Initiative 791 (I-791) would limit nearly all state spending based on a formula that accounts only for general population growth and inflation. This “one size fits all” approach would severely restrict the ability of the state to respond to the needs and demands of Washington citizens by disregarding demographic and social changes and disallowing implementation of previous voter-approved initiatives. This proposal would potentially threaten vital services in health care, public safety, and education. This initiative would establish a fiscal limit so universal in application that it would engender chaos in its implementation and unintended negative consequences in its operation.
Changes to the Fiscal Growth Factor
The analysis contained below demonstrates that I-791 proceeds from a flawed fundamental premise, i.e. that the cost of services purchased by state government or provided by state government at the request of and for its citizens should never grow at a pace faster than the growth rate of general inflation and overall population growth. I-791 would then extend this flawed premise to apply to virtually the whole of state government. No area of state services, no matter the need, demand, or available revenue, would be allowed to grow in cost faster than the rate of general population and inflation.
The establishment of the new fiscal growth factor in proposed I-791 would subject most areas of state service to severe swings. As a rolling, three-year average, the fiscal growth factor in current law for the General Fund smoothes the effect of any particular good or bad year. The elimination of this “smoothing” influence would cause drastic shifts in expenditures from both the General Fund and all limited accounts immediately upon the pronouncement of a change in forecast for the fiscal growth factor.
Inability to Phase In Spending
The extension of these fiscal curbs to most state dedicated funds and accounts would eliminate the ability for the state to do any significant phasing in of projects or programs. Such ramped spending, up or down, would not be allowed by I-791’s spending limit.
The inability to rationally phase increased spending under I-791 would likely extend to many accounts which fund construction projects or are used to provide the implementation costs for allowed trust fund expenditures. The inclusion of solely for language in the exceptions to the I-791 limits will require limits in many areas of spending which the initiative’s authors probably did not intend to cover.
Sweeping Unobligated Balances
The sweeping of unobligated balances provision would result in severe cash flow difficulties in service areas for which the revenue flow does not neatly match up with state fiscal years. Similarly, the sweeping of the unobligated General Fund reserve to the Emergency Reserve Fund within each biennium would turbulently alter the budget process, making it increasingly susceptible to special legislative sessions and across-the board cuts imposed by the Governor between sessions of the legislature.
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