Many fiscally astute legislators recognize that Washington’s system of taxation is unfair. First, lower income residents contribute a greater proportion of their income to the support of state and local government than do those with higher incomes. Second, that Washington disproportionately taxes business relative to other states. That factor reduces the state’s ability to "grow" its economy. Third, and most importantly for local governments, the local tax structure is inadequate to assure that every city and county can fund basic services. Fourth, there are concerns that an increasing proportion of consumer purchases are evaporating through remote commerce, catalog and Internet sales.

Many legislators have concluded that our revenue structure doesn’t work. Whether it’s that the business and occupations tax is discriminating against certain types of business activity, that the inequities of the sales and utility taxes result in unfair taxation of lower income citizens, or that the total tax structure results in unstable revenue flows, the reality is that the Legislature has had to biennially cobble together a budget characterized by ongoing shortfalls.

For the state and many cities and towns, spending discretion is limited. Entitlement programs, K-12 enrollments, prison and jail occupancy levels, binding arbitration decisions, and the like, are outside of the control of state and local officials.

During the past five years, the state and many local governments have pared back and are down to "bare bones" budgeting. Many smaller cities and counties more dramatically impacted by the loss of sales tax equalization and the implementation of Initiative 747, are at "survival" level budgeting.

As the Legislature probes the future fiscal well being of the state and local governments, there’s a basic question being asked, "Is there a way out?"

It is my opinion that while there is a reluctance to recognize the need for radical change, the time may be right for significant changes to our state/local fiscal structure. Those changes should focus on initiation of a "fairer" revenue structure: one that encourages businesses to locate/expand in the State of Washington; and one that recognizes that every city and county requires sufficient revenues to provide basic services as well as sufficient fiscal capacity to address the discretionary service demands of its citizenry. Such change should also recognize the need to "control" spending increases during periods of economic growth, while sustaining services during periods of decline.

We need a fiscal structure that encourages stability of service delivery, as well as a reasonable tax structure. Fiscal reform does not necessarily infer tax reform/income tax. It suggests a repositioning of our fiscal system to address the long term needs of our state and its cities and counties.

The reality is that there’s interdependence between state and local fiscal well-being. As the Legislature wrestles with its own $2 billion problem, they are less inclined to address the fiscal problems of struggling cities, or to address the long term fiscal needs of all cities. Concurrently, the economic well being of our cities suffers as our tax structure discourages economic growth.

However, as the legislature engages in an evaluation of the state and local fiscal system it is vital that local officials participate in that process. Legislators need to understand that the state and its local governments need to be partners, not adversaries, in the provision of services. Legislators also need to recognize that businesses want to locate in quality communities and they want to be assured of the continued availability of local services.

On a closing note, having just gone through a series of legislative hearings relating to the fiscal health of cities and towns, many legislators have acknowledged the need for healthy communities. The dilemma is where to find the money.

Legislative activity has picked up. Many measures are starting to move through the process; some good bills and some bad ones. We’re continually trying to derail harmful legislation while moving along the good measures.

Calls from home are invaluable in backstopping our Olympia efforts. As you go through the Bulletin, please help by continuing those legislative communications - they are invaluable in convincing legislators that their city officials are as concerned as is the Association.