Don C. Brunell: POG is Worth Another Look

In 2003, Gov. Gary Locke (D) faced a 10 percent revenue hole in the state’s budget. He also stared at a sluggish economy still reeling from the Sept. 11, 2001, terrorist attacks. People were reluctant to fly and airlines stopped buying Boeing jets.

Locke faced either recommending substantial tax increases or finding a new way to allocate state tax revenues. He turned to Minnesota’s former commissioner of finance, Peter Hutchinson, who helped his governor balance the budget by cutting waste, tightening efficiencies and prioritizing spending.

The process became known as POG—priorities and price of government. As Gov. Jay Inslee (D) and lawmakers now slug it out in Olympia over the 2017-19 budget, revisiting the POG would be productive.

Just as Locke believed tax increases to fill a $2.3 billion revenue shortfall would stymie a slowly recovering economy and dampen job growth, Inslee’s plan to add $8 billion in new taxes will similarly hurt.

Additionally, to help stimulate economic growth, Locke assembled a blue-ribbon group of business leaders to make recommendations on ways to improve our state’s business climate, attract new investments and grow employment.

Among his competitiveness council leaders was then-Boeing Commercial Airplane Co. President Alan Mulally, who went on to turn around Ford Motor Co. At the time, Mulally was fighting to have Chicago-based Boeing build its revolutionary 787 Dreamliner in Everett.

Locke also learned from 1993 backlash when Democrats controlled state government and raised the B&O taxes of services, increased workers compensation and unemployment insurance costs, and enacted a state-wide health care law requiring every employer to offer health insurance with a state-mandated set of benefits.

In 2003 under POG, Locke and Senate Republicans started at ground zero and shook state government to the core. They looked at all spending and prioritized it—a laborious and time-consuming task. One of the key Republican senators driving the POG was Issaquah’s Dino Rossi, who returned to the Senate late last year.

At the end of the 2003 session, Washington’s budget was balanced without raising taxes and much needed unemployment insurance reforms were enacted.

This year, Senate Republicans plan to restructure public K-12 education. In effect, they are taking a new approach. They hope to improve student learning without adding new carbon and capital gains taxes, eliminating tax incentives and raising the B&O (gross receipts) tax on services to 1993 levels. (Inslee’s B&O rate would go from 1.5 percent to 2.5.)

It is never easy balancing a budget whether it is a family, business or state or local government. There is never enough money and never will be, but the POG process offers a different, more disciplined approach.

Under POG, elected officials determine what they will fund starting with the most important. They resisted attempts to spread money around like a thin coat of peanut butter or simply ordering across the board spending cuts.

In 2003, Locke and lawmakers fully funded about a dozen of the state’s top priorities and then had to cut others. It was not easy.

Unfortunately, POG only lasted two years. Some elected officials feared the second round would be too drastic. So as the state’s economy improved, elected officials drifted away from POG.

A nearly forgotten POG benefit is it offers elected leaders the ability to more quickly respond to rapidly changing technology and global competitive pressures. Hutchinson’s premise is the pace of change is accelerating, government continues to lags behind, and it needs to catch and keep up.

Washington’s economy is still recovering and sizable tax increases will hit business hardest because of our tax structure. The un-intended consequence will impact employment.

(Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at [email protected].)