Time to Permanently Change Budget Debate

by Jason Mercier
Evergreen Freedom Foundation

Jan. 17, 2007

Only a week into the 2007 legislative session and already taxpayers are facing conflicting budget information. On the one hand we hear from Governor Gregoire that Olympia is sitting on nearly a $2 billion surplus and years of pent-up spending priorities to fund. On the other hand fiscal conservatives and the Governor's own budget office project that if adopted, Gregoire's budget would throw the state back into deficits as soon as next biennium.

Who is right?

Unsurprisingly, the answer depends on your worldview. These conflicting worldviews, however, could easily by harmonized if lawmakers would commit to getting the state off the current boom-and-bust budget rollercoaster by putting into practice what they say they're already doing­Priorities of Government (POG) budgeting.

As a refresher, POG requires budgeters to prioritize all potential spending while determining which purchase strategies have the biggest impact on delivering expected performance outcomes. This process creates a government "buy-list" for state purchases. Once this buy-list is created, determining what to purchase is easy. Simply look at the state's revenue forecast and purchase the prioritized activities up to that amount. If the revenue forecast increases or decreases, the buy-line is adjusted accordingly.

This is basically how a family grocery list is built. Everyone in the family has the opportunity to add their priorities to this list. The list is then prioritized and those things that money exists for in the grocery budget are purchased.

The problem with the governor's budget and why it results in future deficit projections is that Gregoire's buy-line is higher than the state's revenue forecast. The state's current revenue forecast is $29.5 billion while the proposed spending is $29.9 billion­a $400 million difference!

It’s this difference that leads to the sustainability problems creating a “bow wave” of deficit spending. A bow wave occurs when expenses of programs purchased in excess of the revenue forecast are carried forward to future years, putting the state in a fiscal hole even before a new budget is considered. To “balance” the budget, the governor plans to utilize one-time available funds.

The Legislature, however, is in good position to come to the rescue. If lawmakers have been doing Priorities of Government budgeting, they too should have a prioritized buy-list available to develop their budget proposal. All lawmakers have to do to correct the governor's over-spending problem is align expenditures with the revenue forecast.

Does this mean that if sustainable, everyone will agree with the budget? No, and nor should they. What is purchased within the revenue forecast is where the real budget debate should be; we shouldn't be debating what the budget framework should look like.

Both the governor and Legislature claim they are using Priorities of Government budgeting. If they are then the words "deficit" and "sustainability" will not apply when describing their budget proposals. To ensure this happens, state officials need to permanently change the budget debate by committing to use POG while budgeting within the state's revenue forecast. By doing this, the budget conversation can focus on what the priorities should be­not whether or not we should spend more than we're taking in.

Jason Mercier is director of the Evergreen Freedom Foundation’s Economic Policy Center. EFF is a non-partisan, public policy watchdog organization, focused on advancing individual liberty, a free-market economy, and limited and responsible government.