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Another revenue forecast, another reality check

Post by Patrick O'Callahan on March 19, 2011 at 3:26 pm |
March 18, 2011 4:26 pm
Employment rebounded much more quickly during the 1981-82 recession than it’s doing today. (Washington State Economic and Revenue Forecast Council chart)

This editorial will appear in Sunday’s print edition.

One graph sums up the grim economic predicament lawmakers face as they struggle to write a new state budget.

Released Thursday – along with yet another forecast of falling revenue – the chart tracks current job losses against the 1982-1982 recession.

Back then, the state had seen slightly more than 50,000 jobs evaporate by the time it hit bottom, but they’d all come back about 27 months into the downturn.

This downturn makes that one look like the good old days. The economic slide that began at the end of 2007 kept sliding for more than two years – and slaughtered 200,000 jobs along the way. We remain down 179,000 jobs down more than three years in. The trajectory looks like a submarine that made a crash dive and is still scraping along the ocean floor.

The message: Get used to it. It’ll be a long time before we see the sun again.

Many of the Democrats who control the Legislature have had a hard time reconciling themselves to the new economic reality. Some of their proposals smack of pure denial – such as the 25th month gimmick, which amounts to pretending that the next biennium will have 25 months worth of revenues to cover 24 months of expenditures.

Another truly bad idea is “securitization” – raising a lump sum by selling bonds backed by future operating revenues. Critics accurately liken this to mortgaging the house to pay for groceries.

The groceries must be paid for with the paycheck, even if the paycheck is smaller.

Any path to a balanced budget will be covered with spike strips and broken glass. We fear most for higher education; as always in a downturn, lawmakers are tempted to treat it as a rainy day fund they can raid to evade more politically painful cuts.

The governor’s budget proposed to slash funding for Washington’s public colleges by 11 percent; some lawmakers will likely be tempted to cut funding yet deeper. But destroying college opportunity is like selling the children to pay the groceries.

All the more reason to adopt the recommendations of the governor’s higher education task force, especially greater tuition-setting authority for public colleges and the creation of a privately funded $1 billion endowment to expand financial assistance for needy students.

The recession may be technically over – as economists look at things – but what once looked like a fiscal crisis increasingly looks like a new, downsized Washington economy. The Legislature must face that reality and plan its spending accordingly.

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