Livestream of the 2012 State of the State address by Governor Chris Gregoire, anchored by KCTS 9 Connects Enrique Cerna with pre-and-post-speech discussion and analysis by Joni Balter, Chris Vance, Joel Connelly, and Cathy Allen.
Governor Christine Gregoire:
It's our time to keep our streets safe. And it's our time to give our young people the education and knowledge they will need to succeed in the world economy. We must succeed. You know, I just read a great new book. It's called "That Used to Be Us." It's by Tom Friedman. They take a critical look at where America has been. For me, one metaphor really stood out. "For generation after generation," they write, "America knew how to win in the turns." Win in the turns. What does that mean exactly? Well, in short, it means the winner hits the gas pedal just when everybody else is hitting the brakes. Visualize yourselves on a race track.
This is a KCTS 9 special report. Governor Gregoire delivers the annual address from the house chambers in the state capitol house in Olympia. We'll have complete coverage plus the Republican response from Senator Joseph Zarelli. Plus analysis from our Insiders Roundtable, next.
Welcome to this KCTS 9 Connects special report, the state of the state address. In just a few minutes, we will take you to the house chambers at the state capitol in Olympia, where Governor Chris Gregoire will deliver our final state of the state address. The state budget, the billion dollar revenue shortfall, a sales tax proposal, education funding, same sex marriage, garnered a lot of news coverage in recent weeks and will likely be addressed by the Governor in her speech today, along with a transportation initiative. Joining me to provide analysis of the Governor's address and the republican response that will be delivered today by State Senator Joe Zarelli, our political strategists Chris Vance and Cathy Allen. Also here, Joni Balter, editorial columnist for the Seattle Times. And Joel Connelly, Seattlepi.com columnist. What do you expect out of this final address from the Governor in her state of the state address? Do you expect her to come out swinging in what she wants?
Coming out with big ideas because she can, because she doesn't have to worry about what it means for her re-election. She's going to come out with apparently some big thoughts about spending for education, and her tax proposal that she's been talking about for some time. I think they actually conflict with each other, but that's another matter. So yeah, big stuff because it's her opportunity to do so.
But the question is, we may have big stuff, she's very very much an energized Governor when you interviewed her last Friday, after being a very tired one in the fall. But the situation is you can propose, but how much will she work to dispose?
You got to take a look at, she calls this our time, our responsibility. The fact is this is her turn, her responsibility, her legacy. That's what she's going to be talking about, and knowing that this is eight years of work that comes to this conclusion. I look for bold ideas, I look for humane ideas, the gay rights stuff, in addition to returning schools to the head of the class.
Cathy's exactly right. Any president, any Governor, as they get close to the end of their term, they start thinking about their legacy. I would expect the Governor to have a big agenda. And Joel is right, her agenda may not fit with the legislators sitting to the floor who are thinking about just one thing, let's get a balanced budget and get out of town so I can go campaign.
60 day session, short amount of time. She has a lot of ideas. We know already that the issue of same-sex marriage is going to be a controversial one and probably going to be one that's going to be talked about a lot here.
That's why I don't think it's going to be 60 days for one session, that's just dreaming, if you're going to do all this reform that a lot of people are talking about, if you're going to deal with same-sex marriage, there is some insurance with abortion that's going to get everybody going. And then she apparently wants to spend a lot on transportation. I don't see how you do it in 60 days.
As well, some things have to be addressed. Paula Hammond, the Transportation Secretary, delivered a deeply pessimistic talk about the future of the ferry system and the demands on her department before a legislative committee yesterday. There has to be something done in terms of getting around, in terms of getting around on the water, there are, there's a great deal of backlog that I think this session needs to address.
I think they talk a lot about transportation as being important, and I see the Governor as using that as her capital stamp, but the heart and soul of this session is going to be education, restoring the funding that we need. I disagree. I believe they'll get in and out because they have to to be able to campaign, and this is going to be a very dicey year to work in terms of redistricting, everyone's got new areas. I just don't see the social agenda. I don't see gay marriage having a problem, I think it's going to get in and get out and get passed.
I'm not sure I agree with Cathy about that. But the main driving force is the campaigns later this year. Filing begins in May. If you want to run for the legislature, you need to be getting geared up now, they all have new districts to deal with. These legislators do not want to be there longer than 60 days.
All right. We need to go to Olympia now. The Governor has already come into the house chambers. Everyone's seated. The honor guard has entered into the building. And they are in process right now. Let's go to Olympia.
Lieutenant Governor Brad Owen:
Our prayer will be offered today by Chris Berger, Evangelical Lutheran Church in America, Seattle.
Bishop Chris Boerger:
Let us pray. Gracious God, you have created all that exists. You institute government, protect that creation, and to preserve the common good. We thank you for these women and men who have been able to serve by your people. Give them wisdom, compassion, and courage. So that the decisions they make will secure the inheritance we have received and steward that inheritance for those who will follow us. Bless those whose location is to lead us in these unique times and the decisions they make bring honor to you and to the state of Washington. This we pray in your name. Amen.
As usual, an excellent job by Washington state honor guard.
And another one of Washington's great fantastic talents, Sofia, you did a wonderful job.
It is now my great honor to introduce her excellency, the Governor of the great state of Washington.
Thank you, thank you.
Thank you, everyone.
Thank you all very much.
Thank you all very much.
Thank you, everyone. Let's start this morning to observe a moment of silence for some who have served Washington so well and who have passed away recently. Let us remember your calling. Senator Scott White, who sadly left us in the prime of his public service. Let us remember two men who gave during their time in office. Senator Alex Deccio, and Senator Bob McCaslin. And let us also remember Senator Al Rosellini. He was one of the best friends I'll ever have. And let us remember the nine Washingtonians who lost their lives in Afghanistan and Iraq serving their country. And just last week, the idyllic Mount Rainier National Park was witness to the loss of Park Ranger Margaret Anderson, who died in the line of duty. Will you all please join me in a moment of silence in their honor. Thank you.
Good afternoon, everyone. First, can I say thank you Bishop Boerger for starting us off with such an inspiring prayer this morning. Thank you and may God bless you. Thank you.
And thank you, Sofia, for your beautiful performance of our national anthem. You are our future. Remember, public service, political office is in your future.
Mr. President, Mr. Speaker, madam Chief Justice, and distinguished justices of our court, honored officials, members of the Washington state legislature, tribal leaders, local government officials, members of the Consular Association of Washington, my fellow citizens, and some of my family with me today. My daughter Courtney and our son-in-law Scott aren't with me, but I'm pleased to say they're moving back to this Washington. My effort was not subtle, but it has been steadfast, and finally, I've got my wish. My extended family, thank you for being here today, all of you. And to Nana Gregoire, who's watching at home, who turned 90 years young this past year, we're sorry you're not here to join us today. Here, however, with me is my daughter Michelle. Michelle is now a second year law student. She loves it. Go figure.
And my husband, Mike, I think you all know he is number 1 champion for the veterans of the state of Washington and this nation. Thank you, Mike.
Mike's not only a great husband, my best friend and a great dad, but I'm noticing something else lately. As he gets older, he's becoming even more athletic. Golf on channel 60, football on channel 13... Soccer on channel 32...
So Michelle, dad will not be making dinner this evening.
As for me, I have a very complicated relationship with growing older. First, I was getting carded at Hannah's Tavern and now I'm getting hearing aid offers in the mail. But as Mike and my staff will tell you, I am not slowing down, not this year.
And that's because today, I begin my last year as Governor of my beloved great state of Washington. We are in a time of great challenge and even greater opportunity. Yes, challenge and opportunity. Like so much else this day, the 24 hour news cycle, these words have lost a bit of their meaning, but not today, not for me, not in the year 2012. For me, if ever those two words meant anything, it's right here, and it's right now. It's our time. It's our time to practice the courage and compassion that has been handed down to us by our parents and grandparents. It's our time to rebuild our bridges and highways. It's our time to create jobs now and for the future. It's our time to keep our streets safe. And it's our time to give our young people the education and knowledge they will need to succeed in the world economy. We must succeed.
You know, I just read a great book, it's called "That Used to Be Us." It's by Tom Friedman and Michael Mandelbaum. The two take a critical look at where America has been. And for me, one metaphor really stood out. "For generation after generation," they write, "America knew how to win in the turns."
Win in the turns. And what does that mean exactly? Well, in short, it means the winner hits the gas pedal just when everybody else is hitting the brakes. Visualize yourselves on a race track, racing along on a sunny day. And suddenly and without warning, you're in a sharp high speed turn. When and if you make it through, you find the world around you has utterly changed. The winner of that race, the one with the determination to thrive in that changed world, is the one who sees that sudden turn as an opportunity. The winner takes the risk to pass everybody in the turn and is now leading the pack. That's winning in the turn. And the great economic turn we're in now, some question if our country or our state will win this time.
When the recession ends, will we be out ahead of the competition in education, infrastructure, economic development? Will we come out of this turn in front of the pack and ready to go? Or will we be stuck back, fighting for position with the also ran? Also ran? Not our Washington. We must, we can, and we will be out ahead.
We know how to win in the turn. We know how to come out ahead. We've done it time and time again.
There was a recession in the early 70s, so bad that somebody put up a billboard asking the last person in Seattle to turn out the lights. But Governor Dan Evans worked with the legislature, controlled by Democrats, to carry out his Washington future. And sent five ballot measures to the voters. The result was new community colleges, water systems for homes, industry, and irrigation. New and refurbished recreational properties and expanded public health facilities. Democratic legislature, Republican Governor, and the people of Washington won in the turn.
There was a scary turn in 1983. The worst recession before this one. Governor John Spellman, a Democratic Senate and house, had the courage to protect the future of our children. They approved a penny increase in the sales tax focused on education. We won in the turn. And by the way, each time Washington survived an economic crisis and rebuilt its future, it has not been about political parties. It has been about the future of our great state.
It's now up to us. This is our time, our time to win in the turn. So in the next 60 days, I ask you to do four things. One, use the early start you got in December and quickly pass a budget. Two, ask the voters this spring to approve a temporary half penny sales tax increase for students and their future.
Three... Three, pass my school reform. And four, pass a major transportation and jobs package.
First, let's solve the budget problem. You made a down payment in December. I know these are some of the most difficult decisions of your careers, but I ask you to finish quickly. Because every day, the problem gets bigger and the choices get harder. Since Wall Street handed us this mess nearly four years ago, we have cut and cut and cut. A projected $10.5 billion. And we're still not done. We have cut K-12 by 26%. Four-year colleges by 46%. And community colleges by 26%. Our social safety net is frayed. We have closed five major institutions, including three prisons and one juvenile facility. The last time we shut down even one was nearly 40 years ago. Now, some states are talking about this. But we're not talking. We're reforming. We've made our pension system one of the five most sustainable in the United States.
A state work force is down nearly 10%. Those employees left are working harder with lower salaries and paying more for benefits. I want to thank them for serving, particularly in these uncertain times.
We have made the biggest reset of state government in decades. Today, we are more cost efficient, we are smaller, faster, and more effective. We are working toward a more sustainable budget in the long-term. Historic reforms brought flat workers' comp rates this year and historic lows in unemployment insurance rates. That's good news for our small businesses, which have been hurt the most in this recession and are absolutely key to this recovery.
One of the fastest growing, biggest, and most complicated drivers of our budget is health care. We're reining it in with significant results. We've cut Medicaid inflation to 2.3%, one of the lowest in the country.
And unlike other states, we have not used this recession to undermine the environmental protections that provide what we value: clean air, clean water, and healthy natural resources.
No one comes to public service thinking the status quo is good enough. No one comes to public service saying we shouldn't find a better, more efficient way to do something. It's the whole reason we all serve. And these times amplify the need. This year is no different. While we must cut, we must also find real reforms that will preserve our ability to serve our citizens while modernizing our practices. And while we must cut and reform again, we must also realize that this problem demands a courageous solution, we must look for new revenue for the state of Washington.
So close tax loopholes to save vital services like the basic health program for the working poor, it's a matter of fairness.
And that brings me to my second request. We must protect our vulnerable seniors and the developmentally disabled. We have to educate our students and provide public safety for our families. So I ask you to send to voters a temporary three year half-cent sales tax to save those vital services. Ladies and gentlemen...
Ladies and gentlemen, make no mistake. We are about to shred very core services. It is time for all of us here in this chamber to stand up for Washingtonians. Well, I know the sales tax is regressive. You know what I find even more regressive? It's cuts in education that will hit our low income students the hardest. It's more cuts in our social safety net to poor seniors and people with developmental disabilities. And it's cuts to public safety that will impact our poor neighborhoods the most. That's regressive.
Remember, the last time that we raised the state sales tax was 1983, under a republican Governor, during the worst recession until this one. So today, I ask you to listen to your hearts as well as to your heads. Will that 85-year-old woman with failing health who needs help to live in dignity at home find it regressive? Will that student who faces the difference between a mediocre education or a great one find it regressive? Will that family living in fear of a criminal getting out of prison five months early with little supervision find it regressive? No. They will say it's the right thing to do because it is and they will remember that we didn't wait for things to get better, we made them better.
Without the half penny, we lose far more than we gain. We lose our future. We lose our way. Like Governors and legislators in the past, it's our time to do something very hard, it's our time to ask for sacrifice from everyone, ask everyone to contribute to our future so everybody wins in return. We have to win in the turn. How do we lead the rest of the world and the rest of the country? We outpace, we out-educate, and we out-perform. Our businesses, our state, our children and our grandchildren cannot afford any more deep cuts in education. About $411 million of the $494 million of the state revenue tax would go to education.
We need the school day to be 180 days and longer, not 176. We need to help our property poor districts, and we need to stop raising college tuition.
It comes down to four simple words. No education, no job. This is our time. The value of quality education, just as our parents and our grandparents did.
So today, I urge you to act on my third request and approve school reform. Now, as Governor, I've been to many schools, and I have never seen a great classroom without a great teacher, or a great school without a great principal. We have a new evaluation system that's been built from the bottom up. Now, we must ensure that every classroom throughout our state has a good teacher and every school has a good principal. Our state deserves nothing less.
We must turn around our failing schools once and for all. We're going to do that by asking our public universities to use bold, innovative programs, and partner with low performing schools. The universities will innovate, research, and teach. They'll give our students the educational advantage they need. And we'll take their success to work and scale it all across our state. Like so many of our reforms, I predict this too could become a model for the nation. We cannot address the education gap we have with the rest of the world until we address the one we have right here in our own home state. And speaking of education gaps, thank you for acting so quickly to make certain that we have trained workers and engineers for our growing aerospace sector, and I'm counting on you to fund those educational opportunities. All of our students, not just those who can afford it, must have more skills and more knowledge if they're going to be able to compete in this century. In business, they find cracks in the system and they fix them. In government, we find cracks in the system and we study them. With an office of student achievement, we can move to action and fix the gaps, from high school through college, to ensure that our students enter the workplace not behind, but ahead. That's winning in the turn. When we ask voters to invest in education, let's show them they'll be getting their money's worth. Good teachers, good principals, good schools, and the most knowledgeable graduates in the United States.
Speaking of innovation and competition, let's celebrate. Let's celebrate our work on early childhood education resulting in a race to the top award of $60 million.
The government found out what we know. And that is if we invest in early learning and make sure a child is really ready to learn when they hit kindergarten, they're going to succeed in school and in life. We started the department of early learning in 2006 and created a public/private partnership. That small investment will bring returns throughout the life of a child and our state will be better for it. If we invest $411 million in our schools and colleges, if we implement these innovative reforms, and if we use our true spirit, we can give our children the best education in the United States.
So the fourth thing I ask you to do is to create jobs now and for the future, by investing in our transportation infrastructure. We have got to step up for the proper maintenance of our very valuable transportation system, from highways and bridges to ferries and city streets. When we build roads, they don't take care of themselves. When you buy a car, you pay for it. And then you maintain it. You change the oil, you rotate the tires, and you make the repairs. It's the same with our roads and bridges and our ferries. We bought them new, but unfortunately, we didn't put money aside for maintenance. The consequences for us is a wake up call. We're facing a $1.6 billion shortfall over the next 10 years just to maintain our state highways. Without maintenance, that means bad roads, more potholes, more congestion. Further, we're facing a $1.3 billion deficit in our ferry system maintenance. I sounded the alarm last year. And without new funding, our ferry system will not survive as we know it. We will completely eliminate five routes and reduce service and runs throughout the entire system, just to maintain where we are today, we must act. So today, I propose a $3.6 billion 10 year package to create about 5500 jobs a year to maintain our transportation infrastructure across the state. In addition to fee increases, I will ask you to pass a modest $1.50 fee per barrel of oil produced in Washington. Our oil companies are getting all the profit and leaving us with the bill. We can do better.
This package will also get money to our cities and counties to fill potholes and fix their bridges and keep their buses running. It will give them additional money to fix their transit. We can't kick the can down the road and saddle our future generations with the repairs that we need to make. This is the year to act and to approve a jobs package and invest in our future. Our own Bill Gates says the way that you get ahead and stay ahead is educating more people. Attracting more talent. And maintaining and building better infrastructure than the other guys. We're better than the other guys. If we aren't, our businesses and our workers are going to go elsewhere. Our transportation is the life blood of our economy. It brings goods to market and promotes our tourism industry. If we don't grow, we will come to a standstill. So this summer, I created Connecting Washington, a task force to look at how to build our economic corridors. This 30-member group realized that our challenge is big, and our time is short. It's time for all of us to have a serious conversation with Washingtonians about the importance of building new infrastructure, that our businesses and their employees need. Even in these hard times, Connecting Washington recommended a minimum $21 billion investment in our vital economic corridors. These projects and more demand serious attention. The Columbia River crossing, Spokane's north/south corridor. Snoqualmie pass. Route 167 between Tacoma and Puyallup. A news 144 car ferry, and I-5 at joint base Lewis/McChord. Consider this, consider this. The old and failing Columbia River crossing supports $40 billion in commerce a year. And 130,000 jobs in warehouses and distribution centers near the ports of Vancouver and Portland alone. Yet the northbound bridge was built in 1917. It was built to accommodate horse and buggy. And it is still the last stop light on I-5. Or consider this. Snoqualmie pass is the only direct route for products flowing from eastern Washington farms to our Puget Sound ports, and for products flowing from those ports to eastern Washington and beyond. That's $80 billion in cargo through that critical corridor every year. Now, our record of success with transportation projects is strong. From the 2005 voter approved gas tax, we are close to completing all 421 state wide projects. 88% have been completed early or on time. 91% on or under budget. That's real accountability. And we can do it again. Educate ourselves, educate the public, and then let's build a better transportation system than the other guys.
People often ask me if we can come back from this great recession. I tell them we can, we will, we are. Our ports and their good paying jobs are booming. International trade is surging. With year over year exports up nearly 30%, and our second biggest export after transportation is agriculture. New free trade agreements with South Korea, Panama, and Colombia will open new markets for Washington. Our exciting global health and life science sectors are spreading not only beyond Puget Sound, the Tri-Cities, Spokane, and Vancouver, they're spreading around the globe. Our software and IT industries are thriving, including a double digit jump in Microsoft earnings just last quarter, and an 8% jump in software jobs. And how about the backbone of our manufacturing sector. Aerospace with its 650 companies in Washington. 2011 was a historic year for one of Washington's signature industries, and it took a village to make it happen. It started last February. When Boeing won the $35 billion contract to build a new generation of 200 Air Force refueling tankers, and all of us -- labor management, democrats, republicans -- worked together to bring that contract home with its 11,000 jobs.
In September, the first Boeing 787, the game-changing composites airplane, 20% more fuel efficient and as high tech as they come, was delivered to Al Nippon airways. The 787 is the future and it's built right here in Washington state.
In December, the Boeing company and the machinists agreed to a historic five year contract, assuring the 737 max would be built here with a projected 20,000 jobs and $500 million in tax revenue, and that was followed by the largest order ever for Boeing, 208 airplanes, all of them 737s or the 737 max, we're winning in the turn and the aerospace industry in Washington state.
But for us, for state government, what we saw in 2011 reminds us that when the economy comes out of this turn, we must already be down the track while our competition hangs back. It's our turn to win in the turn. And it's our responsibility. Now, I've asked you to pass the budget. Send a revenue proposal to voters. Reform education. And invest in our transportation infrastructure to create jobs now and into the future. That's a bold agenda. And it involves risk and courage.
But I have one more very important request. This is about our values. Our Washington has always fought discrimination. It is time for us to do it again. It is time for marriage equality.
Let's tell the children of our same-sex couples that their parents' relationship is equal to all others in this state. Let's pass a marriage equality bill in the great state of Washington.
Ladies and gentlemen, as you labor in the next 60 days, I respectfully ask you to take a minute each day to stop and to reflect. Take time to look back and see how we came to be the great state that we are. Take time to understand and appreciate what our greatest visionary parents and grandparents did for us, what Governors, legislators, and voters did for us when it was time to act. And remember, this is our time. It's our time to give our children what we were given, a good education. Our time to modernize transportation, to put people to work and to make sure that they have jobs in the future. Our time to leave no one behind and our time to protect our communities. The future of our state is in our hands now. We have to do what is very hard, but do it, we must. And together. Let's show the people that in our Washington, we work together. Democrats, Republicans, and Independents. And let history reflect that we took the risks, that we were courageous, we were determined, and we were bold. Let's win in the turn and leave an even greater state to our children and grandchildren. Thank you. God bless you. And God bless the great state of Washington. [APPLAUSE]
Governor Chris Gregoire delivering our final state of the state address in which she called for a bold agenda. She wants lawmakers to quickly pass a budget. They got off to a great start in December, she said. She asked the voters to approved a temporary half-cent sales tax increase. She called for school reforms. She also called for a $3.6 billion transportation package. And she also called for the passage of legislation that would allow gay marriage in Washington state. In a 60-day session, as we noted before, that's a whole lot of stuff to try to get done.
It's a heavy, heavy lift. And the legislature is going to focus on the first priorities, which is just adopting a supplemental budget that meets their constitutional responsibility to balance the budget. Getting the rest of it done is going to be very, very difficult. And I applaud the Governor for focusing on transportation. She's right about all those projects. My frustration is we haven't heard anything about this for months. And it takes a long time to build up support for this.
And there's a conflict here. She's asking for a sales tax in the spring and another tax in November. That's plenty of time for voters to sort of get over one or reject one and go to another one. But there's a lot of talk in there about education. But the problem is by putting all this stuff in the sales tax package, that education stuff in there, when she says she wants to out-educate all the other states, you can't risk spending that you would put into education, and so that you're out-educating. That doesn't work.
I would expect that she would be talking all about education and school reform. But the fact that she's putting in $3.6 billion with regards to transportation. That's our jobs program. And it's so nicely spread out throughout the state, wherever there are going to be very definite swing campaigns. I thought it was interesting. I was surprised by the transportation, but the rest of it was vintage and legacy Chris Gregoire.
An image came to my mind while she spoke, that is watching the burn barrels outside the Boeing plant during those strikes and stopping off and getting some oranges. But recently, we have seen that despite the adversarial relationship that was built up, these two long-time adversaries recognized the need for each other and came to agreement. The old saying goes, nothing like a hanging in the morning to focus the mind. I would like to think that our political class, particularly with the democrats with their entrenched public employee unions, republicans having been infected with the disease of Eymanism, can shake some of this off, and again, follow the example of Boeing and the machinists in terms of working for the state.
We need to go back to Olympia and to the republican response that's going to be delivered by the ranking republican on the Senate ways and means committee, and that is Senator Joe Zarelli from Richfield. Let's go to Senator Zarelli.
State Senator Joseph Zarelli:
Hello, I'm Joseph Zarelli, budget leader for the Republicans in Olympia. Thanks for the opportunity to speak with you about issues that are critically important to our state. The Governor made her final address to the legislature today. Before I respond to some of what she said, I want to wish Governor Gregoire well during her final year as Governor of our state. She has served the people of Washington with distinction for many years and she deserves our thanks that she and her family move forward a new phase of their lives.
Not surprisingly, the Governor and those of us on the other side of the aisle haven't always seen eye to eye. But the respect we have for each other has allowed us to work together. And I fully expect that will continue this session. I don't think there's any doubt that the budget situation is the legislature's top priority. Closing the gap that is now about $1.5 billion will require some difficult choices. But as the saying goes, it is what it is. To me, the legislature is at a fork in the road. We can go for a short-term fix that is based on new, and in some cases temporary revenue. Or we can seize the opportunity that will help make state government more efficient, cost effective, and sustainable now and for years to come.
There will be disagreements about which direction to go. But fortunately, our legislature is not like congress, we are all Washingtonian. You may recall how democrats and republicans in the Senate worked together like never before on the budget that was adopted this past year. That spirit of cooperation and trust is still alive. And I expect it will help to see us through the next couple of months.
There are two sides to the budget equation. There's the same two sides you know from your household or business. One side is revenue or income. The other side is spending. Let's take an honest look at those. Some point out that revenue from taxes and other sources is continuing to grow at a rate of almost 7%. That's true. But don't take that to mean the state is rolling in money. While the rate of revenue growth is about average, the level of revenue coming in is about where it was six years ago. Over on the spending side, some would have you believe that state government has cut spending by $10.5 billion in the last three years. The reality is actual spending is down less than $2 billion from the peak spending level before the recession. That's a far cry from the $10.5 billion some are claiming. Which were only reductions in anticipating spending. I trust you to handle the truth about the state's finances.
So here's the bottom line. Revenue is about where it was six years ago. The population of our state and demand for state services is up from six years ago. Combine that with the drop in anticipated revenue we saw this past year, and the result is a very difficult budget situation. But do not be misled by claims the government has cut to the bone. Government can become more efficient and cost effective if the legislature wants it to.
What can the legislature do to stretch the revenue level of 7 years ago to meet the needs of today? Here's how I would approach it. First, we prioritize or re-prioritize. Think of the budget as a box that is based on the existing level of revenue. We build the budget by putting the highest priority items in the box first, things like education and public safety and services for the most vulnerable. When all the existing revenue is appropriated, we close the box. For things left outside the box may be priorities, but they're lower priorities. The things that are nice to do, but are not things government must do.
Second, we look at reforms. For instance, we look at how tax dollars are being spent and ask whether we can stretch them. If so, we might be able to put more things in the budget box. Reforms can and should look at both spending and tax policy, but reforms are not strictly about dollars and cents. Reforms are things that will result in a better, smarter, and more effective state government. A reform may be about improving outcomes more than saving money. A reform may result in benefits now or a few years from now. A reform might mean the state gets out of an activity entirely or changes how it delivers services. Let me share some examples of the reforms we should be considering in the next two months. Our state spends $2 billion in the current budget just to service the amount of debt we carry. We should ask the people of our state to amend the constitution and lower the permissible debt. Over time, that would free up hundreds of millions of dollars for other priorities. Health care consumes a huge amount of taxpayer dollars and there's only so much we can do about the costs of publicly funded health care due to federal rules. But we could look at adjustments in co-pays and premiums and eligibility for those who are getting public subsidies. I think we should consider that before anyone suggests cutting services to developmentally disabled people.
Our K-12 education system, which accounts for a majority of spending, also offers opportunities for reform. Some reforms would save money. I've suggested a way to shift the burden of K-12 funding to the state. That would take the pressure off local school levies. And it would help in responding to the supreme court's recent ruling about education funding. There are already discussions underway between democrats and republicans about that. Other reforms would lead to better outcomes for our students. We all recognize how much influence teachers have on student achievement and the importance of having a great teacher in every classroom. Senator Steve Litzo and Senator Rodney Tom are working across the aisle and making significant progress on policies that would promote and support teacher excellence.
There's a reform that combines K-12 and health care. If the legislature made it possible for public school employees to purchase their health care benefits at a state wide level, as state employees already can, it would help on two levels. Many school employees would see huge savings in their household budgets and their school districts would free up money that would go into classrooms instead. Senator Steve Hobbs is helping lead the way on that reform. Part of our solution to the budget situation would require both parties to take aim at the sacred cows of government. For my friends on the democrat side of the aisle, that means having the courage and conviction to look at several ideas that are normally unpalatable to them.
For instance, whether the state can continue to fund social services for non-citizens at almost $200 million a biennium. Whether the state can continue to spend $150 million a biennium due to lawsuit abuse. That is more money than we spend on state parks. Whether public employees should be enrolled in a pension system more like we see in the private sector. This would allow employees to have more control while taxpayers would see more stability and certainty when it comes to costs. Whether the legislature should have more tools available to it in an economic crisis.
For example, public employees' compensation accounts for a huge part of spending, but it's one of the few areas that is unlikely to change during budget discussions. That's because the legislature isn't allowed to amend labor agreements on its own. Even at times like this.
I'd also like to see the legislature make good on its promise of 10 years ago to farm out government projects where the private sector can do them more efficiently. As I ask my democrat colleagues to look at those items, likewise, my republican colleagues must be willing to look at tax policy reforms. Just as we know there's room for improvement on the spending side of the equation, let's acknowledge that our tax code is imperfect as well. We must be willing to examine how it can be improved from a policy perspective. Let me be clear. I oppose the Governor's proposal to increase the state sales tax by a half a billion dollars. Partly because it is a temporary fix that does nothing to improve our budget sustainability. But also, because there are other places to reform our tax code. Changes that would not force everyone to pay more.
To that end, I have suggested that the legislature dial back some of the preferential tax rates for certain industries and use a portion of the resulting revenue to address the competitive disadvantage faced by new businesses because of our business and occupation tax. This proposal would benefit more than 90,000 businesses over four years. It would also address core failing of our current tax policy, namely the competitive burden the B&O tax puts on startup businesses in the state. That can only help to stimulate the private sector job growth our state needs. The sort of job growth that raises consumer confidence and ultimately generates more revenue through the existing tax structure. The Governor and others are pointing to reforms that have been made in the past few years. Some of them, such as the agency consolidation effort spearheaded by Senator Michael Baumgartner this past year have already produced savings. But in my mind, the legislature has barely scratched the surface when it comes to reforms. After we make sure the dollars are given to the highest priority items, the next step, if necessary, is to look at revenue options. Not because it's a good policy in and of itself, but it's better than the other option of making cuts to the core parts of government.
Having said that, I am convinced that if we go through the first two steps, prioritize and reform, we will not need to reach the third step. Finally, underlying all of these budget decisions should be the notion of sustainability. I've had friends from both sides of the aisle, from Senator Annie Hill to Senators Kastama and Pridemore voice to me the affirmative belief that we must make choices that put the budget on a sustainable course.
Let me say in closing that I recognize the difficult choices ahead. But as the proverb goes, there is opportunity. The 2012 legislature has the opportunity to reform government and make it more sustainable, to give you a government that has its priorities straight and doesn't waste your money. And we will work in a cooperative way to move our state forward. Thank you for watching.
Senator Joe Zarelli delivering the republican response. He said that he wanted to prioritize and reform. Do you see this as him saying no way on a sales tax increase?
The Governor is looking for a quick agreement on sending a sales tax to the ballot so they can quickly finish up. He has some other ideas about tax reform. That's going to be very hard for the Governor to get her specific proposal through the Senate without Joe Zarelli.
This is a battle of what happens first. What he's saying is let's reform first. What the Governor is saying, let's hurry up and get the tax increase on the ballot. What I heard, and maybe I'm missing something, is reforms come first, and there are no other options, then he said you talk about revenue. And there are a lot of other reforms that set that up.
Quickly, it's a timing issue too.
I didn't see any vision there. I'm reminded of Mayor Daly's great blooper in Chicago, we must rise to higher and higher platitudes. If republicans want to take that power in the state, they're going to have to give a better future for it.
And I heard nothing new from Zarelli other than everybody else, but him should be willing to make some changes. I looked at that and thought it's going to be very complicated, but I still say we get out on time.
Well, we know this for sure. They have 60 days to solve all this stuff. And the first thing that needs to be done is trying to get that budget in order, trying to figure out the revenue shortfall. Also, in February, we have the next revenue forecast from the state. We'll see how that all works out. That's all for this KCTS 9 Connects special report.
Our coverage of the state of state address coming up this Friday on KCTS 9 Connects. We'll talk with Senator Ways and Means Committee Chair Ed Murray, a Seattle democrat, and State Senator Joe Zarelli. We'll talk more about the budget issues. He's the ranking republican on the committee. We'll discuss that with him. What do they think the legislature will be able to accomplish in the 60-day session? And a reminder that you can stay connected to us anytime by visiting our website at KCTS9.org. Follow updates about news and programming on twitter, and become a fan of KCTS 9 Connects on our Facebook page. For our round table, Chris Vance, Cathy Allen, Joni Balter, and Joel Connelly. And all of us here at KCTS 9 working so diligently to bring you this state of the state address. And also to the folks at TVW who provided us the coverage down there in Olympia. We thank you and we'll see you on Friday night.