Three measures introduced by Sen. Joseph Zarelli illustrate the range of reforms he says legislators can and should adopt during the 2012 session to continue moving state government toward financial stability.
“The Legislature can regress and go for a short-term fix based on new revenue, as we saw in 2009 and 2010, or seize opportunities to build on the reforms produced by the bipartisan budget process this past year,” said Zarelli, R-Ridgefield.
“Let’s be clear: A reform doesn’t have to be some big shift in policy that saves hundreds of millions of dollars in one swoop, as helpful as that would be for closing the budget gap. The point of a reform is to move government in a more efficient, cost-effective and sustainable direction. These bills all would do that one way or another, which is why they should be considered before the Legislature starts talking about new revenue.”
Of the three measures, Zarelli said Senate Bill 6378 would do the most to improve the state’s financial outlook because it concerns public pensions that are among the bigger cost-drivers in state government.
For the past decade most new public employees in Washington have been able to choose from two retirement plans. One option is a defined-benefit pension plan that has been offered since 1977, so called because it guarantees a specific benefit upon retirement. The second option, offered since 2002, splits the retirement benefit between a defined portion based on employer contributions and a portion defined by the employee’s own contributions. Private-sector pension plans are more commonly the “defined contribution” type.
Zarelli’s bill, which has bipartisan sponsorship, would close the older plan, meaning new hires would automatically be enrolled in the hybrid system. It also would eliminate the early-retirement benefit for new hires. Together these moves would save state government and local governments an estimated $2.3 billion over 25 years.
A third provision in SB 6378 would save an estimated $130 million by holding off on the state’s contribution to its pre-1977 pension plan for the second half of the 2011-13 biennium.
“Going to a hybrid pension system for all new employees means the government has less liability and more stability in the long run, and that should make for significant savings overall,” Zarelli said. “It isn’t the sweeping sort of reform the pension system could use, but it is a step the Legislature should be able to take this year.”
Senate Bill 6379 would change the fate of unclaimed state-lottery winnings, which are now split between the lottery commission (two-thirds, for future prizes) and the economic development strategic reserve account controlled solely by the governor (one-third). Zarelli’s legislation would move all unclaimed winnings to the general fund – an estimated $18 million per year.
Zarelli said the revenue returned to the general fund by SB 6379 would be enough to “buy back” cuts in the governor’s proposed budget to services for the elderly, including adult day care services to assist with daily living, reimbursement rate reduction to agency providers, and Meals on Wheels.
“This is an example of what I mean about the Legislature reprioritizing to make better use of existing revenue. Why ask voters for new revenue when these dollars can be used for what I would view as core services of government?”
Senate Bill 6377 would eliminate the funding mandates established in 2000 by Initiative 728 and Initiative 732. Zarelli said it’s a reform in that it improves the state’s long-term financial outlook by $1.5 billion in 2013-15 and $2 billion in 2015-17.
“The education initiatives have been suspended by the Legislature more often than not since taking effect. They are well-meaning but have been undone by the lack of a dedicated revenue source,” Zarelli noted.
“This bill acknowledges that reality and lets the Legislature focus instead on addressing the recent Supreme Court decision and the proposals I and others have put forth concerning K-12 funding.”
