Rossi v. Gregoire: Who's right when it comes to the budget?

| THE BELLINGHAM HERALD FILE

• Dino Rossi
  
• Chris Gregoire
  

Rossi helped write a budget in 2003 that froze or cut state spending because he was the Senate's chief budget-writer in the aftermath of the 2001 terrorist attacks, which sent Washington's aircraft-dependent economy into a downward spiral. People stopped flying, airlines postponed airplane orders, the Boeing Co. laid off workers, and the economic fallout spread.

Gregoire became governor in 2005 as the economy was rebounding, giving her more money to spend enough and allowing her to make up for some of the cuts made in the previous two years.

Now, Washington again is facing another big deficit - currently projected to be $3.2 billion. Job growth, economic activity and state government tax collections have slowed so much that it feels like a recession, and could easily tip into one because of the housing and financial crisis on the national stage.

So, let's examine the candidates' claims:

What is the "Rossi" budget?

It's the state operating budget that covered the two years between mid-2003 and mid-2005. It actually started as the budget proposed by then-Gov. Gary Locke, a Democrat. It became the "Rossi" budget after Rossi, who was chairman of the Senate Ways and Means Committee at the time, embraced most of the major pieces.

In December 2002, the state was facing a projected $2.7 billion deficit. Locke's budget would have frozen pay for state workers and teachers for two years, saving about $600 million. It would have saved another $200 million by not giving public schools additional money to reduce class sizes, as called for by voter-approved Initiative 728.

His budget also proposed taking all of the money from the 1-year-old ballot measure that raised cigarette taxes by 60 cents a pack, plus freezing adult enrollment in the state-subsidized Basic Health Plan, which provides health coverage to low-income individuals and families. Combined, those moves saved about $600 million.

Locke closed the rest of the gap with proposals to cut jobs, freeze hiring, postpone pension payments, raid other funds and reduce costs by letting inmates out of prison early, supervising fewer ex-convicts and cutting social programs and higher education funds.

"I praised Gary Locke for not raising taxes," Rossi recalled in an interview last week. "Good job, governor."

By the time Rossi came out with his own budget proposal in April 2003, the budget outlook had worsened and the shortfall had grown to more than $3 billion. So Rossi's budget proposal and the final budget passed by the Legislature increased liquor taxes and put a higher state fee on nursing home residents.

House Democrats and Senate Republicans were in a standoff for months, but the Legislature finally passed the 2003-05 budget in early June, and Locke signed most of it into law.

So who calls it the "Rossi" budget?

The 81,000-member Washington Education Association, the 40,000-member Washington Federation of State Employees and the 27,000-member Service Employees International Union Local 775 call it the Rossi budget with derision and a sneer. Collectively, their members bore about $800 million of the budget-balancing act because of foregone pay raises and higher benefit costs.

Rossi calls it "my" budget when he is trying to make the case that he knows how to write a budget and wipe out a deficit.

Democrats say Rossi balanced the budget on the backs of seniors and children. Is that true?

Partly. He did propose making 40,000 fewer children eligible for medical coverage, but House Democrats wouldn't let him. And the $200-a-month increase in nursing home rates that Rossi supported clearly hit senior citizens.

Those were relatively small parts of the overall budget. As noted above, state and public school workers shouldered much greater shares of cuts in the 2003-05 operating budget.

Gregoire says we don't have a deficit today, but Rossi says we're facing a $3.2 billion deficit. Who's right?

Both of them.

When Gregoire signed the current budget last April, she and her fellow Democrats expected to have almost $850 million in the bank in mid-2009, the end of the budget cycle.

But state tax collections keep falling. The projected surplus in the checking account is now pegged at only $87 million, and tax collections are likely to drop again for the November forecast report.

Gregoire has ordered $290 million in spending cuts, so the state is still on track to have a small surplus in mid-2009, thanks largely to $440 million in a savings account.

The problem lies in the next budget cycle, 2009-2011. Although the state expects tax collections to be $2.5 billion higher in those two years, the current pace of spending would create a shortfall of $3.2 billion.

We aren't in the midst of it yet, but we are "facing" it.

Gregoire's budget director, Victor Moore, said the 2009-11 budget proposal the governor submits to the Legislature in mid-December will be balanced. It will eliminate the projected deficit without raising taxes, the governor said.

Is it true that Rossi left Gregoire with a $2.2 billion deficit when she took office in January 2005?

It wasn't that big, but Rossi certainly had a hand in creating part of the deficit that Gregoire faced when she took office in January 2005. It was about $1.5 billion.

But the blame can be shared by her fellow Democratic leaders in the Legislature, past and present, and her predecessor. Locke, Chopp and Senate Majority Leader Lisa Brown, D-Spokane, presided over a supplemental budget in 2002 that used accounting maneuvers and short-term fixes to cure their own budget problems.

The biggest example was borrowing $450 million and pledging part of Washington's annual payments from the tobacco industry to pay off the debt over 20 to 30 years. That money was used to balance the 2001-03 budget, but it wasn't a permanent fix. The problem cropped up again during the 2003-05 budget cycle.

Incidentally, Rossi opposed that move. So did Gregoire, who was one of the lead state attorneys general who negotiated the nationwide settlement with tobacco companies.

But Rossi also used similar one-time schemes to balance his budget proposal. He skipped state payments into pension funds. Eventually, those $150 million-a-year payments have to be made up, so Rossi and other lawmakers just pushed the catch-up payment into the future. That was part of the deficit Gregoire inherited.

Is it true that Gregoire's "reckless spending" is responsible for the deficit?

Spending is certainly part of the problem. Any deficit is the product of a mismatch between spending and revenue.

Shortly after Gregoire took office, the state's economy had begun to rebound. Housing and construction were particularly strong, as was job growth. More people were working, spending money and paying taxes.

Gregoire spent more because there was more money to spend.

There also was pent-up demand.

More than 250,000 state and school employees had gone two years without cost-of-living raises. Gregoire and the Democratic Legislature not only gave them raises, they gave them extra money to make up for part of the pay freeze for 2003-05. Workers also got back some of the takeaways in the 2003-05 budget. For instance, state employees now pay 12 percent of the cost of their health insurance, down from 16 percent in 2003-05.

The second half of the projected deficit is the return of a sinking economy. The red-hot housing market that was producing so much money for the state and local governments cooled down - way down. State tax collections are growing ever so slightly, but are not expected to decline, as they did in the 2003-05 budget cycle.

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