Budget shortfall likely to be felt in cities throughout South Sound

SCOTT WYLAND, THE OLYMPIAN

Originally published Wednesday, February 20, 2002

THURSTON COUNTY -- The state's estimated shortfall of $1.6 billion is bound to affect cities, especially if the state lays off South Sound workers, business and city officials said Tuesday.

All say the full impact won't be known until the state begins seeking a remedy, either by raising taxes or laying off employees.

"If you start cutting jobs, it definitely has a ripple effect," said Dennis Matson, executive director of the Economic Development Council of Thurston County.

For every state job that is slashed, another corresponding job is lost, Matson said. That premise is based on a standard multiplier effect, he said.

Raising taxes, either on businesses or consumers, could slow economic recovery because it lessens the money people have to spend, Matson said.

This is the most severe budget crisis within the state since the early 1980s, Matson said.

To allay its financial ills, the state might eliminate the backfill it is giving cities as partial compensation for the revenue lost when Initiative 695 slashed vehicle excise taxes, officials say.

The state gives Olympia $200,000 yearly, Tumwater $100,000 and Lacey $139,000.

None of the three cities use the state's budget forecasts to gauge their own sales tax revenues, at least not directly.

For instance, Lacey estimates the next year's revenue by looking at its current sales tax receipts, all the while keeping an eye on what's happening with the state, said Greg Cuoio, city manager.

"We factor everything in, good and bad," Cuoio said.

The state has a much different dynamic than Lacey and more cups to fill, Cuoio said. It must contend with demands from areas as diverse as Eastern Washington and King County, he said.

Jane Kirkemo, Olympia's administrative services director, said one of her biggest concerns is that the state will cut services and expect cities to fill the gap.

Paring the state's resources in any way is certain to be felt in Olympia, she said. "The state is our No. 1 business."

Local businesses depend on state workers to buy goods from them, and many companies have state contracts that could be lost if services are trimmed, said Ken Balsley, president-elect of the Lacey Thurston Chamber of Commerce.

Increasing taxes would have less of an effect on businesses within the county than laying off state workers, Balsley said.

But another chamber official said that area businesses and residents don't need to shoulder any more taxes.

"I would not advocate any short-term tax increase," said David Schaffert, executive director of the Olympia Thurston County Chamber of Commerce. "Seldom do you ever get a lowering of a tax once it's implemented."

Schaffert said it's tough to speculate in the face of such uncertainty. The state needs to take action before any informed opinions can be made, he said.

Right now, he said, "it's more of a 'what if.' "

The Olympian Copyright 2002

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