In Olympia, recession is looking like an opportunity missed

Call me skeptical bordering on cynical, but I doubt Washington state government will emerge from this economic crisis reborn. Sure, there’s been a lot of talk in Olympia over the past year about "rebooting" state government and seizing the opportunity presented by the Great Recession to knock down “sacred cows.” Those are Gov. Chris Gregoire’s words. But to get from reform rhetoric to actual reform requires the sort of heavy lifting that politicians rarely, if ever, have the political will to expend.

I believe there will be incremental changes in how state government does business. Gregoire has teams working on consolidating and finding efficiencies in Natural Resource protection and state IT services. Something is bound to come out of those efforts — although even the governor's reform guru admits the biggest, boldest ideas are unlikely to prevail.

The reality is that state legislatures are not in the business of enacting big, bold ideas and revolutionary change. By its very nature the legislative process — and this is part of the genius of our system — serves to slow change down. In that sense, the legislature works as a check on throwing the baby out with the bath water. Most of the time that’s good, but it also means that in times of crisis, when there’s a narrow window of opportunity to seize the day, legislative bodies (like large ships) are incapable of reacting fast enough.

Given that reality, it seems not only unlikely but downright improbable that majority Democrats in Washington will seize this economic crisis to radically overhaul state government. In my mind, the big three elephants in the room are: tax reform, privatization, and program elimination.

Countless studies — the most recent of which was the 2002 Bill Gates Sr. study — have concluded that Washington’s sales-tax-dependent system is fatally flawed. The Gates study went so far as to call for an income tax. But when it comes to taxes, the consensus in Olympia is that voters and businesses oppose change and prefer to stick with the devil they know. Tax reform is viewed as too politically risky; there’s little appetite to tackle it.

Also in 2002, the Washington Legislature passed civil service reform. That effort gave state workers collective-bargaining rights. As a tradeoff, the state was supposed to be able to contract out work that state employees had traditionally done, if it made more sense financially.

But in a Catch-22, “competitive contracting” is subject to collective bargaining — so the unions still have a big say in whether it happens. Here’s what Jason Mercier of the Washington Policy Center, a free market think tank, wrote last month after the Washington Federation of State Employees union won a lawsuit tossing out the state’s rules for competitive contracting: “Even before today's ruling, the use of competitive contracting by state agencies under the 2002 reform has been less than stellar."

A performance audit conducted by the Joint Legislative Audit and Review Committee in January 2007 found:

“Few agencies have competitively contracted for services in the 16 months since receiving authorization to do so. Agency managers reported two main reasons for not competitively contracting. First, managers perceive the process itself to be complicated and confusing, providing a disincentive to pursue competitive contracting. Second, competitive contracting is a subject of collective bargaining, which creates additional challenges by requiring labor negotiations."

The reality is that much of what state government does is already contracted out — think road construction. Even so, it seems highly unlikely — especially with Democrats in charge in Olympia — that the current economic crisis will result in any significant outsourcing of government work to the private sector.

Finally, there’s the prospect of flat-out canceling state government programs. In the past year lawmakers have radically cut programs, such as the Basic Health Plan. But in my experience there’s almost a congenital inability among lawmakers to rip the Band-Aid off and kill underperforming or expensive programs. Perhaps, that will change in 2010 when lawmakers return to Olympia and face another billion-dollar-plus shortfall. But so far there seems to be little interest in actually turning out the lights on entire programs of state government.

All of this is not to say there aren’t big ideas and big thinkers in the Legislature. Two come to mind immediately.

State Sen. Joe Zarelli, R-Ridgefield, is the ranking Republican on the Senate budget committee. His “Budget Tidbits” has become must-read material in Olympia. Zarelli could, but doesn’t, take credit for the state’s new constitutionally protected rainy-day fund. He had been pushing the idea for years before Gregoire picked up the mantle and got it done in the 2007 session.

Last year, Zarelli unsuccessfully pushed for legislation to put what he terms “extraordinary revenues” into the rainy day fund. The idea being that when state coffers benefit from a super-heated economy, some of that money should be socked away and not spent. It’s a proposal that, like the rainy day fund, I can imagine gaining traction in Olympia over time.