When I first ran for office in 2008, the state had a budget ‘surplus.’ Now, two years later, we’ve seen reductions in our tax collections of $12 billion of the $34 billion two year budget. Now, news comes that next year’s biennial budget faces another $3 billion revenue shortfall to sustain the current levels. (And I didn’t even get to spend very much of it!)

We have no option but to acknowledge that it’s time for a comprehensive zero based budgeting effort. Our current budget process is structured upon the idea that incremental costs must be justified but that the core foundation of the base is generally assumed to be sound. This model has served us well over many years, but we face a new era that is bigger than any party, any administration, any legislator.

Washington is a strong, vital and healthy state and many other states are struggling to function with even core systems. We have a vibrant dialogue, a robust budget process and an honest set of numbers. That sets the stage for us to take the next step: Zero based budgeting.

Zero based budgeting means embracing, with courageous honesty, the opportunity to think and act in new ways about how we structure our state’s finances and use of the public’s money.

Specifically, zero based budgeting is “method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a “zero base” and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.” (source)

If we were to design government from scratch today, what would it look like? How would we spend our money? How would we prioritize?

While there has been extraordinary, even heroic and impressive work performed in the past few years to balance our budget and prioritize spending, we must face the reality that the flexibility of various spending accounts (ie small dedicated funds for special purposes) has been reduced. The ability to transfer funds between accounts (capital to operating) to both support priorities and even help with cash flow is less robust than in years. Our revenue system is dependent upon consumer spending and despite improvements in our economy, we’re seeing a fundamental change in the public’s spending patterns. We are entering a period of sustained deficits under our current model, and that’s why we need a new approach.

Simply, we face a historic, worldwide impacting economic restructuring, and it’s time for our state to embrace the bold challenge of systems reform. We must embrace this crisis, move beyond the status quo, and find the courage to build a sound financial model for today’s world.

During these difficult times, demand for public services increase while revenue decrease, a painful reality that we all know. And we must build a budget structure that recognizes the fundamental obligation of government to provide vital services from health care to education to housing and food support.

And yet it’s time to move beyond the rhetoric of ‘seizing the opportunity of this crisis‘ and embrace the dignity of a zero based budgeting project to begin anew.

There is, of course, no one answer. But it does mean major restructuring such as getting out of some lines of business, providing more taxing authority to local governments and reducing heavy subsidies from Olympia to communities, and recognizing that we simply must take a harder look at the ‘base’ budgets of state agencies. We can’t just view the incremental costs that are added each budget cycle. And we can’t just allow local governments to almost purposely reject taxes and services at the local level because they have found a way to politically secure those vital resources from state government. The subsidy model we have built needs to be examined with depth and conviction.

What does it mean systemically?

It means every dollar of spending must be justified from the ground up not the top down. It means we must build models of performance metrics, return on investment and accountability. It means the mere existence of a program is no longer justification for its continued existence. It means that we simply must reform our fiscal note process to capture the idea of opportunity cost and not just incremental costs of an idea.

The legislative session is only 105 days long. The Administration is working night and day in Olympia now to build a sustainable budget, and key legislators are working to question budget models and assumptions. I honor that hard work and respect the difficulty of that challenge.

Now is the time to seize the opportunity of this crisis.

Your partner in service,

Reuven.