Legislative prospects hinge on Nov. 2 vote

By Jerry Reilly

Confounding the pollsters and the pundits, the voters in Washington State defeated a set of ballot initiatives that would have reduced state revenues by $1.2 Billion and another initiative that would have made it impossible for the legislature to close tax loopholes and update a tax on hazardous petroleum products. The voters also approved an initiative to give tax relief to small businesses and property owners and to improve the state’s regressive tax system by installing an income tax on high earners.

If this is the news story on November 3rd, after the general election, the task for the 2011 session of the Legislature will be challenging, but manageable. The Legislature will need to build a budget for the next biennium with an estimated shortfall in revenues of around $5 Billion. But they will not have to cope with the loss of an extra $1.2 Billion in revenue caused by passing initiatives 1107 (rolling back the soda pop and candy tax); 1100 and/or 1105 (privatizing liquor sales) and 1082 (creating a private insurance scheme for worker’s compensation).

If the Eyman/British Petroleum Initiative 1053 is defeated, the legislature will also have the ability to consider, again, closing some of the tax loopholes (in excess of $1 billion) that they were not able to muster the votes to accomplish in the 2010 session. But most important of all, they can expect to see about $1 billion in additional revenue in the next biennium from the passage of Initiative 1098 (taxing high earners). They can also plan to see about $4 billion in additional revenue from Initiative 1098 in the biennium after next that begins in July 2013. Even with some new revenue options available, they will most likely still need to make additional cuts to state services to bring the budget into balance.

The outlook for the 2011 session will be very different if the news story on November 3rd is as follows:

Confirming predictions that the voters were going to “vote their anger”, Washington voters passed initiatives to roll back taxes, privatize liquor sales, bring private insurers into the worker’s compensation system and assure minority rule on tax matters. They also rejected an initiative that combined small business and property owner tax relief with an income tax on high earners.

If this how the election turns out, then the legislature will face a revenue shortfall of over $6 billion, without any real option to raise new revenue or close existing loopholes. They will have no real choice except to make additional cuts of $6 Billion on top of the $5 Billion already made in the current biennium. They will be forced to gut health care and long term care for the poor, disabled and elderly, make additional drastic cuts to higher education, curtail preschool opportunities for children and impose dozens of other harmful reductions. If this turns out to be our future, we should retain Governor Haley Barbour as a budget consultant because we will be on our way to becoming Mississippi.

The outlook for the 2011 Legislative Session all depends on the outcome of the November 2nd election—and that outcome depends on us.