serve you.


Terry Nealey

State Representative Terry Nealey, 16th Legislative District
404 John L. O'Brien Building | P.O. Box 40600 | Olympia, WA 98504-0600
(360) 786-7828 | Toll-free: (800) 562-6000