In 2003, Gov. Gary Locke, a Democrat, faced a 10 percent revenue hole in the state’s budget. He also stared at a sluggish economy still reeling from the Sept. 11 terrorist attacks. People were reluctant to fly, and airlines stopped buying Boeing jets.
Locke faced either recommending substantial tax increases or finding a new way to allocate state tax revenues. He turned to Minnesota’s former commissioner of finance, Peter Hutchinson, who helped his governor balance the budget by cutting waste, tightening efficiencies and prioritizing spending.
The process became known as POG — priorities and price of government. As Gov. Jay Inslee, also a Democrat, and lawmakers now slug it out in Olympia over the 2017-19 budget, revisiting the POG would be productive.
Just as Locke believed tax increases to fill a $2.3 billion revenue shortfall would stymie a slowly recovering economy and dampen job growth, Inslee’s plan to add $8 billion in new taxes will similarly hurt.
Locke assembled a blue-ribbon group of business leaders to make recommendations on ways to improve our state’s business climate, attract new investments and grow employment. Among them was then-Boeing Commercial Airplane Co. President Alan Mulally, who went on to turn around Ford Motor Co. At the time, Mulally was fighting to have Chicago-based Boeing build its revolutionary 787 Dreamliner in Everett.
Locke also learned from a 1993 backlash when Democrats controlled state government and raised the B&O taxes of services, increased workers compensation and unemployment insurance costs, and enacted a statewide health care law requiring employers to offer health insurance with a state-mandated set of benefits.
In 2003 under POG, Locke and Senate Republicans started at ground zero and shook state government to the core. They looked at all spending and prioritized it — a laborious and time-consuming task. One of the key Republican senators driving the POG was Issaquah’s Dino Rossi, who returned to the Senate late last year.
At the end of the 2003 session, Washington’s budget was balanced without raising taxes and much-needed unemployment insurance reforms were enacted.
This year, Senate Republicans plan to restructure public K-12 education. In effect, they are taking a new approach. They hope to improve student learning without adding new carbon and capital gains taxes, eliminating tax incentives and raising the B&O (gross receipts) tax on services to 1993 levels. (Inslee’s B&O rate would go from 1.5 percent to 2.5).
It is never easy balancing a budget, whether it is a family, business or state or local government. There is never enough money and never will be, but the POG process offers a different, more disciplined approach.
Under POG, elected officials determine what they will fund starting with the most important. They resisted attempts to spread money around like a thin coat of peanut butter or simply ordering across-the-board spending cuts.
In 2003, Locke and lawmakers fully funded about a dozen of the state’s top priorities and then had to cut others. It was not easy.
Unfortunately, POG only lasted two years. Some elected officials feared the second round would be too drastic. So as the state’s economy improved, elected officials drifted away from POG.
A nearly forgotten POG benefit is, it offers elected leaders the ability to more quickly respond to rapidly changing technology and global competitive pressures. Hutchinson’s premise is that the pace of change is accelerating, government continues to lag, and it needs to catch up and keep up.
Our economy is still recovering, and sizeable tax increases will hit business hardest because of our tax structure. The unintended consequence will impact employment.
Don Brunell, retired as president of the Association of Washington Business, is a business analyst, writer, and columnist. He lives in Vancouver and can be contacted at TheBrunells@msn.com.
