Where are we headed as a state?

I had a provocative conversation today with my friend Denny Heck this morning on the future of Washington State. We wrestled with the question, where are we headed?

A few things jump out and set the stage for thinking about the question.

First of all, we are in one hell of a fiscal mess. The state does not have the dollars to compete in the future. We ended up this year with a record budget deficit that equalled about one-quarter of our maintenance level state budget. We filled the whole with about $4.0 billion in cuts, $3 billion in federal stimulus dollars and another $2 billion in short term fixes. The bottom line, we are likely to be in the same mess in two years as we are in now. Right off the bat, the federal stimulus dollars are unlikely to be there and the $2.5 billion in short term fixes won't work for four years in a row. In 2011, we are unlikely to find another $2.5 billion in short term fixes. We start off in a $5.5 billion hole. Can we grow out of this. I don't know.

Meanwhile we have cut shredded our safety net and damaged both our k12 and higher education capacity with cuts to college faculty, teachers, health care for the working poor and services to the mentally ill, disabled and the poor.

Secondly, our economy is down but we are well positioned for a recovery. We are well set for employment growth in the next big wave of green jobs and clean energy. Our information technology industry based on employers like Microsoft, Amazon, Adobe and many others looks stable and growing. Our health care industry is anchored in federal research dollars at the University of Washington, a strong research based biotech industry and a powerful health care cluster in Spokane. Our diverse and high value-added agriculture industry is likely to continue to be our state's biggest industry with value-added and wages rising as it becomes more tech dependent. Our industries have decades of experience in the global economy and we have become the most trade dependent state in the nation.

Thirdly, we face big questions with many of our traditional industries. Boeing has already moved their corporate headquarters out of the state. After a bruising strike last Fall, the Chicago company has threatened to move new lines of commercial airline production to nonunion states.

Weyerhauser and much of the forest products industry is facing a major upheaval that could transition more of the industry out of the state into the South, Russian and parts of Asia.

Finally, unemployment is likely to remain high for another two to three years. Income inequality in our state is at the highest level since statistics have been kept and cuts to the safety net threaten to make it worst. Our tax system is the most regressive in the country. But we have a highly trained workforce and excellent institutions of higher education who have the potential to counter the trend if we can find a way to restore the knowledge capacity we have just cut.

We have tremendous problems but we also have all the ingredients for success. I think there are five key steps that need to be taken in the next four years. We need to:

1. Reform our tax system and rebuild our fiscal infrastructure.
2. Restore cuts to k12 education and higher education systems and make smart investments in education reform and in higher education instruction.
3. Continue to clear the way for a strong clean energy and green jobs sector to grow into our industry of the future.
4. Build a stronger and flexible labor movement in our state that can level the economic playing field and do a better job of building more stable relationships with our major employers.
5. We need to provide stable and workable incentives to retain our state's traditional industries.

I'm hoping to focus future blogs on each of these issues.