Voters getting a greater say over spending

Whether voters approve Initiative 1033 on Tuesday or not, voter control of city and county general fund revenue increases during the next few years will almost certainly come into play.

Both Kitsap County and Port Orchard have experienced significant declines in the sales tax revenue they use to pay operating costs.

The decline in new construction after the housing bubble burst has caused annual property tax revenue increases to be less than before.

Under existing law, regular property tax levies can increase each year by 1 percent plus the amount generated by the value of new construction.

While the construction industry was booming, annual increases generated by new construction caused general fund property tax revenue to rise enough to keep up with population growth and inflation.

The bursting of the bubble put an end to those increases, so it’s possible that future levies will not keep up with inflation and population absent a voter-approved “lid lift.”

If the limits of I-1033 come into effect, property tax levies for the city and county general funds might be reduced each year to keep total revenue from growing faster than inflation and population.

Either way, revenue growth would be controlled by the voters. A lid lift can authorize an increase of more than 1 percent plus new construction.

I-1033 provides for a voter-approved increase in total general fund revenue.

When and if voters are asked to approve one or the other, understanding the effect of the recent recession on city and county general fund revenues will be important.

In essence, a reasonable ballot proposition would ask voters to authorize sufficient general fund revenue to match necessary expenditures.

Under existing law, if sales tax revenue doesn’t increase quickly enough as the economy recovers, a lid lift could be proposed to increase general fund revenues to keep up with expenditures.

Under I-1033, the usual sales tax revenue increases that result from a growing economy could be offset in part by a reduction in property taxes, unless the voters agree to higher total revenues.

Since both city and county general fund revenues have taken a battering during the past two years, voters need to be aware of the starting point when considering the justification for approving any increase.

At the pace it has declined this year, annual Kitsap County sales tax revenue used for general fund operating expenditures will have fallen from the peak in 2007 more than $4 million by year’s end.

Rather than merely trying to control the growth in spending, the county commissioners have had to reduce spending.

Port Orchard’s annual sales tax revenue will have fallen by more than a half million since 2007 — presenting the city council with a budgeting task similar to that of the county commissioners.

If asked to approve higher tax revenue in the next few years, voters have to keep in mind how much the recession caused revenues to decline.

Not all spending increases during the good years prior to 2008 were inarguably necessary, and not all the cuts during the recession were consistent with what voters would want when we aren’t in a recession.

The problem prior to the recession that apparently most voters perceived was too high a rate of spending growth. Even with a healthy economy, the appetite for spending exceeded available revenue.

This same problem will probably exist once the growing economy causes revenues to increase again, but that appetite for spending will start at a lower point than before.

Holding spending growth to a level that keeps up with inflation plus population growth is a good rule of thumb, but the starting point also matters.

After a period of good years, voters ought to require ample justification for exceeding this rule of thumb, since revenues ordinarily increase at least that quickly.

After a recession, the problem could be more complicated.

Voters may have to decide how much of the cuts to restore while also considering whether to support new spending.

Bob Meadows is a Port Orchard resident.