When the Washington Legislature convenes next month, it will face a large elephant in a small room.


Thats the analogy Richard Davis, president of the Washington Research Council, a Seattle-based public policy think tank, uses to describe how the effects of Initiative 695 will dominate the 2000 legislative session.


The voter-approved initiative replaced the states motor-vehicle excise tax (MVET) with a flat $30 license fee, slashing state revenues by about $1.2 billion in the current biennium, and mandated that tax and fee increases by all levels of government be approved by voters. To fund currently planned programs and projects, legislators must decide whether to tap state reserves; look at new funding sources; and consider ways to privatize or more efficiently contract out state services, say business and civic groups.


Whatever they do to respond will ripple through the whole state budget, Davis says.


The Spokane Area Chamber of Commerce intends to focus on obtaining better economic development tools, such as tax-increment financing, funding for the Spokane Intercollegiate Research and Technology Institute (SIRTI), and a $1.2 million health-sciences initiative that is believed would boost health and biotechnology research and education here, says chamber public affairs director Dan Kirschner.


Local concerns


The chamber hopes that both SIRTI and a new Washington State University health-science program will receive a share of the states supplemental budget this year, Kirschner says.


We will advocate for those programs because they are consistent with the communitys desire for expanding its bio-tech research industry and building on its natural competency in health care, he says.


SIRTI, which received state funding during the last legislative session, is seeking additional money to strengthen its infrastructure for research, Kirschner says.


WSU wants $1.2 million for health sciences to fund an intercollegiate consortium that would coordinate medical research and instruction here, says Dorothy Detlor, who helped develop the proposal and is dean of WSUs College of Nursing and the Intercollegiate Center for Nursing Education here.


The initiative would establish graduate programs in health-care information systems and gerontology, and would expand upper-division nursing education. It would move WSUs Cancer Prevention and Research Center from Pullman to Spokane and expand that center, and would provide a coordinator to oversee cooperative research and teaching opportunities and the sharing of technology, such as video conferencing networks. A similar plan was presented to the 1999 Legislature, but wasnt funded.


The Spokane chamber also continues to support tax-increment financing, which would allow local governments to use some of the anticipated increase in property-tax revenue from new development to pay for infrastructure that would serve the development. Kirschner says the chamber wants the community to have a variety of tools to address economic development, redevelopment, and growth-management needs adequately.


Kirschner says the chamber also remains supportive of regulatory changes and legislative policies that would help boost the expansion of high-speed telecommunications infrastructure here. He notes that broadband infrastructure is especially important to rural areas, which Spokane relies on for its economic health.


Dealing with the elephant


The Spokane chamber wants to encourage a response to I-695 that would meet the voters demands for limits on taxes and fees collected by government. The chamber wants to focus not on what was lost with the passage of the initiative, but on opportunities to make government more efficient, he says.


Some clarification on how the new law will work is needed, though, Kirschner says. The chamber and other business groups across the state, including the Association of Washington Business (AWB), want the Legislature to determine how the mandate for voter approval of fee increases will affect programs such as workers compensation and unemployment insurance, which charge employers a rate based on how much their workers have used such programs.


If those rates cant increase based on a businesss experience over the year, the Legislature must address that, says Don Brunell, president of the Association of Washington Business. Requiring a vote on every fee increase as program costs go up isnt fair or reasonable, he says.


Transportation and transit


Because more than three-quarters of the MVET had funded transportation-related expenditures, funding for transportation projects and transit programs is a top concern for many legislative watchers. Brunell says his group had identified for the 1999 session 12 traffic chokepointsincluding Spokanes long-awaited north-south freewaythat needed funding immediately. Funding for those projects, approved last year by voters through the passage of Referendum 49, included the sale of bonds that would be repaid with MVET revenues, but those revenues are gone now, and the state must find replacement funds, Brunell says.


Loren Mitchell, president and CEO of the Spokane Valley Chamber of Commerce, says the Valley chamber wants funding secured for the north-south freeway, for the completion of the Interstate 90-Sprague Avenue interchange, and for the widening of I-90 through the Valley.


Possible new funding sources include a gas tax or the states share of tobacco settlement funds, says Davis, of the Washington Research Council. He says, however, that both those options are unlikely, as tobacco money has been earmarked for other uses, and Republicans previously have shied away from gas taxesresulting in Referendum 49. Also, an election year isnt a popular time to put new taxes on the ballot, especially with the resounding call for lower taxes voiced in the passage of I-695, he says.


I expect an 18- to 24-month gap before the state will step up to face transportation needs, Davis says.


Transit systems shouldnt expect much help either, he says. Davis says legislators might grant some additional local-option taxes, such as a local-option gas tax, but those funding options would still need to face a vote of the people in the areas served by individual transit systems.


The possibility of tapping the states reserves runs into the spending limits put in place by Initiative 601, Davis says. About $950 million of the states nearly $1 billion reserve fund probably isnt available because of I-601 limits, he says.


Washingtonians are comfortable with the discipline imposed by those limits, and past efforts to craft exemptions to them largely have been denied, Davis says. If the Legislature wants to tap reserves now to make up for I-695 cuts, it must be careful not to destroy the limits voters put in place with I-601, he says.


Several business groups hope spending cuts forced by I-695 will prompt discussions about privatizing and contracting out additional services, an issue that has long been important to many such groups. These can be ways to cut state spending, so that we dont have to cut services or raise taxes, contends Carolyn Logue, state director of the National Federation of Independent Business (NFIB), in Olympia.


Health care


The NFIB and others continue to advocate changes in health-care insurance regulations. Logue says the state must find ways to encourage more insurers to offer plans so people can have several affordable choices for insurance coverage.


Of special concern is the virtual disappearance of individual coverage in the stateand the resulting about 400,000 state residents who currently arent eligible for coverage, says Brunell, at the AWB. He says that in its last session, the Legislature worked on developing incentives to encourage healthy people to keep their insurance policies, rather than paying for insurance only when they expect to need coverage, such as for a planned surgery, prenatal care, or delivery of a baby. Those efforts, however, failed to result in any legislation. He hopes this session to see a system of incentives emerge for individuals who keep insurance and penalties for those who drop coverage.


The Spokane chambers health-care committee recognizes that the state is at a crossroads where it must chose a single-payer or market-driven system, although the chamber hasnt reached a conclusion on the direction it will favor, Kirschner says. Each system would have its own set of fixes that would have to be enacted to make it work, he says, but first the state must choose the road it will follow.


The Washington Research Council advocates eliminating the elective office of state insurance commissioner and moving the regulatory duties of that office to the Washington state Department of Financial Institutions. Such a change would increase gubernatorial authority, lessen politics in the insurance arena, and reflect an increasingly integrated marketplace, the Seattle-based think-tank contends. The elimination of a state office and its attending bureaucracy also could result in efficiencies that could save the state money in light of I-695, Davis says.


A call for unemployment-insurance reform also has united business groups voices. Washington has one of the highest unemployment insurance costs in the nation, and rates are expected to rise next year, even though the states economy is healthy and unemployment is low, says the AWBs Brunell. Unemployment benefits are based on the states average monthly wage, which has been driven up by high-paying technology jobs in the Puget Sound area, and under the current system, as benefits increase, the reserve funds must grow, too, he explains.


The system isnt working in todays economy, Brunell says. Weve become victims of our own success.


He says government, labor, and business all want to see change in the unemployment insurance system. The Spokane Area Chamber and the NFIB say they plan to advocate unemployment insurance reform, but Davis of the Washington Research Council says the issue could be ignored this year as the Legislature focuses on pressing I-695 issues.


Davis says growth managementwhich the NFIB and others would like to see be more locally controlled, rather than under the authority of a state hearings boards as is now the caseand state property-tax relief also probably wont get the attention business groups feel they deserve. He says statewide interest and legislative support for the issues isnt strong enough.


Brunell says the Legislature also must take control of the L&I regulations on musculoskeletal injuries and workplace ergonomics. He and Logue both say the current rules place an undue burden on employers by requiring costly changes that havent been proven effective in preventing workplace injuries.


Control of the House of Representatives remains equally split between Democrats and Republicans, and Democrats control the Senate. Davis notes that the divided House last session had difficulty reaching consensus on many issues, and with current budget constraints, compromise could be even tougher this year. Davis says Democratic Gov. Gary Locke must provide the leadership to bring about the cooperation needed.