The case for state spending guidelines — no matter the source

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The case for state spending guidelines — no matter the source

By Karinda Harris, Betty Jane Narver Fellow - March 31, 2011

A number of tools are in place to ensure transparency in state spending; some more effective than others. However, all forms of state spending should be held to the same level of review and accountability.

Washington state uses performance-based contracts in its contract spending, which is payment to individuals and organizations for goods and services.  Performance-based contracts specify deliverables, performance measures, and outcomes.  Contract payment is contingent on meeting those specified deliverables and measures.  This is an effective way to track state spending.

On the other hand, the state budget includes hundreds of special tax exemptions, credits, preferential rates, and other tax preferences or “tax expenditures.” State spending on tax expenditures is  not based on meeting deliverables nor the original intent of the expenditure, but on the existing tax code — which is rarely reviewed.  This does not provide us with a comprehensive picture of state spending.

One good example of transparency and accountability is House Bill 2106, enacted in 2009, which requires the Children’s Administration within the Department of Social and Health Services (DSHS) to convert all existing contracts for child welfare services into performance-based contracts. Social workers are held to specific contract deliverables for payment. This law restructures the way social workers provide services, with the goal of increasing the quality of care and services for children and families.  The statue seeks to implement the necessary accountability in state spending.

In contrast, there are no accountability or transparency measures in place to hold recipients of the Washington FilmWorks Contributors B&O tax credit responsible to the state. The only qualifying activity for the tax credit is a contribution to the motion picture fund that offers assistance to filmmakers working in our state. The maximum individual credit is limited to the lesser of $1 million or the amount contributed to the motion picture fund.  There are no other requirements or accountability measures.

Consider another comparison — the accountability in contract dollars for Department of Transportation (DOT) construction projects to the B&O tax exemption on seafood processing.  DOT contracts are held to outcomes of reducing traffic grid, quality in design, timeliness, and other deliverables for payment.  Performance-based contracting helps to ensure that DOT partners carry out contract purposes in order to receive government funds.  No such deliverables are in place for seafood processors; they simply complete an annual survey on business activity after receiving their exemption.

The table below illustrates the differences in the two types of spending:

 

Types of Spending Accountability? Transparency?
Child Welfare Service Contracts within DSHS Yes, requirements to deliver specific contract outcomes Yes, through performance-based contracts
Washington FilmWorks Contributors B&O Tax Credit No accountability mechanisms No transparency measures
DOT Construction Contracts Yes, requirements to meet specific contract deliverables Yes, through performance-based contracts
B&O Tax Exemption for Seafood Processors No accountability measures Very minimal, businesses complete annual survey

 

 

Whether it is in the tax code or directly in the state budget, all spending should be held to the same level of accountability, oversight, and transparency.  Tax expenditures or spending through the tax code should have the same mechanisms as those in performance-based contracts to ensure their benefit to the state and its taxpayers.  It is time for all state spending to be held to the same standards.

Washington’s recovery requires a rational, balanced approach to the ongoing economic crisis.  Our new Framework for Prosperity tool provides a common sense, vision-based approach that includes measuring our progress toward key public priorities and securing our fiscal future through long-term reforms.