Report on City Club meeting about the state budget

On June 22, I attended a public forum, “Law and Politics:The State Budget—Searching for Long-Term Sustainability”, at the Rainier Square Atrium in downtown Seattle. The panelists were

• Representative Reuven Carlyle (D-36), Washington State Legislature
• Representative Bruce Dammier (R-25), Washington State Legislature
• Paul Guppy, vice president for research, Washington Policy Center
• Marty Loesch, director of external affairs and senior counsel, Office of the Governor.

The moderator was Joni Balter, editorial writer and columnist for The Seattle Times.

How to achieve a more sustainable budget? How to avoid boom and bust cycles?

Loesch recommended the use of rainy day funds.

Guppy (WPC) said, “Only in government do they call a decrease in growth a decrease.” Guppy also said that the Washington Policy Center is nonpartisan. That may, technically, be true. But WPC is a think tank that supports free-market solutions.

Dammier (R) said “it makes no sense” to pull programs when they’re needed most, but most important is fiscal discipline.  He said there’s a lack of moral discipline among some legislators.

Carlyle (D) mentioned that the state educates 1,000,000 students in public schools and 300,000 college students. “The thief in the room” is healthcare spending, which has been rising faster than inflation.  Carlyle said, “I resist the idea that there’s a lack of moral discipline.”

The moderator asked: is the initiative process effective?

A panelist (Loesch?)  said: the reason we have an AA bond rating, and not an AAA bond rating, is that the anti-tax initiatives cause a chronic lack of funding, and yet people expect and demand services. Also, spending is required constitutionally (education), by statute, or by federal law. (The Washington State Constitution says that education is the paramount obligation of the state.) The lack of an AAA bond rating ends up costing the state millions of extra dollars in interest.

Dammier (R) said that initiatives and elections have consequences. The voters’ message about taxation and 2/3 requirement is very clear (I-1053). On the other hand, some initiatives are less clear; for example, the renewable energy initiative is complex to follow.

Guppy (WPC) said that the initiative process has been good for taxpayers but bad for “beneficiaries.” He acknowledged that government spending grows naturally and said, “I agree that government spending serves the general interest: police, education, social services.” But the unions get too much.

Dammier (R) said that the collective bargaining process is done behind closed doors, early on in the process. The legislators just get to vote yes or no. Shouldn’t they be involved earlier on?

Loesch (governor’s aide) rejects the “false dichotomy” between taxpayers and beneficiaries (since almost all taxpayers benefit from programs). The unions in fact gave up a lot. 3% lower pay. 25% more for healthcare contributions. Furloughs. It’s “an illusion” that government and unions collude to raise costs.

Someone mentioned that rising gas prices are contributing to deficits.

Carlyle (D) said there are 567 tax exemptions. We require commissions and auditors for spending programs. But we don’t require the same for elimination of tax exemptions, which tend to persist indefinitely.

Balter (moderator): why no traction on eliminating tax exemptions?

Carlyle (D): because of I-1053 (duh).

Dammier (R): the next budget will have another $2 billion (?) deficit. We kicked it forwarded (postponed the pain with gimmicks). But populations of students and seniors are growing.

Balter (moderator) said, “we may not have enough money to express our values.” The Governor herself said that her December budget was immoral. We’re stopping mammograms on low-income women. Unless we can control health care costs, we’re doomed. Health care spending is growing at 2% to 3% faster than inflation.

Guppy (WPC) asked: what goal should government play in society? Why have unfunded entitlements like 732 and 728. The number of kids in the classroom is not as important as the quality of the teacher.

Carlyle (D) disagreed about class size. Class size definitely DOES matter in the early years of education.

Dammier (R) said that his constituents want 1. Jobs, 2. lower government spending, and 3. education. Very few say they want lower taxes.

It was Carlyle (D), I think, who said that the budget cuts will take effect on July 1 of this year, and when the citizens realize the effects of those cuts they make reconsider their support for I-1053.

Guppy (WPC) predicted the “Washington Monument Effect”, wherein government bureaucrats choose to close the most visible, inconveniencing programs and services. Instead of making necessary changes to increase efficiency, they close the Washington Monument for tourists, for example.

How did other states handle their deficits? Guppy said: some states made policy decisions that would be unacceptable here.

Guppy (WPC) and Dammier (R) agreed that it’s a good idea to sunset some tax exemptions. Dammier gave as an example a tax exemption that favors ferries.

After the event, there was time for questions. I spoke, “This question is directed to Mr. Guppy, who said that the voters were very clear when they voted for I-1053.   Given the increasing concentration of wealth, the extreme regressiveness of Washington State’s tax system, the fact that tax rates are in fact lower than they’ve been in decades, and the fact that voters in Colorado and Massachusetts overwhelmingly rejected anti-tax initiatives, can we really suppose that Washington State voters understood what they were voting for with I-1053?  Specifically, did the voters really understand that, in addition to making it very hard to raise taxes, I-1053 made it very hard to eliminate tax exemptions?”

Guppy said that the voters have repeatedly voted for 2/3 requirements. They knew exactly what they were doing. The initiative process works well. The voters understood that raising taxes would reduce their take home pay.

I wanted to say, “You mean raising taxes on the rich would reduce the take-home pay for the middle class?” But we ran out of time, and the moderator thanked everyone for coming.

I shook hands with Mr. Guppy, who said that he agreed that the voters probably didn’t completely understand I-1053.   Eyman’s initiatives are always like that, he said.  The summary description of the initiatives sound quite reasonable, Guppy said, but the fine print always contains some sort of unexpected conditions that make the initiatives a lot more consequential.

I’ve notice that when you talk to moderately conservative politicians and activists, they seem quite reasonable. For example, they acknowledge the need for government services and openly admit that Washington State’s tax system is unfair.   Still, they go along with the immoderately conservatives’ anti-tax frenzy that is busting budgets nationwide.  To some extent, you have to blame the voters, who — in Washington State, at least — continue to buy into the right wing messaging.  As Adam Kline suggested, some of the legislators probably figure  “Why should I stick my neck out and educate the voters about taxation?   let the voters’ reap what they sow.”      Perhaps that’s the Governor’s attitude.

On my way out, a couple of people thanked me for my question.