July 2016 Bar Bulletin
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July 2016 Bar Bulletin

Final Report of King County Bar AssociationReferendums & Initiatives Project to KCBA Public Policy Committee

 

In November 2015, the Referendum and Initiative Project Subcommittee of the King County Bar Association’s Public Policy Committee presented its final report to the KCBA Board of Trustees. The Public Policy Committee will be organizing a forum this year on the issues addressed in the report, as KCBA explores engaging in advocacy on these issues in a long-term way, following the model of the Drug Policy Project in recommending reforms between 2000 and 2008.

The report is being serialized over the course of several issues of the Bar Bulletin. (The “parts” in which the report is divided for publication do not expressly conform to sections of the report, but are used only for the sake of convenience, i.e., available space). This month we present Part IV of this continuing series.

PRE-CERTIFICATION ISSUES

3.2 Budget Impact Issues

Washington has a history of passing initiatives that have enormous impacts on the state’s budget with little apparent appreciation of the fiscal impacts of the initiatives. Initiatives such as I-728, I-732 and I-1391 offered to reduce class size and increase teacher pay, but failed to include funding mechanisms that would have provided long-term sustainable revenue needed to implement the initiative. Similarly, initiatives such as I-695 and I-1107 cut taxes without providing voters with information about what programs and projects would need to be cut as a result of the decrease in state revenue.

During the economic downturns in 2001 and again in 2008 to 2010, Washington’s ability to pay for existing government programs decreased. As a result, many of the initiatives that created unfunded mandates, such as the initiatives to decrease class size and increase teacher pay, have simply remained unfunded. By contrast, initiatives that cut taxes have been implemented. So, although Washington voters have supported both new programs and lower taxes, in practice only the initiatives that lower taxes have remained in effect, creating a one-way ratchet in which voters have reduced the state’s ability to collect revenue.

Washington is not the only state whose budget has been impacted by initiatives. Somewhere between one-third to one-half of California’s budget has been dedicated to spending mandated by voter-approved initiatives or constitutional amendments.70 Of the 24 states that have the initiative process, approximately half of those states have some sort of limitation regarding the ways in which initiatives can impact the state budget.71 For example, Florida has a provision that prohibits initiatives that limit the government’s ability to raise revenue.72 Maine’s constitution makes an initiative inoperative if it provides for the expenditure of funds in excess of what has been appropriated.73 Montana prohibits appropriations by initiative altogether.74

3.2.1. Proposal—Budget Neutrality

The Subcommittee considered two categories of initiative reform proposals that could address the conundrum of voters approving tax cuts or spending without offsetting the budget impact: (1) a constitutional amendment to require that initiatives specify the tax increases or program cuts that would be required for the policy to be fully implemented, an idea we term a “budget neutral constitutional amendment;” or (2) require more information to be provided to voters about the budget impact of initiatives.

The Subcommittee recommends the passage of a budget neutral constitutional amendment. Initiatives that create programs would be required to include appropriate tax increases or set forth the programs in the budget that will be cut to offset the increased spending. Initiatives that cut taxes would be required to identify the cuts to programs that will be necessary to offset the decrease in state revenue.

So as not to unduly burden sponsors whose initiatives have little or no budget impact, the Subcommittee recommends that these requirements only apply to initiatives that will have more than 0.1-percent impact on the operating budget. In the 2013–2015 biennium, the state operating budget was approximately $33.6 billion. Therefore, 0.1 percent of the budget would be $33.6 million for the budget biennium or $16.8 million in one year.

When an initiative is first submitted, the Office of Financial Management (OFM) will prepare a Fiscal Impact Statement, which is the same as the statement they are required to prepare for all legislation introduced by members of the legislature. If OFM’s Fiscal Impact Statement concludes that the initiative will increase spending or decrease revenue by more than 0.1 percent of the general budget, then the sponsors of the initiative will have the opportunity to supplement the initiative by specifying the additional revenue sources or programmatic cuts that would be required in order to offset the impact to the budget. OFM will review the revised versions of the initiative to ensure that the proposed revenue sources or programmatic cuts properly offset the cost of the initiative.

During the 2015 Washington legislative session, Sen. Joe Fain introduced Senate Joint Resolution 8201, a proposed constitutional amendment that attempted to accomplish this reform. The language of the resolution would have prohibited the Secretary of State from accepting any initiative that is not in compliance with the state’s balanced budget requirement. Senator Fain’s measure garnered the support of 33 co-sponsors and a companion resolution in the State House of Representatives. However, neither the Senate nor the House measure made it out of committee. A constitutional amendment would provide the most concrete solution to the problem.

Because a constitutional amendment may be unlikely to pass, the Subcommittee also recommends adopting legislation that requires improved budget information to be provided to the voters. For example, such legislation could require that the ballot title articulate the budget impact, or allow the pro and con campaigns more room within the voters’ pamphlet to explain the budget impact using graphs and charts.

Currently, Fiscal Impact Statements prepared by the Office of Financial Management are difficult to comprehend and the information provided to voters in the pamphlet is equally obtuse. These statements are often dense and full of obscure data and calculations.75 Encouraging a simple, accurate, and prominent statement of the fiscal impact is key to providing information to the voters.


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