Democrats confirm I-601 strategy - Budget gimmicks used to raise spending limit

by Jason Mercier for
Evergreen Freedom Foundation

3/25/05

OLYMPIA—At a March 24 House Appropriations hearing on Governor Gregoire's 2005 "emergency" supplemental budget, Rep. Eileen Cody (D) acknowledged that Democrats were pursuing budget gimmicks in order to artificially increase the voter-approved I-601 spending limit.

In Gregoire's $219 million 2005 "emergency" supplemental budget, the governor transfers $45 million from the general fund to the Health Services Account. But Gregoire then plans to transfer $86 million from the Health Services Account to the general fund in her 2005-07 budget. This budget shell game artificially increases the I-601 spending limit. This means that the people will not be able to vote on this increase as required under the law.

Rep. Barbara Bailey (R) offered an amendment to the supplemental budget to remove the $45 million transfer to the Health Services Account. This amendment was opposed by Rep. Cody who stated the transfer was needed in order to increase the I-601 spending limit. Rep. Bailey's amendment failed.

"Democrats are free to raise taxes and spend at any level they want, but under the law, the voters are to be given the opportunity to approve expenditures in excess of the I-601 spending limit," said Jason Mercier, budget analyst for the Evergreen Freedom Foundation. "By playing budget games the Democrats are denying the people their right to reaffirm that the budget actually reflects their priorities."

If the Democrats were to not artificially increase the voter-approved I-601 spending limit, the governor's $203 million tax increase to fund I-728 and I-732 would require a vote of the people for approval. This is due to the fact the expenditures and tax increases would exceed the I-601 limit.

"Rather than resort to budget gimmicks to thwart the will of the people, Gregoire should refer the full costs of the two 'free' education initiatives to a vote of the people with a corresponding revenue source," said Mercier.

Additional Information
(Audio link provided courtesy of TVW: starts at 14:22)

Below is a partial transcript from the March 24 House Appropriations hearing on Rep. Bailey's amendment to remove the $45 million transfer to the Health Services Account.

Rep. Barbara Bailey (R): "When we looked at the supplemental budget in its entirety and realized that there was $45 million being transferred into the Health Savings Account without explanation, I just feel like that in this time when we really need to be prudent that perhaps putting $45 million from general fund over into the Health Savings Account is not necessary and would urge everyone to support this [amendment to remove transfer]. It certainly brings us with a little more in reserve in the general fund."

Rep. Eileen Cody (D): "The $45 million appropriation from the general fund to the Health Services Account is necessary in order to live within the very narrow constraints of our state expenditure limit. The fiscal growth factor for the next biennium is 2.82 percent in the first year and 3.09 percent in the second year and, as much as I'd like to say I thought we'd hold health care costs to that, I don't think we will be. So until the state has a more meaningful expenditure limit that might be able to accommodate the growth of vital state programs, this move is completely legal under 601. I urge defeat of the amendment."

Rep. Gary Alexander (R): "I would seriously ask us to support this amendment. You know, one of the things that was really bothersome is, I've looked through three documents that have the $45 million transfer from the general fund to the Health Services Account. Not one of those documents had an explanation to what the reason was why we were doing this. I thought maybe the issue was one of the fact there was not sufficient money in the Health Services Account to make us through the end of the biennium. That is not the case. There is sufficient dollars coming into the Health Services Account to pay all the responsibilities and have a surplus at the end of the biennium before you make this transfer. I would remind everybody if this is an issue that basically is required to support the Health Services Account on an ongoing basis, I'm going to be looking very, very closely to see if we have any transfers from the Health Services Account back to the general fund in 2005-07. Because if there is, then this is only a game playing situation and has no basis for what the supplemental budget item is. I would urge your support [of the amendment to remove transfer]."

Contact: Jason Mercier | Budget Research Analyst | 360.956.3482