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.

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[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