State Budget

No denying it: At least $10 billion has been cut from the state budget

Kim Justice — 2011-12-19T00:35:55Z

by Kim Justice and Andy Nicholas

Introduction

State budget cuts have taken an enormous toll on Washington state’s core public health, education, and community safety structures. Basic public services have been cut by at least $10 billion since the start of the Great Recession. These budget cuts have taken a grizzly toll on the health and well-being of workers and families from Aberdeen to Spokane.

Yet, some have suggested that the impact of budget cuts has been greatly exaggerated. Nothing could be further from the truth. Here’s why:

The human toll of budget cuts is undeniable: Over 70,000 low-income working adults have lost health care coverage, over 20,000 children and families have lost assistance to get and keep a job, and the cost to attend college has almost doubled since 2007 at four-year institutions due to increases in tuition.
Claims about higher state revenues fall apart when placed in context: In real terms (after adjustment for inflation) state revenues are currently about $2 billion (12.6 percent) below pre-recession levels.
Resources are low, but the need for public services is high: In addition to normal cost pressures such as inflation and population growth, the impact of the Great Recession has led more families to seek assistance to meet their basic needs.
In reality, public structures have weathered more than $10 billion in budget cuts: Round after round of cuts from an ever-decreasing baseline has hidden the true magnitude of the cuts enacted since the start of the recession.

The human toll of budget cuts is undeniable

Those who argue that budget cuts have been exaggerated ignore the very real impact that these cuts have had on communities throughout our state:

The number of kids in K-12 increased by 12,135 between 2008 and 2010, but the number of teachers in classrooms shrunk by nearly 3,000.
Over 20,000 eligible students were unable to receive financial aid in 2010 due to insufficient state resources.
The average cost to attend college has risen 94 percent for students and families since 2007 at four-year institutions due to dramatic increases in tuition. The cost has risen 54 percent at community and technical colleges.
Over 70,000 low-income working adults have lost health care coverage since 2009, through the Basic Health Plan.
Over 20,000 adults and children have lost assistance needed for families to get and keep a job.
Approximately 7,000 low-income working parents have lost crucial child care support, which helps them remain in the workforce.
Over 50,000 low income seniors have lost support to help them afford their prescription drugs.
Roughly 20,000 individuals who cannot work due to a disability have seen their income support vanish.

For more detailed information on these cuts and others, view the Budget & Policy Center briefs, “Economic Security: Key to Recovery” and “Declining Support for Education Threatens Economic Growth.”(1)

Every area of state investment has been affected by cuts (Figure 1). The majority of cuts have fallen on our education and health care systems. Cuts to education have reduced the quality of our children’s education and the ability of workers to obtain the skills they need for the jobs of tomorrow. Health care cuts have left thousands of Washingtonians without medical care.

In reality, public structures have weathered more than $10 billion in budget cuts

Some have argued the budget cuts reported to date are mere accounting tricks – that actual service reductions have been much lower. In fact, the opposite is true. Budget cuts are significantly undercounted in our state budget process. That’s because every year that reductions are made, the current service baseline, or “maintenance level,” is reduced (see Box 1). The maintenance level has been diminished with multiple rounds of budget reductions. And, cutting from an ever-shrinking baseline masks the true magnitude of the cuts enacted so far. The bottom line, as shown in Figure 2, is that at least $10 billion in budget cuts have been enacted since the start of the recession.

Box 1: The maintenance budget

The maintenance level refers to the cost of maintaining the same level of services from one fiscal year to the next, accounting for factors such as general price inflation, increases in the population, and increases in the number of people qualifying for support.

The maintenance level is recalculated each year to account for changes in state law enacted the previous year and for increases or decreases in caseloads. Because it is recalculated annually, it is unknown how much it would cost to provide pre-recession levels of services in the current year.

Claims about higher state revenues fall apart when placed in context

State tax revenues are far below pre-recession levels. Before adjustment for inflation, Figure 3 shows that by 2010, the deepest part of the recession, state revenues had fallen to $1.9 billion (12.3 percent) below 2007 levels. Revenues are presently $820 million (5.3 percent) below the pre-recession mark, and aren’t projected to approach 2007 levels until 2013.

The decline in state revenues is even more dramatic once elements of inflation, such as rising energy prices – which make it more expensive for the state to fuel police cars and heat classrooms – are taken into account. In real terms (after adjustment for inflation) state revenues are currently about $2 billion (12.6 percent) below pre-recession levels, and aren’t projected to recover within the foreseeable future, based on estimates from the state’s Economic and Revenue Forecast Council.

Resources are low, but the need for public services is high

The cost of providing consistent levels of services rises each year due to inflation, demographic changes such as the aging of our state population, and other factors. In addition to these ordinary cost pressures, the Great Recession – and the mass layoffs that have come with it – has greatly increased the need for state-supported health care, educational opportunities, and other essential services among Washingtonians.

A good example is Washington’s Apple Health for Kids program, which has proven to be a crucial backstop for families throughout the recession. Figure 4 shows that while thousands of children in Washington have lost their parents’ employer-provided health coverage since the start of the recession, Apple Health and other public insurance programs have helped to fill the gap. As the graph shows, about 165,000 children in Washington lost employer-sponsored insurance from 2006-07 through 2009-10. During the same period, the number of children enrolled in state-supported health programs grew by about 208,000.(2) Accordingly, the costs of maintaining Apple Health have risen significantly in the last few years.

Conclusion

Over the next few months, state lawmakers will make pivotal decisions about the future of our state as they work to address a $2 billion shortfall. It is important for all of us to know where we’ve been before we can make decisions about where we’re going next.

In just three years, there have been more than $10 billion in cuts impacting working families, children, older adults, people with disabilities, and students. Another all cuts budget would be indefensible. Therefore, it is vital that new revenue be included as part of a balanced solution to our economic problems.

In the short run, we can raise additional resources to preserve our essential health and education structures by ending unjustified tax breaks and modestly increasing the sales tax.(3) An increase in the sales tax should be paired with the Working Families Tax Rebate to significantly reduce costs for lower-income working families with children.

In the long run, a small excise tax on some capital gains would go a long way toward improving the adequacy and equity of our flawed revenue system.(4)

There will be disagreements about the revenue package – where it should come from, how much it would raise, and who would pay. That is to be expected. But we should not diminish the magnitude of cuts to state investments enacted since the start of the recession. Thousands of Washingtonians have lost health care and opportunities to build a better future. Ignoring this fact clouds our ability to make sensible choices about public priorities going forward.

Acknowledgments

The Budget & Policy Center gratefully acknowledges the support of the Annie E. Casey Foundation, Bill & Melinda Gates Foundation, Paul G. Allen Family Foundation, Campion Foundation, Northwest Area Foundation, Stoneman Family Foundation, and The Seattle Foundation. The findings and conclusions presented in this report are those of the author alone, and do not necessarily reflect the opinions of these organizations.

Endnotes

For more information see “Economic Security: Key to Recovery,” located on-line at http://budgetandpolicy.org/reports/economic-security-key-to-recovery-and-properity and “Declining Support for Education Threatens Economic Growth,” located on-line at http://budgetandpolicy.org/reports/declining-support-for-education-threatens-economic-growth.
To improve statistical precision, the data were split in to two periods, each consisting of two years of data – i.e. 2006-07 and 2009-10.
For more details see the schumdget post “Five advantages of increasing the sales tax,” located on-line at http://budgetandpolicy.org/schmudget/five-advantages-of-raising-the-sales-tax.
For more information see “A Capital Reform: Using Capital Gains to Fuel Job Creation and Economic Prosperity in Washington state,” located on-line at http://budgetandpolicy.org/reports/a-capital-reform-using-capital-gains-to-fuel-job-creation-and-economic-prosperity-in-washington-state.

Access to higher education is shrinking due to cuts

Kim Justice — 2011-11-29T22:23:26Z

At a time when the state’s unemployment rate is the highest it has been since 1983 (9.1 percent), we need state investments in education. Educational attainment opens doors to better employability, higher wages, and economic stability for families. Yet, as our recent policy brief illustrates, the ability to access a higher education is shrinking as state investments have been severely slashed over the last three years.

Reduced state support for higher education has pushed the bulk of costs to students and families. Due to dramatic increases in tuition, the average cost to attend college has risen 94 percent for students and families at four-year institutions since 2007. The cost has risen 54 percent at community and technical colleges.

The state historically supported a commitment to learning by making sure students paid less than half the actual cost, but that flipped in 2011due to deep budget cuts, and now families are asked to pay the lion’s share at four-year institutions, and more than one-third (37 percent) of the costs at community and technical colleges (see figures below).

The Governor’s 2012 supplemental budget was rolled out yesterday, it relies on voter approval of a half cent increase (0.5 percentage points) in the sales tax to stave off further cuts to colleges and universities. Without additional revenue, higher education institutions face additional cuts ranging from 13 to 17 percent ($160 million).

Our economy cannot begin to recover until people get back to work. For many, this will require further educational development and enhanced job skills. Without increased revenue as part of the budget solution, access to a higher education will be impossible for many lower- to middle-income families.

Click here to read the full brief, Declining Support for Education Threatens Economic Growth.

Governor’s revenue proposal is a good start, more needed

Kim Justice — 2011-11-22T01:04:01Z

Earlier today, Governor Gregoire introduced her 2012 supplemental budget proposal, which would address the $2 billion gap between the amount needed to maintain our vital public health and education investments, and the resources available. While previous budget shortfalls have been addressed almost entirely via economically damaging cuts to community services, the Governor’s latest proposal offers a more balanced approach by including revenue as part of the solution. However, the suggested level of revenue falls short of what’s needed to maintain our investments in education, health care and thriving communities.

To prevent catastrophic cuts to Washington’s core economic structures, the Governor recommends that voters approve roughly $500 million in new revenues by temporarily increasing the state sales tax rate by 0.5 percentages points (half cent), to 7.0 percent from 6.5 percent.

While this is an important step in the right direction, more is needed. Given the magnitude of the shortfall and the depth at which our public structures have been cut in the last three years, additional revenue is needed. This could be accomplished by asking voters to increase the sales tax by a full penny to bring in $1 billion in revenue, and by closing targeted tax breaks.

If the recommended half cent increase in the sales tax were approved by voters, the Governor intends to protect some funding for education, public safety and health care. But the suggested level of revenue falls short of what’s needed to maintain our quality of life and rebuild our economy. Numerous programs in education, health and public safety would remain on the chopping block. Under the Governor’s proposal, even if the sales tax increase were approved by voters:

Fewer people will have access to a quality education:

7,600 students at public and private colleges and universities would lose financial assistance through the Work Study program.
Funding that ensures children enter school ready to learn would be eliminated.

The health of people and the environment would deteriorate:

21,000 people who cannot work due to a disability would lose health care coverage.
Health care for 35,000 low-income working adults would be eliminated.
Child welfare programs that serve approximately 5,700 children a year would be eliminated, such as sex abuse recognition training, children’s advocacy centers, educational coordinators, adoption support recruitment, and support for street youth.
38,000 individuals with low incomes would lose access to routine dental care.
Funding for monitoring of water systems and surveillance of plague mosquito borne and tick-borne diseases would be cut.

Many would lose the support they need to get and keep a job:

Child care support that helps low-wage workers keep their jobs would be reduced, affecting 4,000 children and their parents.
Food assistance to an estimated 11,000 individuals each month would be eliminated.
2,000 families would lose supports that provide training, job search, child care, and financial assistance to help people find work.

We need immediate revenues to prevent the worst of the cuts that are under consideration. The Governor’s half-cent sales tax increase represents a significant step in the right direction, but more is needed. At the same time, policymakers should also work to address the long-term structural problems with our revenue system. Our recent proposal to create a new capital gains tax in Washington would do much to improve the adequacy and stability of our flawed tax structure.

For more information on what a balanced approach would entail for Washington state as well as information on potential revenues and investments that assist in economic recovery, read our “Framework for Prosperity.”

New Policy Brief: Declining support for education threatens economic growth

Tara Lee — 2011-11-16T21:02:10Z

Washington’s ability to create jobs and build a strong economy is closely linked to providing quality education and making it widely available. But progress is jeopardized by potential options that lawmakers will consider when they meet in special session later this month to respond to the ongoing revenue crisis.

Our newest policy brief by Kim Justice, highlights the need to maintain strong investments in education.

Some key highlights of the brief:

-The average cost to attend college has risen 94 percent since 2007 at four-year institutions and has risen 54 percent at community and technical colleges. Current proposals would cut an additional 15 percent of state support from higher education.

-Over 20,000 eligible students were unable to receive financial aid in 2010 due to insufficient state resources. Financial aid for 70,000 students is on the line in the next round of budget decisions.

-The number of kids in K-12 increased by 12,135 between 2008 and 2010, but the number of teachers in classrooms shrunk by nearly 3,000. Further budget cuts would increase class sizes in grades 4 through 12, making it harder for kids to get the attention and engagement they need to succeed.

-Access to quality early learning during the first five years of life for over 2,000 kids would be cut under budget proposals currently being considered. Opportunities for childhood educators to advance their skills have been eliminated, weakening the quality of education for children during the most important learning years of their life.

Read the full brief here

Declining Support for Education Threatens Economic Growth

Kim Justice — 2011-12-16T20:41:44Z

Introduction

The need to maintain strong investments in education is one reason why Washington needs a balanced approach that includes revenue rather than a cuts-only approach that backs away from the building blocks of a strong economy. Upholding a strong education system is crucial to our economic recovery and future prosperity. But decisions made in the wake of the Great Recession have taken our investments in a different direction, slicing approximately $5 billion out of our education system in the last three years (figure 1). Another $2 billion in cuts are being considered right now, many of which will come out of education, making it even harder for Washingtonians to access educational opportunities that are necessary for a better future. Some facts to help put this in perspective:(1)

The average cost to attend college has risen 94 percent for students and families since 2007 at four-year institutions due to dramatic increases in tuition. The cost has risen 54 percent at community and technical colleges.(2)Current proposals would cut an additional 15 percent of state support from higher education;
Over 20,000 eligible students were unable to receive financial aid in 2010 due to insufficient state resources. Financial aid for 70,000 students is on the line in the next round of budget decisions;
The number of kids in K-12 increased by 12,135 between 2008 and 2010, but the number of teachers in classrooms shrunk by nearly 3,000.(3) Further budget cuts would increase class sizes in grades 4 through 12, making it harder for kids to get the attention and engagement they need to succeed;
Access to quality early learning during the first five years of life for over 2,000 kids would be cut under budget proposals currently being considered. Opportunities for childhood educators to advance their skills have been eliminated, weakening the quality of education for children during the most important learning years of their life.

A high quality education system – one that spans early learning through higher education and prepares adults for the labor market– is essential to ignite our sluggish economy and prepare our workforce to be globally competitive. A strong education system guarantees high quality early learning opportunities for children, upholds a strong K-12 system to prepare students for college or a job, builds a workforce that can translate today’s breakthroughs into tomorrow’s cutting-edge industries, and ensures educational opportunities among low and moderate income students by providing financial aid.

In our Framework for Prosperity, we lay out a vision for the future prosperity of our state, which includes making investments in high quality, affordable education to put Washingtonians back to work. And we offer up solutions to boost our resources in order to make these essential investments.

Today’s job market requires more education and skills

At a time when the state’s unemployment rate sits at the highest it’s been since 1983 (9.1 percent), educational attainment has become even more essential to landing a job.(4) In fact, as of April 2010 nearly half of vacant jobs in Washington required an education beyond a high school diploma or GED, according to the University of Washington. Those with less educational attainment tend to fare worse in the job market — in 2010, nearly one in six people with less than a high school diploma were unemployed compared to one in 20 with a Bachelor’s degree or higher (figure 2).

Not only is higher education the key to employment, it also reaps significant benefits for individuals and society including higher lifetime earnings, better health, and more civic participation. According to a report by the Employment Security Department, a bachelor’s degree is worth $15.54 more per hour than a high school diploma.(5)

Our economy cannot begin to recover until people get back to work. For many, this will require further educational development and enhanced job skills. But there is a problem and policymakers need to prevent it from getting worse: just as the need to go back to school to train in a new career or advance educational skills is increasing, the ability to access education is shrinking.

HIGHER EDUCATION

Declining state support is making college unaffordable

The Great Recession, along with structural changes to our state and national economies, has greatly increased the need Washingtonians have for the opportunities provided by higher education. However, the prospect of obtaining an advanced education is diminishing for many as it becomes harder than ever to afford the cost of attending a college or university.

Since 2007, the average cost to attend college has risen 94 percent for students and families at four-year institutions, due to dramatic increases in tuition. The cost has risen 54 percent at community and technical colleges. The state historically supported society’s commitment to learning by making sure students paid less than half the actual cost, but that flipped in 2011 and now families are asked to pay the lion’s share at four-year institutions, and 37 percent of the costs at community and technical colleges (figures 3 and 4). At the University of Washington, tuition jumped by $3,528 between 2008 and 2011, and increased 30 percent at community and technical colleges over the same time period.

During the 2009-11 biennium, when the state faced enormous recession-induced declines in revenue, the Legislature authorized tuition increases of 14 percent at the six baccalaureate universities and seven percent at the 34 community and technical colleges.(6) In the 2011-13 biennium, the Legislature authorized further tuition increases and allowed four-year institutions to go beyond their authorized increases by granting them the authority to set their own tuition. The University of Washington exercised this authority and raised tuition four percent beyond what the legislature authorized, for a total of a 20 percent increase in 2011-12. As discussed in Box 1, the dramatic increases in tuition have significantly shifted the majority of the costs to families.

Financial aid has not kept pace with need

Along with the rising costs of tuition, Washington’s students are facing the challenge of having to pay for higher education with limited state financial aid. Even though the overall amount of state resources devoted to financial aid has increased since 2009, it has not kept up with growing needs. The State Need Grant (SNG), Washington’s largest and longest standing student aid initiative aimed at serving the state’s lowest-income students, has experienced unparalleled levels of need. Since 2005, the number of students eligible for these grants has increased by 18 percent. However, over the same time period the number of students receiving the SNG has declined by 8 percent. As shown in figure 5, the total number of students receiving a SNG in 2005 (65,328) was greater than the overall number of students receiving grants in 2010 (59,941). Furthermore, more than a quarter of all students eligible for state need grants in 2010 were unable to receive them due to insufficient state funding.

More cuts would close the door to opportunity for many

Reductions being considered for the 2012 supplemental budget would make access to a higher education impossible for many lower- to middle-income families.

Further increases in tuition would be inevitable under initial budget proposals that recommend a 15 percent deeper cut to state funding of colleges and universities.
Students who most need access to financial aid to withstand tuition increases could find that there is no support to turn to. Proposed reductions to the State Need Grant range from reduced eligibility to reduced grant amounts, to complete elimination which would impact 70,000 low-income students.

EARLY LEARNING

The first few years of learning are the most important

The first five years of a child’s life are the most critical time for learning. These years are a significant time for the development of a child’s brain and shape a child’s future health, happiness, and achievement in school. An effective early learning experience encompasses prenatal care for mothers, social-emotional development, child care and preschool, kindergarten through third grade, health and nutrition, education for parents, and professional development for educators.
Despite the importance of education during this time in a child’s life, funding for early learning makes up the smallest portion of state spending on education (figure 6).

Quality early learning depends upon quality teachers

One of the key components to a child’s successful learning during these first five years is having skilled, capable early childhood teachers. That was the driving force behind the creation of the Washington State Early Childhood Education Career and Wage Ladder. The program was first established as a pilot in 2000 to reduce staff turnover and improve the quality of early learning educators in licensed child care centers. It has been highly successful in providing opportunities for childcare staff to enhance their skills and the professionalism of their career by increasing wages based on level of education, years of relevant experience, and level of work responsibility.

In a final evaluation report of the pilot project, child care centers with the Career and Wage Ladder pilot were measured against a comparison sample of centers that were not part of the pilot. Compelling positive outcomes of the program were identified, such as quality of care was found to be significantly higher in the pilot than in comparison centers observed, educational attainment of employees at pilot sites was much greater, and the average wage for educators was higher in the pilot than the comparison centers.(9)

Despite its proven track record, funding for the Career and Wage Ladder was eliminated in the 2011-13 budget. The lack of opportunities for educators to further their educational attainment and increase earnings will likely have an impact on not only the sustainability of the profession, but also on the quality of care that children receive.

Looming cuts could close the door on early learning for many kids

As additional reductions are being explored, there is risk that many kids will no longer have access to early learning at all. Options being considered under further budget reductions include cutting enrollments in early learning programs to all 3-year olds and some 4-year olds.(10) This cut would leave up to 2,200 kids without critical early learning.

K-12 EDUCATION

Our public schools must prepare children to succeed

A top-notch education complete with highly qualified teachers, safe buildings, small class sizes, and updated textbooks and equipment is integral to the ability of kids to succeed in jobs, college, and in life. As our state’s population continues to grow, so do the number of kids enrolled in kindergarten through 12th grade. But our state’s investment in education — for good teachers, keeping class sizes small, and providing quality learning tools— have not kept pace with that growth. As shown in figure 7, Washington’s public schools have suffered steep cuts in the last three years. Consequently, kids are getting less support in the classroom. Between 2008 and 2010, enrollment in K-12 schools grew by 12,135 students, but the number of teachers in classrooms shrunk by nearly 3,000.

Student achievement threatened as class sizes grow

Research shows that smaller class sizes improve student learning and result in significant gains in student achievement. Small class sizes allow teachers to provide individualized attention to students. Initiative 728, passed by voters in 2000, established funding for quality improvements such as class size reduction. But in the last few years, our state has not maintained these investments. Funding for Initiative 728 was eliminated by the Legislature in 2010 and has been suspended ever since.

In addition, funding to reduce class sizes in fourth grade classrooms was reduced in the 2011 fiscal year, and in the current biennium, funding for class size reduction in kindergarten through fourth grade was eliminated altogether. Under the Governor’s preliminary 2012 Supplemental budget, class sizes would continue to increase in grades four through 12.

Conclusion

In the coming weeks, policymakers will convene during a special session to make decisions with serious implications for Washington’s commitment to invest in creating jobs and promoting economic recovery. Choices they make will go a long way toward determining whether the state stays with what has worked over the years to build economic growth or retreat from the established course and take stakes that hurt the ability to create jobs and compete around the world.

Washington’s path to economic recovery and future prosperity is dependent upon the choices that are made. Access to a high-quality, affordable education is necessary to the vitality of our overall economy, businesses, families, and the quality of life we all want to enjoy.

In our Framework for Prosperity, we lay out a vision for the future and solutions to get us there. We propose making investments that will put Washingtonians back to work by preserving opportunities to access high quality, affordable education. To do that, we need to build a revenue system that works. To continue to meet our immediate needs, we must raise revenue now, through options such as temporarily increasing and permanently modernizing the sales tax and eliminating unproductive tax breaks.

At the same time, we must also make long-term, structural changes to ensure our revenue system is sustainable into the future. This includes adding new revenue sources, strengthening our Rainy Day Fund, and increasing transparency and accountability of our tax system.

To read the full Framework for Prosperity, click here.

Acknowledgments

The Budget & Policy Center gratefully acknowledges the support of the Annie E. Casey Foundation, Bill & Melinda Gates Foundation, Paul G. Allen Family Foundation, Campion Foundation, Northwest Area Foundation, Stoneman Family Foundation, and The Seattle Foundation. The findings and conclusions presented in this report are those of the Budget &Policy Center, and do not necessarily reflect the opinions of these organizations.

Endnotes

1. The primary source throughout the report is the author’s analysis of budget data from the Legislative Evaluation and Accountability Program and the Office of Financial Management (see http://fiscal.wa.gov, http://leap.leg.wa.gov, and http://ofm.wa.gov).

2. Senate Committee Services, presentation to Senate Ways and Means Committee, Oct. 10, 2011.

3. Student enrollment data from LEAP, 350 students added to account for full-day kindergarten enrollment; data for teachers from the Office of Superintendent of Public Instruction, Personnel Summary Reports.

4. Data from the Bureau of Labor Statistics, Local Area Unemployment Statistics; Unemployment rate from 1976-2011, not seasonally adjusted.

5. Nora Keith, “WA State Spring 2010 Job Vacancy Report,” Employment Security Department, July 2010.

6. WA State’s six baccalaureate colleges: University of Washington, Washington State University, Central Washington University, Eastern Washington University, Western Washington University, and The Evergeen State College.

7. Data from the Higher Education Coordinating Board and US Census Bureau (ACS).

8. The Project on Student Debt, “Student debt and the class of 2010,” November 2011.

9. Boyd and Wandschneider, Career and Wage Ladder Final Executive Summary, March 2004. http://del.wa.gov/publications/research/docs/CareerWageLadder_2004.pdf.

10. Budget reductions identified by Governor for 2012 Supplemental budget; reflects 11 percent and 25 percent enrollment reductions. Reductions would impact all 3-year olds except where needed to maintain viable classrooms.

SJR 8206 fails to address biggest problems in the state's rainy day fund

Michael Mitchell — 2011-11-01T17:37:42Z

On the ballot for next week’s election is Senate Joint Resolution 8206, a measure that would amend the state constitution to require higher deposits into our state Budget Stabilization Account or “Rainy Day Fund” (RDF). While Washington should stash away more of its resources during good economic times, SJR 8206 does nothing to address the fundamental deficiencies associated with our current RDF and revenue system.

SJR 8206 would require that revenues resulting from “extraordinary growth” be deposited in the rainy day fund. Under the resolution, revenues from growth exceeding by one-third the average growth in the previous five fiscal biennia (ten years) would automatically be transferred to the RDF. Only under certain circumstances, such as during or directly after a recession would “extraordinary revenue growth” transfers not have to occur.

While the goal of SJR 8206 is to create a more adequate and reliable RDF, it does nothing to address the rainy day fund’s largest and most pressing issues:

Our revenue system is not capable of supporting a robust RDF. Experts in public finance recommend a rainy day fund balance of approximately 15 percent of annual spending. States with rainy day funds at or near this benchmark have strong revenue systems to support and replenish the fund. An expansion of the sales tax to a wider range of services would do much to bolster our revenue system and, in turn, the adequacy of our rainy day fund.
In times of need, onerous barriers to withdrawal make it difficult for the state to use RDF funds. Unless the Governor declares an emergency, the withdrawal of funds from the RDF requires a supermajority (3/5ths vote) of the legislature. This creates an almost insurmountable barrier for the state to address budget shortfalls and allows a small minority of legislators to block the funding of vital public structures in times of need.
Mandatory deposits are counterproductive during tough economic times. Under current constitutional law, 1 percent of total annual revenues must be deposited into the RDF by the end of every fiscal year regardless of the financial or economic issues facing the state. Mandatory transfers defeat the purpose of a rainy day fund and deprive key public investments such as education and public safety of funds when they need them most.

While SJR 8206 would prompt additional saving during good economic times, it does nothing to address the fundamental failures currently associated with our rainy day fund. To create a robust and dependable rainy day fund which can stabilize and support the state in its toughest time, more adjustments, both to the RDF and our revenue system, are needed.

For more information on how we can strengthen our rainy day fund read our policy brief.

Is this the kind of state we want?

Kim Justice — 2011-10-27T23:04:28Z

Today Governor Gregoire released a preliminary 2012 Supplemental budget. The budget plan provides a starting point for legislators to address a $2 billion shortfall when they return to Olympia for a special session on November 28th.

The proposed cuts take our state in the wrong direction- they represent a huge departure from the values of Washingtonians and erode the investments that have made this state a great place to live, work, and do business.

Under the proposed budget reductions:

Many would lose the support they need to get and keep a job:

Child care support that helps low-wage workers keep their jobs would be reduced, affecting 4,000 children and their parents.
1,900 families would lose supports that provide training, job search, child care, and financial assistance to help people find work.
Food assistance to an estimated 13,000 individuals each month would be eliminated.

The health of people and the environment would deteriorate:

Health care for 35,000 low-income working adults would be eliminated.
Medical services for 21,000 people who cannot work due to a disability would be cut off.
Services that keep over 500 families intact each year would be eliminated.
5,000 low-income, elderly clients and 800 individuals with developmental disabilities would lose care.
The cost of health care for children would increase.
Services that support 55,000 pregnant women who are at risk of unhealthy birth outcomes would be cut in half.
Funding to monitor water systems and infectious disease would be reduced.

The safety of communities would be put at risk:

The length of supervision for people leaving prison would be reduced.
Some prisoners would be released 150 days early.
Chemical dependency treatment for offenders in prison and on community supervision would be reduced by 50 percent.

Fewer people will have access to a quality education:

Funding to colleges and universities would be cut by 15 percent.
Funding that is used to help equalize school funding across wealthier and poorer districts would be reduced by 50 percent.
Class sizes in grades 4 through 12 would increase by two students.
Financial aid through the state Work Study program would be eliminated for 7,600 students at colleges and universities.

There is a better way forward. Policymakers must raise revenue so that we can get our economy back on track by maintaining our investments in education, health care, and economic security. We have a vision on how to make this happen.

Yesterday we released “A Framework for Prosperity,” which outlines what state lawmakers should do to fill this year’s budget deficit and make comprehensive changes to ensure our state's viability in the long term.

Our Executive Director Remy Trupin released a statement this morning on the Governor’s budget plan. Read it here.

A Framework for Prosperity

Kim Justice — 2011-10-26T15:17:41Z

Introduction

Washington’s path to economic recovery and future prosperity is dependent upon the choices we make in the coming weeks. Our state budget is an essential tool for investing in smart choices that will uphold our values and put us on the right path. In the midst of the worst economy since the Great Depression, our state’s primary responsibility should be to make investments that will ignite the economy, put people back to work, and provide opportunities for future generations to prosper.

Washingtonians know how to do this—we’ve done it before. Our state is a great place to live because people before us made deliberate and thoughtful decisions to invest in the future by building schools, parks, and roads, making college affordable, and creating safe, strong communities. Returning to these investments will speed our recovery and help Washington remain a place where families, communities, and businesses can thrive.

We have a vision to make this happen. The Framework for Prosperity has two components:

Invest in our future prosperity

By pursuing practical and reasonable strategies, we can emerge from the economic downturn as a state where everyone can achieve prosperity. Our strategies for building prosperity include:

Putting Washingtonians back to work;

Preserving opportunities for accessing high quality, affordable education;

Creating conditions for healthy living and safe environments; and

Building thriving communities by ensuring public safety.

Build a revenue system that works

We need an adequate, sustainable, and equitable tax system to make these investments. We can build this system by:

Raising revenue now to address our immediate needs; and

Making structural changes so that our revenue system is adequate and sustainable in the long-term.

The Framework for Prosperity provides a vision for the future and solutions to get us there. Together, we can create a state budget that works for everyone in Washington.

Invest in our future prosperity

The decisions made about the state budget play a significant role in our ability to put people back to work, educate our children, maintain the health and well-being of our communities, and provide economic security to those in need. Washington state should build a budget that can invest in the following strategies.

Put Washingtonians back to work

State investments in economic security protect families from poverty and deprivation when someone loses a job or faces financial hardship. These supports are especially important when the impact of a downturn is as severe as the one we are experiencing now. Our economic recovery depends upon keeping people employed, getting those without jobs back to work, and providing assistance to meet basic needs. To achieve this, the state should:

Ensure that working parents can keep their jobs by providing assistance with child care;

Help unemployed, low-income parents get and keep a job by providing education and training, job search, child care and financial assistance;

Provide food and housing assistance to those who are most impacted by the recession so they can meet their basic needs and continue to participate in the economy; and

Maintain a lifeline of financial support for people who cannot work due to a disability.

Preserve opportunities for accessing high quality, affordable education

In order for Washington to rebound from our current economic slump and secure our long-term prosperity, we must keep our education system strong. High-quality educational opportunities are fundamental to generating a skilled workforce that meets the demands of our state’s industries, and essential for creating better job opportunities, higher wages, and job security for everyone in the state. Policymakers should sustain an education system that will:

Guarantee that children will have access to affordable, high quality early learning;

Uphold a strong K-12 education system that provides students with a world-class education, high quality teachers, and prepares them for college or a job;

Build a strong workforce through adequate funding of public universities and community and technical colleges; and

Ensure educational opportunities among low and moderate income students by providing financial aid support.

Create conditions for healthy living and safe environments

Good health and safe, clean environments are key to quality of life and the strength of our economy. Businesses succeed when they have a healthy workforce, families thrive when they have the resources they need to provide safe and healthy homes, the elderly and people with developmental disabilities are secure when they receive adequate care and protection, and we all benefit from a safe and clean environment. To safeguard the health of people and the environment, policymakers should:

Maintain access to affordable, quality health care for children, pregnant women, working adults, vulnerable populations, and people with low-incomes;

Provide resources needed to keep families intact and ensure that youth separated from their families live in safe homes and receive support during transitions to adulthood;

Maintain a full range of supports and services for people with long-term health needs; and

Protect public and environmental health by making sure food and water are safe and our forests, farmlands, and aquatic resources are sustained.

Maintain public safety to promote thriving communities

Vibrant communities depend upon the safety and protection of people, property, and neighborhoods. Therefore, we must ensure the stability and security of communities across the state. To guarantee this, policymakers should:

Sustain access to supports and services that keep people from entering the criminal justice system, such as alcohol and drug treatment and mental health services; and

Provide assistance to help former prisoners transition successfully to the community, such as housing support and connection to vital services.

Build a revenue system that works

We need revenue to make this vision a reality. For too long Washington’s revenue system has failed to keep pace with the investments we value, our rapidly growing and diverse population, and the enormous demand for public health and family support services amid the most severe economic downturn in 60 years. Rather than bolstering these public structures during the economic downturn, deep cuts have been made that damage our ability to rebuild our economy, create jobs, and improve well-being for all Washingtonians. It is crucial that we modernize and broaden our revenue system in order to strengthen our economy and ensure Washington remains a place where families, communities, and businesses can thrive. The following strategies will build a revenue system that will put Washington on a stronger path to prosperity.

Raise revenue now

Temporarily increase and permanently modernize our state sales tax. A temporary, one-cent increase would quickly generate about $1 billion in new resources to help maintain our health, education, and community safety systems – all of which are essential to a vibrant and growing state economy. To reflect the modern economy, the sales tax should also be updated to include currently untaxed entertainment and cosmetic services, which would generate more than $100 million in new resources each year (see Figure 1). This expanded definition would ensure the tax became a more robust tool for financing important public priorities in the long run.

Eliminate unproductive tax breaks. It is imperative that policymakers closely examine and prioritize all forms of state spending – including spending on special tax breaks. While closing tax breaks alone won’t close our budget deficit, it would be a valuable place to start. The Joint Legislative Audit and Review Committee (JLARC) has identified 33 tax breaks that have no clear purpose or that fail to achieve public goals. Notably, a tax break that mostly benefits out-of-state banks costs our state some $50 million each year in foregone resources. JLARC found no evidence that the break benefits homeowners or our state economy in any way.

Make long-term structural change

Enact a new tax on capital gains. Capital gains – profits from the sale of stocks, bonds, vacation homes, and other real estate assets (not primary homes) – are an abundant but untapped economic resource in Washington state. Enacting a modest tax on capital gains would generate hundreds of millions of dollars in new job-creating resources that would grow rapidly over time.

Strengthen our Rainy Day Fund. In good economic times our state should set aside resources to help maintain vital public priorities during recessions and other state emergencies. However, our current revenue system simply cannot support a robust Rainy Day Fund (RDF) while also maintaining core public structures. Devoting a share of revenue created under the capital gains tax (discussed above) would allow our state to build up ample reserves when times are good, diminishing the need for tax increases or damaging cuts to our health and education systems during economic downturns. Policymakers should also replace the RDF’s onerous and arbitrary deposit and withdrawal requirements. Doing so would create a more accessible RDF that is sensibly replenished only during good economic times.

Lower taxes for lower-and middle-income families. Our current revenue structure is upside down. It asks little of the wealthiest Washingtonians but consumes a large share of lower-and moderate-income families’ resources. Based on the highly successful federal Earned Income Tax Credit, the Working Families Tax Rebate (WFTR) would significantly reduce taxes for lower-income working families with children in Washington (see Figure 2). Under full funding of the WFTR, families would receive a rebate of up to $466 each year.

Increase transparency and accountability of our tax system. Our current state budget process fails to account for the billions of dollars spent each year on tax expenditures - the hundreds of special credits, exemptions, deductions and other tax breaks (see Figure 3). To create a more holistic, transparent, and accountable state budget process we must pursue common-sense reforms that would allow policymakers and the public to balance the costs and benefits of tax expenditures against other important public priorities - like health care and education.

Conclusion

In the coming weeks, policymakers will convene to decide on what our future will look like. Now more than ever they should make the investments that we know create high quality jobs, a strong economy, and promote social and economic well-being for all Washingtonians.

Our Framework for Prosperity lays out a vision that upholds the values that matter most to Washingtonians – economic security for all, educational opportunity, optimal health, a sustainable environment, and safe, strong communities. Coupled with an adequate revenue system, we can achieve this vision. Together, we can make Washington a state where everyone has the opportunity to thrive.

Acknowledgments

The Budget & Policy Center gratefully acknowledges the support of the Annie E. Casey Foundation, Bill & Melinda Gates Foundation, Paul G. Allen Family Foundation, Campion Foundation, Northwest Area Foundation, Stoneman Family Foundation, and The Seattle Foundation. The findings and conclusions presented in this report are those of the Budget &Policy Center, and do not necessarily reflect the opinions of these organizations.

Affordable child care helps parents keep their jobs

Kim Justice — 2011-10-24T21:14:58Z

High-quality early child care, which helps prepare young children to succeed in school, is also a key factor in helping parents retain their jobs. In our latest policy brief, Economic Security: Key to Recovery and Prosperity, we highlight how maintaining a job can be difficult if not impossible without affordable child care.

The Working Connections Child Care (WCCC) program helps low-income families pay for child care so they can maintain jobs and gradually achieve self-sufficiency.

Without WCCC, affording the full cost of child care presents an enormous challenge to low-wage workers who are trying to make ends meet. The average monthly cost for child care for two children is $1,433. For a family of four with an income at 175 percent of the federal poverty level, or $3,216 per month, paying for child care would be unaffordable given other living expenses (see figure below).

At a time when families and our economy need child care more than ever, nearly 7,000 families have lost child care support due to a drop in eligibility from 200 percent of the federal poverty level (FPL) to 175 percent of FPL. A cap was also placed on the program to limit the number of families receiving child care support.

Without affordable child care, families face a dilemma in balancing their own budgets: pay for child care in order to keep a job, but no longer be able to pay rent; or quit working altogether.

When families are forced to quit their jobs because they can no longer afford child care, the state may end up paying more. Once low-income families are no longer working, they may qualify for benefits that assist unemployed workers.
These supports are critical for families who are out-of-work, but wouldn’t be necessary if families didn’t have to leave their jobs in the first place. Not only is this a step backwards for families, but it’s also a step backwards in the state’s goal of cutting costs and creating jobs.

In tough times, policymakers should be doing more, not less, to help people get and keep jobs.

Read the full brief here.

Look for our “Framework for Prosperity” later this week, where we will lay out concrete steps our state should take to create jobs and strengthen its public structures.

New Policy Brief: Economic security is key to recovery

Kim Justice — 2011-10-19T19:49:23Z

State investments in economic security- such as supports that protect families from job loss and financial hardship- are especially important when the impact of a downturn is as severe as the one we are experiencing now.

Yet, as our new policy brief, Economic Security: Key to Recovery and Prosperity shows, recent budget decisions have impaired our recovery and have put families and individuals at risk of further financial hardship:

Over 20,000 adults and children have been impacted by the loss of assistance needed for families to get and keep a job; roughly 7,000 low-income working parents have lost crucial child care support; and 20,000 individuals who cannot work due to a disability face the imminent loss of financial assistance.

Over 320,000 people in our state are unemployed (over 9 percent) and nearly 890,000 people in our state now live below the federal poverty line (13 percent). State investments are necessary to help people get and keep jobs.

Further budget reductions being considered include additional limits to assistance for families seeking employment which would impact an estimated 4,000 adults and children, and completely eliminating support for 37,000 people with disabilities.

In the face of further revenue declines, policymakers should take a different approach to solving the budget situation. That approach must include boosting our revenue so we can maintain our commitment to those most impacted by the recession. This can be accomplished by modestly increasing state tax rates, eliminating unproductive tax breaks, or both.

Click here to read the full brief.

Economic Security: Key to Recovery and Prosperity

Kim Justice — 2011-10-24T21:56:17Z

Introduction

State investments play a critical role in protecting Washingtonians against the continued economic downturn. Strong public structures- such as unemployment insurance, child care, housing, and food assistance – protect our families from poverty and deprivation when someone loses a job or faces a financial hardship. These types of investments are especially important when the impact of a downturn is as severe as the one we are experiencing now.

No one knows the importance of these investments better than Sarah. Like many parents with low-wage jobs, affordable child care is what kept her employed. So when her child care support disappeared due to budget cuts, the cost of child care outweighed her paycheck. Sarah had no choice but to leave her job and apply for additional support so she could keep her son in preschool, which provided him with crucial early learning opportunities (see Box 1 for Sarah’s full story).

Our recovery is made much more difficult when people like Sarah are unable to keep their jobs, find new ones, or maintain their basic needs during difficult economic times. Yet, recent budget decisions have impaired our recovery and have put families and individuals at risk of further financial hardship:

Over 20,000 adults and children have been impacted by the loss of assistance needed for families to get and keep a job; roughly 7,000 low-income working parents have lost crucial child care support; and 20,000 individuals who cannot work due to a disability face the imminent loss of financial assistance.

Over 320,000 people in our state are unemployed (over 9 percent) and nearly 890,000 people in our state now live below the federal poverty line (13 percent). State investments are necessary to help people get and keep jobs.

Further budget reductions being considered include additional limits to assistance for families seeking employment which would impact an estimated 4,000 adults and children, and completely eliminating support for 37,000 people with disabilities.

Economic Security makes up smallest portion of state spending, and is in decline

Despite the importance of keeping our friends and neighbors in jobs and protecting people from the impacts of the recession, investments in economic security make up the smallest portion of state spending compared with other major spending areas (Figure 1).(1)

In addition, state support for economic security has been in dramatic decline in the wake of the recession. Since 2009, nearly $500 million has been cut from programs that ensure that people who are out of work or cannot work due to a disability are able to meet their most basic needs (Figure 2).

Providing work supports is critical to the economic recovery of our state. This type of assistance keeps people engaged in the economy and helps to prevent the prospect of additional pressure on other public systems such as child welfare, emergency rooms and jails.(2)

State investments are declining when Washingtonians need them most

Our state’s unemployment has remained stubbornly high since the recession technically ended in June 2009 (Figure 3). The rate has remained above 9 percent and hit a high of 10 percent in December of 2009 and January and February of 2010- double the rate it was prior to the recession.(3)

The sluggish economy and large number of people out of work are major contributors to recent rises in poverty. According to the latest US Census data, nearly 890,000 people in our state now live below the federal poverty line. For a family of four, that means surviving on less than $23,000 a year. What’s worse, the number of people living in deep poverty – with incomes below $12,000 a year (for a family of four) – now account for 45 percent of all people living in poverty. Until the economy improves and unemployment declines we can expect high poverty rates to continue.

State investments have a critical role in supporting Washingtonians when the economy is failing them. Investing in programs that help people retain their jobs and meet their basic needs pays off in the long-run. Unfortunately, the short-sighted approach is to make drastic cuts to these programs, jeopardizing the well-being of children and families, and straining an already fragile economy.

Child care is good for kids and the economy

High-quality early child care helps prepare young children to succeed in school and helps parents keep their jobs. Maintaining a job can be difficult if not impossible without affordable child care. The Working Connections Child Care (WCCC) program helps low-income families pay for child care so they can participate in the labor force and gradually achieve self-sufficiency.

Without WCCC, affording the full cost of child care presents an enormous challenge to low-wage workers who are trying to make ends meet. The average monthly cost for child care for two children is $1,433.(4) For a family of four with an income at 175 percent of the federal poverty level, or $3,216 per month, paying for child care would be unaffordable given other living expenses (Figure 4).

At a time when families and our economy need child care more than ever, nearly 7,000 families have lost child care support over the past two years due to a drop in eligibility from 200 percent of the federal poverty level (FPL) to 175 percent of FPL (Figure 5). A cap was also placed on the program to limit the number of families receiving child care support.

Without affordable child care, families face a dilemma in balancing their own budgets: pay for child care in order to keep a job, but no longer be able to pay rent; or quit working altogether. Sarah, a working mother who lost her child care benefits knows this dilemma all too well (see Box 1).

__________________________________________________________________________________________

Box 1: Child care support can mean the difference between work and poverty

Sarah* is 30 years old, and lives in south King County with her five year-old son. Until recently she worked at a company that helped connect people with developmental disabilities to employment opportunities. Sarah loved her job – “I have always enjoyed helping other people…it gives me the opportunity to give back to the community”. Her passion for her job didn’t go unnoticed. In December 2010 she was awarded Employee of the Year at her company, and was given a $500 bonus check.

Receiving $500 should have been cause for celebration. But Sarah grew concerned that the extra money would make her ineligible for Working Connections Child Care (WCCC) – a state work support program that allowed her to put her son in an early learning program while she worked. Her concern was warranted – at the same time she received her reward, the state reduced eligibility for WCCC to offset budget cuts, leaving Sarah with no support for her son to attend preschool.

Sarah explored all of her options, but she ended up with two devastating choices: to continue to keep her son in child care so she could work, but be homeless because she couldn’t afford rent, or leave her job so she could continue to receive support , keep her home, and keep her son in school.

“Without child care support, I simply could no longer keep my job.”

The outcome was devastating for Sarah: “the fear of not being able to provide for my son sent me into a deep depression. I felt powerless.” She looked for other employment, but the bad economy worked against her. Eventually, she applied for cash assistance, food stamps, and health insurance to meet her basic needs – costing the state, in her estimation, three to four times more than what she received when she was working and just receiving child care support: “It didn’t make sense to me...the state thinks it’s saving money by cutting the budget, but reducing my eligibility for child care forced me to apply for three other support programs. How is that saving money?”

After several months of financial and emotional distress, Sarah and her son are once again economically secure. She considers herself lucky, and the experience has strengthened her desire to give back to the community. But Sarah’s story is emblematic of the devastating impact cuts to important programs like WCCC have on people’s lives, not to mention the long-term economic costs to the state.

*Name has been changed to protect confidentiality.

___________________________________________________________________________________________________________

At a time when our focus should be on creating and retaining jobs, situations like Sarah’s illustrate the upside down logic of cuts to critical programs like child care support.

These supports are critical for families who are out-of-work, but wouldn’t be necessary if families didn’t have to leave their jobs in the first place. Not only is this a step backwards for families, but it’s also a step backwards in the state’s goal of cutting costs and creating jobs.

In tough times, policymakers should be doing more, not less, to help people get and keep jobs. That is the key to our recovery and future prosperity. Ensuring that families such as Sarah’s can continue to participate in the workforce, and thus the economy, benefits everyone in the state.

Economic recovery depends on getting families back to work

Washington state’s WorkFirst program provides the assistance low-income families need to get and keep a job.(5) Those supports include education and training, job search, child care, and financial assistance. But just as those supports are becoming increasingly important in light of a dismal job market, the rug is being pulled out from underneath thousands of families.

Earlier this year, a 60 month time limit was enforced for families receiving WorkFirst benefits. The result: over 20,000 adults and children have been left without necessary help to find work, maintain housing and care for their children (Figure 6).

A study conducted by the Department of Social and Health Services found that families who remain on WorkFirst the longest are more likely to have high barriers to self-sufficiency including substance abuse, mental health needs, family violence, and temporary or chronic health conditions.(6) When already fragile families are cut from WorkFirst, they are extremely vulnerable to further risk including the safety of children and stability of the whole family.

Yet, under current proposals, benefits would be further limited to 48 months, immediately impacting 2,380 families. When accounting for the number of adults and kids, this cut will likely impact 4,000 people.

Getting families back to work is a central component to our state’s recovery from tough economic times. Revenue options must be part of the solution to fill the budget gap, or else more families will see their lifeline to jobs disappear.

State must maintain a lifeline for people with disabilities

For decades Washington state has made sure that individuals who cannot work due to a disability are provided medical support and modest financial assistance to meet their most basic needs. This support has served as a lifeline for those who are awaiting long-term federal benefits or who do not qualify for any other assistance but have a medically-assessed disability that prevents them from working.

Due to deep budget cuts in the last year, these individuals have seen that support drastically fall. What was a $339 per month stipend dropped to $197, and starting in November, all financial support will disappear entirely for 20,000 individuals. In its place, local jurisdictions and organizations will attempt to provide housing support for clients who are homeless and maintain an “essential needs” bank to offer personal health and hygiene items, household cleaning supplies, and bus passes.

The most recent data available from the Department of Social and Health Services reports that one third of this population is already homeless (Figure 7). Modest income assistance is often what allows the remaining 67 percent of these individuals to afford rent. With the complete loss of income assistance, it is anticipated that many more individuals will face homelessness.

This lifeline is at risk of full elimination under proposals to address the further shortfall for the remainder of the biennium. Without this crucial lifeline, and no prospect of employment or income, not only will these individuals will be unable to participate in the state’s economy, but their mere ability to survive will be jeopardized.

Conclusion

The state budget is a reflection of our values and goals. The decisions we make to balance the budget will have an impact on our future prosperity and determine what kind of state we live in. Washington state should continue to make investments that create jobs, protect families, and make smart investments in our future.

Maintaining and strengthening our investments in economic security, especially during tough times, helps cushion the impact for families and ensures that people can take steps to improve their quality of life.

Policymakers have tried and failed to do more with less for the past three years—which has not created jobs and not pulled our state out of tough economic times.

Without additional revenue, investments in economic security, like many areas of the state budget, will continue to fall short of meeting the needs of all our residents.

The Legislature and the Governor should take a balanced and responsible approach to the budget that preserves vital public services such as funding for economic security, through tax increases, the elimination of wasteful tax breaks, or both. The prosperity of our state and its residents depends on it.

Acknowledgments

Endnotes

1. The primary source throughout the report is the authors’ analysis of budget data from the Legislative Evaluation and Accountability Program and the Office of Financial Management (see http://fiscal.wa.gov, http:// leap.leg.wa.gov/leap/budget/index_lbns.asp, and http://ofm.wa.gov).

2. Research conducted by DSHS (see footnote 6) finds that thirty-one percent of TANF clients had an identified alcohol/drug treatment need at some time over the FY 2005 to FY 2009 period. The prevalence of alcohol/drug problems amongst TANF recipients is a key driver of arrest risk and involvement with child protection services. Access to alcohol/drug treatment is a key intervention for the WorkFirst population.

3. Data from Washington State Employment Security Department, Labor Market and Economic Analysis Branch. Figures are seasonally-adjusted.

4. Washington State Child Care Resource & Referral, 2010 Data Reports. Average statewide cost for one preschooler and one toddler. Assumes children are in full-time, full-year center care.

5. Funding decisions for the state’s WorkFirst program are at the discretion of the Governor.

6. “Adults on TANF in Washington State: Risks and Outcomes for Leavers, Cyclers and Stayers,” DSHS Planning, Performance and Accountability, Research and Data Analysis Division, August 2010.

Deeper budget cuts would put lives on the line

Kim Justice — 2011-09-27T21:35:31Z

The severity of Washington’s budget situation continues to grow. In the face of a further decline in resources needed to ensure our state’s economic recovery, the Governor will be calling the Legislature into a special session on November 28th with the direction to cut an additional $2 billion.

This approach places the burden of the economic downturn on the shoulders of our most vulnerable citizens - children, the unemployed, the elderly, and people with disabilities. Unless policymakers adopt sensible and immediate revenue increases when they gather in Olympia in November, the toll will be devastating.

As a starting point, state agencies have submitted proposals to reflect a 10 percent reduction in their budgets. Such a scenario would involve:

Suspension of prescription drug coverage for 500,000 individuals.
Over 18,000 less students enrolled in community and technical colleges.

Elimination of food assistance for 14,000 low-income legal immigrants.

Reductions in domestic violence services and assistance for children with high behavior needs, affecting 4,500 children.
The loss of health care for 25,000 children.

Elimination or reduction of mental health, long term care, and developmental disability services for more than 80,000 individuals.

Elimination of support to ensure positive birth outcomes for 54,000 at-risk mothers.

Elimination of health care coverage for 36,000 working adults.

Keep in mind: these proposed cuts represent the starting point for budget reductions. By the time the Legislature convenes for special session, another revenue forecast will have occurred with all indications pointing to further decline. This will almost certainly result in more cuts, which means more people without health insurance, more people out of work, and less college graduates to fill the jobs of the future. Not a prescription for economy recovery, and certainly not what we need for a vibrant and prosperous state.

But it doesn’t have to be that way. Policymakers can and should raise additional resources through a combination of eliminating wasteful tax breaks and temporarily increasing general tax rates or sin tax rates.

Stay tuned to schmudget. In the coming weeks we’ll be posting more budget analysis and offering options for shoring up our economy now while expanding prosperity and economic growth.

The only thing trickling down is the pain

Lori Pfingst — 2011-08-17T18:40:44Z

Most people would agree that all children, regardless of their social and economic background, deserve the same opportunities to succeed in life. For a growing number of Washington’s children those opportunities are slipping away. Without adequate public investment the chances of our children succeeding in life will continue to diminish.

According to a new report released today by the Annie E. Casey Foundation, a growing number of children in Washington are experiencing the impact of parental unemployment and foreclosure in the wake of the recession:

One in eight kids (169,000) in Washington state has at least one parent experiencing unemployment. That marks an increase of 90,000 since the beginning of the recession in 2007.

The number of Washington kids living in homes subject to foreclosure since 2007 totals 68,000.

The research is clear – children who grow up in families experiencing the economic impact of unemployment and foreclosure are less likely to navigate life’s challenges and achieve future success. The younger they are and the longer they are exposed to economic hardship, the more opportunities diminish and the higher the risk of failure.

Overwhelming evidence suggests that state investments to help children and families remain economically secure in the wake of the recession would be a wise investment in our children’s – and our own – future.

Too bad Washington is doing exactly the opposite. The most recent budget passed in our state significantly undermines our children’s opportunities for success in life by making cuts like the following (see report for list of all cuts):

Funding to reduce class sizes and improve learning opportunities in grades K-4 was eliminated, compromising the quality of education our children receive (a modest amount of funding was provided to reduce class sizes in K-3 high-poverty schools);
Eligibility for Working Connections Child Care was reduced from 200 percent of the federal poverty line to 175 percent, making it harder for thousands of families to find child care so they can work;
Funding for higher education was cut so severely that tuition at Washington’s four-year institutions and community and technical colleges increased 11 percent to 16 percent, reducing affordability;
Pregnancy support for at-risk mothers to ensure positive birth outcomes was reduced by 30 percent.

Congress and many states continue to pass legislation that disproportionately benefits the super-rich under the myth that investing in them will trickle down to the rest of us. Most economists agree that this is exactly the opposite of what we should be doing. We need to make stronger investments in all our children and families at the federal and state level if we want to put our country on a path to prosperity. Until federal and state governments decide to make those investments, the only thing trickling down will be the pain.

Federal budget decisions could make matters worse for cash-strapped states

Kim Justice — 2011-07-28T21:39:55Z

A new report by the Center on Budget and Policy Priorities (CBPP) shows that among states that enacted a budget for the 2012 fiscal year, nearly all will spend less than they spent in 2008, (after accounting for inflation). Across the country and in Washington state, reductions fall heavily on K-12 education, higher education, health care, and other public structures.

If this weren’t troubling enough, debates at the federal level about raising the debt ceiling have centered on additional cuts to these core services. Further cuts at the federal level would only make matters worse for states who are struggling to recover from the recent recession. In Washington state, federal funding accounts for approximately $15 billion, or 30 percent, of our state operating budget. Cuts at the federal level could spell further troubles for our state budget.

As the CBPP report points out, state budgets for fiscal year 2012 have been hampered by three main factors:

Depressed revenues caused by the severe recession;

Rising costs to meet people’s needs due to demographic changes and the fact that more people are in need of services during a recession;

The expiration of emergency federal aid.

Not only is federal emergency aid ending, but federal policymakers are in the midst of debating various proposals to reduce national spending as part of a deal to raise the national debt ceiling. Proposals would cut anywhere from $500 billion to $1.8 trillion from entitlement programs that support low-income and working families. While the proposals have been shifting and changing by the minute, cuts could include slashing Medicaid, Medicare, Social Security, food assistance, and rolling back health care reform. The disastrous result? More people in need of public systems, less federal money to states (many of which are already operating far below pre-recession levels), and likely additional deep cuts to balance state budgets.

As the President and members of Congress work towards a solution to raise the debt limit and reduce the deficit, they should protect low-income Americans and seek a balanced approach— one that considers reductions or eliminations of special tax breaks for high-income families and corporations.

Click here to read our post on key deficit reduction principles.

New tax break audit report: A valuable but limited tool

Andy Nicholas — 2011-07-27T22:54:28Z

Washington’s Joint Legislative Audit and Review Committee (JLARC) recently released preliminary performance evaluations of 25 Washington state tax breaks (out of more than 500 on the books). The reviewed tax preferences will cumulatively cost our state more than $2.3 billion in the current 2011-13 budget cycle.

JLARC’s evaluations provide policymakers and the public with useful information about the effectiveness of state spending on special tax breaks. However, the evaluations are greatly limited by state law and available resources. In order to fully understand JLARC’s recommendations, it is important to understand how these constraints affect the review process and analysis.

Important things to note about JLARC’s recommendations

Overall the JLARC report found that of the 25 tax breaks reviewed:

Three of these tax breaks, valued at about $44 million, should be terminated or allowed to expire.
Eight tax breaks worth about $616 million should be reviewed or clarified by the legislature because they have no discernible public purpose. This includes a wasteful business tax break that primarily benefits out-of-state banks.
Fourteen tax breaks, which total about $1.6 billion, fulfill their intended purpose and should be continued.

While this analysis is informative, it is important to understand the following realities about our tax break system and the constraints around JLARC’s review process:

Many tax breaks cannot be evaluated

State law places strict parameters around JLARC’s evaluation process. In particular, it is limited by legislative intent – that is it can only evaluate tax breaks according policy goals established by the legislature. Problematically, the legislature frequently does not establish clear policy goals – i.e. creating jobs – when it enacts a tax break. As a result, JLARC is unable to evaluate these breaks and is forced to simply recommend that the legislature clarify its intent (which has never happened). Of the 95 tax breaks reviewed to date, JLARC has found that 21 do not have a clearly defined purpose. (1)

Many tax breaks have questionable goals

JLARC cannot comment on the appropriateness of tax break policy goals established by the legislature, even if those goals are overly simplistic, questionable, or even ridiculous. For example, in its latest report, JLARC recommends continuing a sales tax exemption for certain nonresident shoppers because it fulfills the legislature’s goal of “removing a disincentive for nonresidents…to purchase goods in Washington.” (2)

However, removing a theoretical disincentive is not a reasonable public goal because it is imprecise and not measurable. We don’t want an education system that might educate our children, nor do we want a public safety system that theoretically incarcerates dangerous criminals. We require that these public systems actually achieve these goals and evaluate them accordingly. The same standard should also apply to narrow tax breaks like the sales tax exemption for nonresident shoppers.

Yet, because the exemption technically meets the legislature’s goal of removing a theoretical disincentive, JLARC curiously concluded that it should remain intact.

(JLARC noted that it is impossible to determine whether this exemption actually increases sales or economic activity in Washington. Accordingly, it should have recommended that the legislature either create a clearly defined and measurable policy goal for this tax break, or eliminate it altogether.)

Reports don’t consider tax breaks within larger budget context

Finally, even in instances in which JLARC recommends that a tax break be continued, the legislature should not necessarily do so. That’s because JLARC’s reports only assess the effectiveness of one type of state spending: tax breaks. (3) Its reports do not evaluate spending on competing priorities, such as ensuring Washington’s children are well-educated, healthy, and prepared to compete in the global economy. Given our limited resources, it may be entirely appropriate for the legislature to redirect funding for special tax breaks (even effective ones) to more pressing investments in health care, higher education, and other important public structures.

Reforms needed to improve tax break transparency

The tax break evaluations conducted by JLARC supply invaluable information about the billions of dollars spent each year on special tax breaks in our state. However, these reports are not enough. State spending on tax breaks still lacks the strict accountability measures that is routinely applied to education, health care, and other public structures. The result has been a highly distorted state budget process in which core health and education systems have been cut to the bone in recent years, while costly and unproven tax breaks have remained completely intact. For more information on how Washington achieve greater transparency over tax breaks read our policy brief Every Dollar Counts: Why It’s Time for Tax Expenditure Reform.

1. One of these 21 tax breaks one was appropriately allowed to expire, but the legislature has never clarified the intent or purpose of a tax break since JLARC began auditing them in 2007. See this summary sheet prepared by JLARC for details.

2. Joint Legislative Audit and Review Committee, "2011 Tax Preference Performance Reviews: Preliminary Report," July 20, 2011, p. 229.

3. Most economists and policy experts agree that narrow tax breaks should be treated like direct state expenditures on health care, education, and other public services during the state budget process. More information on this perspective is available here and here.