What’s Missing from What You’re Hearing About Washington’s Budget

Last June, Gov. Jay Inslee made headlines when he signed a state budget totaling $43.4 billion in spending for 2017-19. Which of the following statements about that budget is true?

A. State spending will grow 15.3% by 2019.
B. State spending will grow 6.1% by 2019.
C. State spending will grow 3.2% by 2019.
D. State spending will grow 0.27% by 2019.

If you chose any answer, congratulations: you’re right (technically)! Let me tell you why – and what you can do with the often-contradictory things you hear about the state budget.

A. “State spending will grow 15.3% by 2019”

Washington’s Fiscal Year (FY) 2017 budget was $19.6 billion, and the FY 2019 budget is $22.6 billion, which is a 15.3% increase.[1] A “double-digit increase” isn’t only helpful for writing catchy headlines – it’s also useful rhetorical bait for conservative and anti-tax (well, anti-tax for the wealthy) activists. But this easy-to-understand calculation is also a pretty misleading one, as we’ll see below.

B. “State spending will grow 6.1% by 2019”

This figure takes inflation into account. Like every market, the amount the state pays for workers and goods changes from year-to-year – usually upward. So unless we account for inflation, simply comparing one budget year to another isn’t “apples-to-apples”.

Here’s an illustration of the difference – in the graph below, the “nominal” line shows spending in current dollars, while the “real” line show the equivalent amounts in 2017 dollars: [2]

Adjusted for inflation, FY 2019 spending ($20.8 billion) will be 6.1% higher than FY 2017 ($19.6 billion) – less than half the increase shown in answer A). But some important information is still missing.

C. “State spending will grow 3.2% by 2019”

Since Washington is a growing state – with just over 6 million people residing here in 2002, and more than 7.6 million projected in 2019 – our budget and spending comparisons also need to account for the fact that the cost of public structures and services goes up as population increases.[3]

To account for population change, we can use the same nominal and real numbers from above and divide by the state’s population for the corresponding year to get spending per capita:

So: adjusted for both population and inflation, the state spent $2,643 per capita in 2017, and will spend $2,728 in 2019 – an increase of just 3.2% ($85/person). You won’t see that figure in many headlines, let alone hear it in talking points from conservative legislators and activists advocating for budget cuts.

This particular chart also highlights why it’s important to know how a reference year fits into the bigger picture. Even using these population- and inflation-adjusted numbers, you could truthfully say that in 2019, Washington is a) budgeted to spend 12.6% less ($395/resident) than it did 17 years ago; or b) spend 14.9% more ($355/resident) than it did 5 years ago.

It all depends on the story you want to tell.

D. “State spending will grow 0.27% by 2019”

Political rhetoric commonly cites spending as evidence government is “too big” – but what exactly is the ruler used to make this judgement? Compared to Washington’s economy (Gross Domestic Product), state spending is well below what it was 10 years ago, and will rise just one-quarter of 1% (0.27%) from 2017 to 2019 [4]:

It’s the same story when you measure by state total personal income – state spending is at historically low levels, and is projected to rise a mere 0.16% from 2017 to 2019 [5]:

Why It Matters and What You Can Do

The old adage that “statistics can be made to prove anything – even the truth” seems applicable here, if a touch too cynical for my taste. And media coverage of Washington’s budget too often revolves around political wrangling, last-minute deal making, or short-term analysis, which doesn’t help.

The case I’m making is not to ignore the numbers or the news, but to remember: without the context of inflation, population, and historical perspective, budget numbers don’t tell us nearly enough about what our government is doing.

So the first thing you should do when you encounter news or opinions on the state (or any other government) budget – whether from a legislator, media outlet, or other source – yes, I’m looking at you, sketchy Facebook meme! – is pause to find out:

  • Are the numbers adjusted for inflation?
  • Does it account for population (or change in enrollment, number of people served, etc.)?
  • What’s the time period of reference for a particular percentage/dollar change? What happens if you use a different year for comparison?
  • Who came up with the source data, and is it public so I can I see it for myself?

If your source can’t or won’t give you those answers, they haven’t done their homework (or they don’t want to tell you the results), and you really can’t rely on them to provide a useful perspective.

Second, remember that Washington’s budget is really a list of public values. For example:

  • In our current society and economy, every child needs a lot more education than they did 50 or even 30 years ago – starting before they’re 5 and continuing after they’re 18. So we fund pre-K, K-12 and higher education.
  • A healthy community and environment are essential not just for our health, but for our quality of life and economic development – so we fund the Department of Ecology, Department of Health, and similar agencies.
  • We consider beautiful natural spaces a birthright for current and future generations to enjoy – so we fund State Parks and the Department of Natural Resources.

When you read or hear someone opine that “the budget” for something is too big or too small – or that some unit of government is spending too much or too little on something – they’re actually telling you something else: that it’s a lower (or higher) priority than it ought to be.

Now, there’s nothing wrong with that – just don’t get bogged down in their numbers (unless they haven’t given any, which ought to be a red flag!). Instead, think about the needs and priorities of the wide variety of families, neighborhoods, and communities in (as the case may be) your city, state or nation.

Then ask that person to explain exactly how their proposal will affect the structures and services necessary to deliver on the public values you care about. See what they have to say for themselves. You’ll learn more from that conversation than any graph or spreadsheet can tell you.


[1] Nominal budget data provided by fiscal.wa.gov, Historical Spending (annual), “Near General Fund – State” (NGFS). NGFS includes the General Fund, Education Legacy Trust Account, Pension Funding Stabilization Account, and Opportunity Pathways Account. The largest of these is the state general fund, which is the fund in which most general revenues are deposited; the other funds have more specific purposes. Washington receives additional federal funding (not shown here) that is reserved for specific services, such as Food Stamps, Medicaid, and children’s health. The state legislature also adopts separate budgets for transportation (using the gas tax and other dedicated revenue) and capital projects.

[2] Real (inflation-adjusted) numbers calculated by the author using the Implicit Price Deflator (IPD) provided by the Bureau of Economic Analysis and economic estimates from the Washington State Economic and Revenue Forecast Council. The IPD is a measure of inflation, similar to the Consumer Price Index – however, the IPD includes a measure of inflation specifically for state and local governments, which is used here.

[3] Yes, I hear you there in the back, and I get that not every person uses everything our state has to offer, and different public structures/services cost different amounts. Here’s the thing: in general, everybody benefits, directly or indirectly, when our state government delivers on widely shared/supported public values. Think of it like going to a buffet dinner. Everyone pays at the door, and everyone has access to the entire buffet (in this case, our state’s public structures/services). Maybe you may only eat salad and jello, while others enjoy turkey and potatoes.

[4] State Gross Domestic Product data through 2017 via U.S. Bureau of Economic Analysis, “Annual Gross Domestic Product by State”; 2018-2019 are author’s estimates, based on 3-year rolling average of prior years.

[5] Per Capita Income data through 2017 via U.S. Bureau of Economic Analysis, “Annual State Personal Income and Employment”; 2017 data based on Q1-Q3 average of same year, 2018-2019 data are author’s estimates based on WA Economic and Revenue Forecast Council reports.

Originally published at Economic Opportunity Institute

Dishonest, negative campaign ads by Republicans in Bellevue

I got a flier in the mail today from Friends of Jared Nieuwenhuis, Friends of Steve Fricke, and Friends of Phil Yin that says “STOP THESE CANDIDATES FROM BRINGING HEROIN INTO BELLEVUE.” The candidates referred to are Karol Brown, Lynne Robinson, and Janice Zahn.

What a scare tactic! If this isn’t negative campaigning, I don’t know what is.

Karol Brown has repeatedly said (including in comments on nextdoor.com, at a half dozen candidates forums, and on her website) that she opposes bringing safe injection sites into Bellevue. The City Council has effectively banned such sites from Bellevue for the foreseeable future. Besides, it’s a medical issue and shouldn’t be politicized!

The flier makes it appear that the candidates, or people who support such sites, want to bring heroin into Bellevue. Ridiculous and not true.

KAROL OPPOSES BRINGING SUCH SITES TO BELLEVUE and has repeatedly said that!

Lynne Robinson voted against safe injection sites when the issue came up for a vote on the city council.   Janice Zahn too said she opposes them, on nextdoor.com. The headline “WRONG ON HEROIN” is hitting below the belt. It gives the impression that these candidates want to bring heroin into Bellevue.

Image of back of campaign flier by Friends of Jared Nieuwenhuis, Steve Fricks, and Phil Yin

Such dishonest politicking (swiftboating, fake news) is customary at the national level. How unfortunate that we have it locally too.

Please don’t degrade local politics in a similar way. The three females have stated they oppose safe injection sites in Bellevue. The three male candidates are playing a transparently dirty trick. Besides, there is an epidemic, and addicts are dying. The people who propose safe-injection sites in King County are trying to save lives. They’re not trying to “bring heroin.” Heroin is already here. The City Council has voted against the sites for Bellevue. Please stop exploiting this issue for political purposes.

As further evidence of the politicization of the issue: “Chris Vance, a former state Republican Party chairman, said he believes those leading the I-27 campaign sincerely believe safe-injection is bad policy. But they also see it as a way to make political gains.” https://www.seattletimes.com/seattle-news/politics/bellevue-bans-safe-injection-sites-for-heroin-users/

Image of back of campaign flier by Friends of Jared Nieuwenhuis, Steve Fricks, and Phil Yin

Opponents of safe injection sites passionately oppose/attack any politician who even refuses to agree to ban the sites in King County. And if the politician votes against the sites or announces their opposition, they are accused of lacking the courage of their convictions and of wanting to bring heroin into Bellevue. Heads you win, tails I lose. Meanwhile, people are dying and the homeless languish on the streets.

Wanting to leave open the possibility of safe injection sites in King County is very different from wanting to bring heroin to Bellevue, which is what the ads claimed. The fact is: people are shooting heroin every day — it’s a national crisis — and people are dying from overdoses every day. A safe injection site makes a lot of sense for the addicts who are still using. It’s not encouraging addiction, any more than condoms encourage unsafe sex. Abstinence programs do not work in either case.

Some more attack ads

This one is paid for by Friends of Steve Fricke:

And here’s an ad by the Master Builders:
Master Builders attack ad

"another $500 million regressive sales tax increase"

The Official Local Voters’ Pamphlet for the primary election in King County includes statements for and against Proposition 1, which would impose a 0.1% increase in the sales tax in order to fund arts, science and cultural enrichment programs.

The statement against Proposition 1 states, “it is unwise and inequitable to impose another $500 million regressive sales tax increase on overburdened King County taxpayers.

The interesting thing about this statement is that one of the co-authors is state Senator Dino Rossi (45th LD), a Republican who ran for governor.  Republicans are, with few exceptions, adamantly opposed to fixing our regressive tax system.  In the latest session of the legislature, they refused to agree to a capital gains tax and instead insisted on raising real estate taxes to fund education. Real estate taxes are more regressive than a capital gains tax, though not as regressive as a sales tax.

It’s disingenuous for politicians who oppose progressive taxation to use an argument about regressivity to attack a ballot initiative that increases the sales or real estate tax.

At least they acknowledge that the problem exists.

I note, by the way, that the legislature, including Republicans, voted, in 2015 to raise the regressive gas tax by 11.9 cents.   See http://www.thenewstribune.com/news/politics-government/article43025553.html  and Gas tax increases by 7 cents in Washington state.

Republicans raised regressive taxes

Is K-12 education fully funded? Not so fast

In 2009 I voted against an “education reform” bill that, amidst devastating cuts, promised fully-funding K-12 education by 2018. As I asked then, how could we expect future Legislatures to possess the courage of our convictions if even we didn’t possess that courage?

The 2009 bill’s promise was to avoid litigation, now known as the “McCleary case,” over K-12 funding inadequacy. The Washington state Supreme Court saw through the smokescreen and, in August 2015, began imposing a $100,000 daily contempt-of-court fine upon the Legislature for not progressing toward its self-imposed goal.

This year’s never-ending legislative process produced what Gov. Jay Inslee proclaimed “a historic budget that fully funds our schools for the first time in more than 30 years.” Other Democrats echoed his exultations, labeling “Democratic” a budget borne out of a Republican Senate, a claim that ignores nine Senate Democratic no votes, and frothing in a press release that it “adds $7.3 billion to Washington schools.”

Not so fast: Education isn’t fully-funded.

The $7.3 billion figure reportedly fails to subtract billions lost from local property tax revenues. The Legislature has added by subtraction before, as it did in 2013 by shamelessly counting $295.5 million in denied K-12 cost-of-living increases toward a “$1 billion funding increase.” It’s doubtful the high court will be fooled.

 The budget also spreads new funding over four years, when truly meeting McCleary might require $5 billion more just by next year. It relies upon fickle property tax revenue and various gimmicks, like diverting $5.5 million from the litter account. It may also fail to fix a broken mental health system — where federal contempt-of-court fines have exceeded $21.5 million so far this year.

Political triumphalism is inevitable. But Carter McCleary was 7 years old when the McCleary litigation was filed. He graduated from high school last month. My son starts high school this fall. Am I wrong to feel impatient about the state meeting its constitutional “paramount duty”?

I also worry about the budget’s unsustainability. As a House member, I voted against budgets on that basis.

The 2007 budget, for example, was “balanced” by breaking a 1998 pension promise — largely for teachers. The state reacted to the Great Recession by decimating programs and denying state workers’ wage increases for eight years. It was heart-wrenching.

Washington continues to use baling wire and volatile revenue sources for budgets, and we are only ever a volatile president’s actions (perhaps tweets) away from another recession. The Washington state Supreme Court has, rightly, insisted on “dependable revenue sources” for K-12.

You can’t separate a budget from its shaky revenue foundation. So why should the public demand progressive tax reform if even Democrats claim progressive aims were “fully” achieved by regressive means? Settling for less is learned helplessness.

It happened in 2009, when I opposed cuts initially characterized as “cuts that will kill” — in a half-hearted case for new revenue — that rhetorically transformed into “cuts with a conscience.” The next year, Democratic super-majorities mustered courage and finally raised taxes upon … candy. Budget secrecy — culminating this year in voting on a budget no one had read — hardly helps make the tax reform case, either.

The public can handle honesty. While it might not serve the aims of political rhetoric, it would be honest to admit trying hard, as I know many legislators did, but falling short in key respects. The public must, again, hope for that honesty from the state Supreme Court.

Originally published at HeraldNet

Senator Reuven Carlyle explains why he voted against the McCleary deal: the entire burden is placed on the middle class

Video: Sen. Carlyle’s McCleary Floor Speech


Reuven Carlyle explaining his opposition to the McCleary deal

(Excerpts)

70% of low income people in King County are going to see a tax increase.
There is a perception that this is about taxing rich folk in the big cities [but it’s not so].

There is not one business in this state that does not win in terms of lower taxes in this deal. And the middle class is going to feel it deeply and seriously.

The entire weight, the entire obligation, the entire bill is being sent to the middle class, seniors, working folk, renters, and so many others. We have lots of people who are, effectively, house rich and cash poor because we’ve had an explosion in the past 10, 15 years of value in homes.

To put all of that burden, in a state with the most regressive tax system in the nation, all of the burden, exclusively on the middle class . We’re better than this. We could have made it fair, we could have made it equitable, and we could have made it widespread.

We haven’t closed any tax breaks of meaningful size. We haven’t done anything. We haven’t asked anyone else [other than the middle class] to contribute. Hundreds of millions of dollars in business taxes will be reduced. Hundreds of millions in this deal. And yet a retired grandma in Ballard will see 100s of dollars of increase for a home she’s lived in for 20 years.

To put that entire bill on that grandma in the middle class is just not right.

This middle class property tax increase is just too much, too high, too unfair, and too narrowly applied.

A tale of two studies: poor research leads to poor findings on minimum wage

Seattle’s economy is booming: construction everywhere, crowded streets and transit, housing costs soaring, bustling neighborhood restaurants, and a 2.6% unemployment rate. Much of this growth is driven by high wage-tech jobs and the spillover effect of all those workers eating out, shopping, and paying premium prices.

It’s in this context that Seattle instituted its higher minimum wage ordinance in 2015. In the past week, two studies have come out with very different conclusions on the impacts of those wage increases on low wage work – one says it’s positive, and the other negative. But the two studies are not created equal.

The first study, led by Michael Reich and Sylvia Allegretto based at the University of California, Berkeley, concludes that the 2015 and 2016 increases to $11 and $13 an hour had the intended effects of raising incomes for low-wage workers without having discernible impact on the number of jobs. These findings are consistent with the bulk of economic studies of minimum wage increases over the past couple of decades.

In the second, a University of Washington team concluded that the 2016 wage increase reduced the number of low-wage jobs by 9% and actually lowered the incomes of low-wage workers. This diverges from the majority of economic research. Across the U.S., city, state, and federal governments have changed minimum wages dozens of times over the past two decades. Multiple economists from across the ideological spectrum have studied these changes, and even opponents of minimum wage increases have not found impacts anywhere near the scale of the UW team.

The UW’s counter-intuitive findings underscore several methodological flaws:

  • They limit their study only to single-site establishments, because their data could not distinguish whether employees of multi-site chains – think Molly Moon’s, Mud Bay, Mod Pizza, Starbucks – actually worked inside or outside the city limits. That leaves 40% of workers excluded from their study. It also means that leaving a job at small business for a job at a larger company counts incorrectly as a job loss.
  • The UW team created a control by comparing Seattle’s employment statistics with other parts of the state. But there is no place in Washington that has a similar economy to Seattle. Seattle has an economy more like San Francisco or New York than Everett or Spokane. The Berkeley team used the more accepted methodology of generating a control from similar areas across the country, rather than just the state. Moreover, the Berkeley team compared numbers for the previous 5 years, while the UW only looked at the previous 9 months.
  • The UW study focused on jobs paying $19 an hour or less, making the assumption that fewer jobs in this bracket meant lost opportunity for workers who used to be in this pay range. But what we’re seeing in Seattle is that jobs that used to pay $18 an hour now pay $20 due to competition for employees. In the UW study, this was unaccounted for and incorrectly counted as job loss.

The quality of a study hinges on the quality of its methods. But the UW study was too myopic in its lens. It eschewed all of the hallmarks of good science – including all the data, equivalent control group, breadth of time. There’s a reason its findings go against what the vast majority of previous studies found: the UW study isn’t as academically rigorous.

If something seems too bad to be true, it probably is.

Originally published at EOIOnline

Republicans work hard to main our regressive tax system that benefits the rich

The perennial brinkmanship that the Republican State Senate engages in on the State Budget can best be seen as a concerted effort to maintain the most regressive state system in the United States. Please see the chart from Money Magazine, hardly a progressive publication. Essentially, every two years, the Republicans fight to maintain a system where the middle 60 percent of us pay four times the percentage of our income in state taxes that the top one percent pay and the poorest Washingtonians pay almost seven times the percentage of their income in state taxes that the top one percent pay.

If you earn $379,000 a year or more in Washington State, you are in the top one percent of earners (source: Economics Policy Institute) and the regressive status quo that Republicans fight so hard to maintain means you pay lower taxes. If you earn LESS than $379,000 a year, the Republican efforts to maintain the regressive tax system in Washington State mean you pay higher taxes than you should.

Let me repeat that: If you earn LESS than $379,000 a year, the Republican efforts to maintain the regressive tax system in Washington State mean you pay higher taxes than you should. Perhaps it is time that Washington voters sent Republicans and tax breaks for the One Percent at the expense of everyone else state tax system packing.

Washington State has the most regressive taxes in the U.S.

Refusal to re-balance taxes hinders schoolkids

It’s day 23 of a second special session in Olympia, since legislators couldn’t agree to a state budget before the end of the regular session. Now they have only 16 days left until the new two-year fiscal term. It will be hard to start that without a budget!

classroom

The cause for delay is a disagreement over how to increase funding for the state’s paramount duty: public education. Republicans have proposed increasing property taxes in cities; Democrats have talked about a carbon tax or a capital gains tax. Gov. Jay Inslee suggests a sales tax on goods purchased online. But none of those measure has enough support to pass.

That leaves us with the status quo — which is convenient for avoiding tough political decisions, but atrocious for our kids and schools. The state Supreme Court ruled in 2012 that the state was guilty of underfunding education. Two years later, the court found the Legislature in contempt for failing to remedy this constitutional violation. And in 2015 the Court imposed a $100,000 per day fine on the Legislature for their failure to act, which now totals $67.1 million.

The Legislature has already put a plan for fully funding education into law, but they haven’t given themselves the tools to fund it. Unable — or rather, unwilling — to remedy that fundamental problem, some are now trying to pretend it no longer exists. Both parties have touted the improvements to education funding in the last few years. But it’s like having a house with a leaky roof, then patting yourself in the back for putting on a new coat of paint: the reality contrasts with the rhetoric.

In terms of quality, Washington’s K-12 schools lag behind 19 states, according to the Education Week Research Center: Massachusetts, New Jersey, Vermont, New Hampshire, Maryland, Connecticut, Wyoming, Pennsylvania, New York, Rhode Island, Minnesota, Wisconsin, Maine, Virginia, Illinois, North Dakota, Iowa, Delaware, and Nebraska. Part of those states’ success is their ability to maintain smaller student-teacher ratios: an average of 13 to 14 students per teacher. Washington has the seventh-worst ratio in the nation, at 19 students per teacher.

The only way to fix that is to hire more teachers. And that requires money. What would it take for our state to have class sizes like the states ahead of us? About $1.35 billion a year — but only if we could attract more teachers at current salaries!

Washington teachers are paid about 10 percent less than the national average, so we’re not attracting new talent. A beginning educator now earns only $35,700, even though the Legislature’s own technical working group recommended a starting salary of $54,000 next year. Raising teachers’ salaries to competitive levels would mean $2 billion a year in new public investments.

The Legislature is not even close to reaching those levels of funding. The core problem is that Washington state relies too much on regressive sales and property taxes, which mean poor and middle-class households pay four to seven times more of their income than those at the top. We can’t generate the revenue we need for public education with an upside-down tax system.

There are some options on the table. State law currently allows the very wealthy to accrue profit through stocks and bonds with no contribution to public good. A person pays no state tax when selling high-end financial assets. A capital gains tax — 92 percent of which would be paid by those with incomes over $600,000 a year — would generate about $700 million per year.

It’s nowhere near enough to cover the more than $3 billion we need to truly build a strong K-12 education system. But it’s a step in the right direction.

In the long run, the only realistic way we’re going to ensure educational opportunity is really a right for all children in Washington — and not a privilege for the lucky few — is with broad-based progressive tax reform that reduces taxes on low- and middle-income families, and increases them on the rich.

So far, our legislators have been loath to tax the wealthy. So we are left with this inconvenient truth: The wealthy are protected while the education of our children is undermined. The kids are not all right!

Original: Everett Herald »