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Saturday, April 29, 2006

New numbers? No. - WA OFM

The new OFM Six-Year Outlook made it to the front page this week under the head "State goes from feast to famine on budget" (TNT, 4.26.06). This is not the budget hole we have been warning about the state dropping into, so we won't be doing any gloating, yet.

The omelette may have one fewer egg in the latest OFM (Washington Office of Financial Management) recipe, but it is not "feast to famine." We've had a couple of good years, but our family is growing and the farm is not. Under the leadership of Chris Gregoire we have a year's worth of canned goods in the cellar and we've stocked some staples, but there ain't no feasting in this house.

The "respite from budget woes" that will "end abruptly" is really only the underlying deterioration agitated by a bit of this and a bit of that. Most of it is mandatory, a bit of it the few new initiatives from the last session.

In fact, there are no changes to projected revenues from the February 15 version of the Outlook, and it is revenues that worry us. The housing boom is tapering off and higher fuel prices will squeeze retail sales. Even before that, where OFM sees a 5% underlying growth, we put it at under 4%. But maybe they are waiting on Chang Mook Sohn and the Office of Forecast Council to tweak revenues. [Not that oil prices and the Forecast Council have agreed on a direction yet. They're still debating. During the session, Mr. Sohn suggested prices in the $50-$60 per barrel range. A couple of years ago, the Council's forecast came out projecting a retreat in oil prices to under $30 just before they took off. Now they are $70-plus and rising.]

The whole budget situation was, of course, obfuscated immediately by Republican state senator Joe Zarelli, who threw out his tired old pitch and labeled it a "spending problem." I wish he would direct his remarks to his own party and the federal budget that is driving this country into the ditch.

Helen Sommers is chair of the House committee assigned spending (Appropriations). She points to the "unbelievably high costs in the medical area." Elsewhere there is mention of 12 percent "inflation" for medical assistance.

"Inflation" is a term for a general rise in the price level. A specific rise is called a "cost increase." It may be driven by increased participation in a program, or it may be an increase in the unit cost of a particular good or service, but there is not specific "inflation." This messy language messes up thinking, and it's been there for at least five years. (I know, "picky-picky.")

The substantial point is that comprehensive health care reform could solve everybody's problems. My friend who lost his job has VA coverage. But his wife doesn't. Nine hundred dollars ($900) per month. The state budget has big bills for the uninsured, partly insured, and a host of employees. Likewise the Feds and the local governments. Likewise businesses of every kind and size. This health care crisis is an inflating ring around our necks, and it's going to choke us all.

It needs to be dealt with as a particular cost increase. It is acute, not chronic.

Look for a fuller examination of the OFM Outlook on Prediction Tuesday in two weeks.

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