Jason Mercier - Is Washington state spending itself off a cliff?

Washington’s operating budget has grown dramatically while lawmakers continue warning about major shortfalls. Is the state facing a revenue problem, or has Olympia simply lost control of its spending? Jason Mercier is Vice President and Director of Research at the Mountain States Policy Center. He joins the show to compare Washington’s financial troubles with Idaho’s budget surplus and discuss what state leaders must do to avoid a deeper fiscal crisis. 

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SPEAKER_00 0:13

Welcome back to the Lawrence Larson Show. Well, two Democratic former governors of the state of Washington just admitted that Olympia spending is out of control. Not the thing you usually expect to hear from people who are members of the Democrat Party. Is the Evergreen State really broke or is it just broken? I thought we'd put that question. Jason Mercier, who's vice president and director of research at Mountain State's Policy Center. Jason, welcome back.

SPEAKER_01 0:39

Hey Lars, great to be with you.

SPEAKER_00 0:41

Does it tell us something important when even former Democrat high-ranking officials are willing to say the spending is out of control, whether it's Gary Locke, whether it's Christine Gregoire or others, that they're saying this is the problem and it's not representative, they say, of their party?

SPEAKER_01 0:59

Well, hopefully the voices of Governor Gregoire and Governor Locke will be the ones that Governor Fertherson and the Democratic legislature listens to, because this warning about out-of-control tax and spending in Washington has been going on for a decade and it's been falling on deaf ears. So the fact you've got Governor Locke and Governor Gregoire saying enough is enough. We have got to get our fiscal house in order. Otherwise, we're going to continue to see our citizens and businesses fleeing to other states. Hopefully, that's enough to get Olympia's attention.

SPEAKER_00 1:31

Well, a moment ago, I was sharing with my audience that there's a brand new report out of the legislative, one of the legislative committees, that says the state budget of Washington has gone up 230% in the last 24 years. So just barely short of 10% a year, every single year for almost a quarter of a century. And I've said, unless the salaries of the people who pay the taxes, meaning the citizens of Washington State, have been going up 10% a year, and I can tell you reliably they haven't been going up 10% a year, then you've got a government that's going to rapidly outgrow uh the folks who have to actually fund that government. Does anybody in Olympia actually understand that?

SPEAKER_01 2:11

Well, it's kind of funny they had to commission a study to figure out what was wrong with Washington's budget. Because you just need to look at the balance sheet, you need to look at the trajectory, and that's what Governor Locke and Gregor were pointing to. You know, Governor Locke was famous for the priorities of government helping balance Washington's budget during the Boeing recession. Governor Gray War had the performance program where she actually tried to measure are we getting results for the money we're investing? Now, I know that there were some tax decisions made from both of them that some of us disagree with, but they were kind of grown-up budget riders. And you know, we can look across the border to Idaho to see that there's another case study showing that this isn't national headwinds, this isn't international economic factors. These are state decisions causing this problem because Idaho's in the exact opposite position that Washington's in because they've chosen a different course.

SPEAKER_00 3:04

Well, and there are isn't Idaho right now cutting tax rates, cutting total taxes on citizens, and still ending up with a surplus?

SPEAKER_01 3:13

Well, you're exactly right. Over the past several years, every single year, Idaho has enacted record tax cuts. They have one of the largest reserves in the country. So they've set aside money, they've cut taxes, they actually held spending essentially flat this year, so not a massive increase in spending, and they're being rewarded for that. They've got the highest credit rating in the country, people are moving there, and Washington's the exact opposite. It's year after year of tax increases. They've been warned that their credit rating is at risk. You've got the business community in absolute real absolute revolt saying that we can't we can't do business here anymore. So this is this is self-inflicted wounds. This isn't some type of national economic headwinds Washington is facing.

SPEAKER_00 3:56

Well, I'm talking to Jason Mercy here, who is vice president and director of research at Mountain States Policy Center. See, I try, Jason, I try to test my conclusions against, you know, uh and and I I think it'd be reasonable to say, well, is there some major way in which the State of Idaho is not serving its citizens that the State of Washington is? And that would explain that Idaho's tax cuts and spending cuts are actually foolish and Washington State is being sensible by jacking up its budget 10 percent a year. But I can't, I haven't seen any reports at all that suggest that Idaho is somehow shortchanging the people who live there for any of the services they actually want. Have you?

SPEAKER_01 4:39

You're exactly right, Dory. In fact, it's the opposite. Maybe if Washington was getting exceptional results for this high spending, you can make a case for it. And as you indicated, if you look across the board at education test scores and at road quality, at infrastructure, Idaho scores higher than Washington despite Washington's higher spending.

SPEAKER_00 5:00

So is the easy explanation, and I to some extent I hesitate to do it, but the easy explanation seems to be that the public employee unions have made the state government captive, and they've said, hey, we're gonna milk this thing for every dime we can get out of it. We're gonna get the biggest salaries, and we don't even have to produce results because the people of Washington state don't seem to care. You spend the most in the country on public education and get the worst results. Well, but as long as you're willing to give us a raise, who cares?

SPEAKER_01 5:30

Well, and that's an interesting difference between Idaho and Washington. Washington has that exclusive collective bargaining with the governor that cuts the legislature out. Idaho doesn't do that. It's part of their budget process, and that's why you're not seeing these billions of dollars of increases in employee compensation for government workers.

SPEAKER_00 5:48

I mean, does does Olympia and and I guess by extension Salem, do they have to just hit a brick wall really, really hard before they're gonna change their course? Because I I hear them, you know, people like uh uh co Governor Kotec in Oregon saying, I'm gonna have a prosperity council and they're gonna give me recommendations that I'm gonna ignore. Ferguson isn't even trying to wallpaper his way out of this one. Uh they they don't seem to be listening to the message they're getting from both the citizens and the vote in May in Oregon, 83 percent no on taxes, and and the vote I think they're going to get uh come fall with the vote on the so-called millionaires tax. At what point is are we are they gonna get in a bad enough situation that they'll actually have to listen?

SPEAKER_01 6:32

I think you're getting to that point. When you've got former Democratic governors coming out and saying your spending's out of control, when you've got businesses saying we're leaving the state, if that message doesn't sink in now, you're gonna be losing your economic outlook to other states.

SPEAKER_00 6:46

Yeah, and and at that point, I mean, I kind of in some ways, Jason, I expect them to say, oh gosh, I mean, this is like the most foolish business owner in the world. He loses some of his clientele. They stop coming into a store to buy things, and he says, I'm short of money, raise prices. And his sensible staff members say, Hey, boss, if we raise prices, we're gonna lose more customers. He said, And then we'll just raise the prices some more. And pretty soon he has a store where the prices are sky high and there isn't a single customer in the place. And I think that's where Washington State's gonna be.

SPEAKER_01 7:17

I think one of my favorite budget quotes was from Governor Mitch Daniels of Indiana. When he was asked, how did he balance the budget? He said, Prepare to be amazed. I reduce spending.

SPEAKER_00 7:27

Now, do you think that any way, shape, or form, Bob Ferguson could actually say those words? Well, here's the challenge.

SPEAKER_01 7:35

When he became governor and this last cycle, he says the right things. He said that we're not going to do tax increases, he says we're gonna have fiscal discipline, but then he signs whatever the legislature sends him. So if we're gonna get this course correction, the governor really needs to lay down the gauntlet and say, I will veto tax increases. I will veto out-of-control sending. That's where this conversation needs to end.

SPEAKER_00 7:57

Yeah, and of course, uh, I think the public employee unions would probably take him out back of the Capitol and probably beat the daylights out of him. That's Jason Mercier. Jason is with the Mountain States Policy Center. Back in a moment. I gotta give you a little mashup of some of my favorite crazy Democrat sound bites from the week. And we'll get to your phone calls and emails. Eight six six six six six six six-439-5277. Naysayers go to the head of the line.