State Economy

New Bills Promote Economic Security and Transparency

Kim Justice — 2013-02-06T23:43:26Z

Several recently-introduced pieces of legislation would help create jobs, build lasting prosperity, and foster a more transparent and accountable state budget process. These measures, based on our research, would provide more resources and opportunities for struggling workers and families, while giving policymakers and the public more complete information about the ongoing costs and benefits of public investments.

These bills reflect the policy recommendations we made in our Framework for Prosperity to create a strong economy for all Washingtonians.

SB 5638 Fiscal Impacts-would add transparency and accountability to budget decisions by providing lawmakers with more information, including how cuts to one program may impact other areas of the budget. A broader view of the impact of budget decisions will help aid policymakers in making the best, most-informed judgments on how to prioritize state resources. Click here for analysis we did on a similar proposal.

HB 1734/ SB 5643 Exemptions from the five-year time limit for recipients of TANF (Temporary Assistance for Needy Families) - provides more opportunities for people to find and keep a job by curtailing an onerous red tape barrier – an arbitrary time limit that is not connected to the state of the economy --that prevents struggling families from receiving work supports. It would ensure that parents who have disabilities, are victims of domestic violence, or live in areas with high unemployment (among other exemptions) would be able to continue to receive services. Click here for additional research.

HB 1671/ SB 5595 Child care- improves access to affordable child care for parents, supporting their efforts to find or keep a job. The proposed legislation increases the benefit amount provided to parents, allowing them greater access to providers, and establishes a program to reward child care providers for providing high-quality care. Click here for additional research.

Policy Agenda: Framework for Prosperity

Tara Lee — 2013-01-14T23:59:22Z

Investments

•    Education and Opportunity
•    Thriving Communities
•    Healthy People and Environment
•    Economic Security

Revenue

•    Capital Gains
•    Sales Tax
•    Working Families Tax Rebate
•    Strengthening the Rainy Day Fund

INTRODUCTION

This is a crucial time in Washington state’s history. There are choices to be made by our newly elected Governor and state Legislature that will impact millions of Washingtonians.

How to fulfill the requirements of the McCleary school funding decision, which will touch not only education but all areas of the budget?
How to implement the Affordable Care Act, to provide access to health coverage?
What should our priorities be for investing in the building blocks of a strong economy?
How will we pay for all these things?

When I think of the kind of state I want my young son to grow up in, I know every Washingtonian wants the same: a state with safe, thriving communities, healthy people, an environment with clean air and water, jobs that offer economic security for families, and an education that provides opportunities for the next generation. But those values are in jeopardy right now. All of this comes together in one place—the state budget.

It’s a powerful tool for social change and a reflection of our values. In this document, we lay out specific recommendations for targeted investments that would bring our state closer to providing prosperity for all Washingtonians. We also provide revenue options to help pay for those investments.

The measure of our success is a state with the financial resources to invest in what reflects Washingtonians’ values—a state that can create shared prosperity during good times, and during bad times maintains our commitment to progress. This document is a framework to help get us there.

The Washington State Budget & Policy Center staff and I look forward to working with elected officials, advocates, community members, and everyone else who cares about tomorrow’s Washington state to realize this vision.

_Remy Trupin, Executive Director

INVESTMENTS SUMMARY

Widely shared prosperity does not happen by accident. It happens when we deliberately invest in the foundations of a strong economy—broad and equal opportunity to build knowledge and skills, adequate compensation
and support for workers, and targeted investments in conditions that foster
economic growth.

Washington state’s investments should:

Provide opportunity for all. Opportunities that most Washingtonians need to prosper—access to high-quality education, health care, transportation,
clean environment, and work supports—are cost-effective and improve
long-term outcomes for families, communities, and the economy.

Create better jobs. A thriving middle class is dependent on having enough
jobs that allow Washingtonians to get ahead, and policies that reward
workers for their productivity. In addition, jobs that maintain our physical
infrastructure (construction and maintenance on schools, roads, bridges,
transportation) and build knowledge and skills (teachers, job trainers,
social workers) strengthen the foundation of a strong economy.

Bottom Line

When more people have a chance to reach their full potential and enough economic security to make investments in their future, our economy will grow.

Click for specific investment recommendations.

REVENUE SUMMARY

After the worst recession of our lifetime, rebuilding Washington state’s economy must be policymakers first priority. To build a strong state, we need reforms that will create a more robust and stable revenue system that is able to meet the demands of the 21st century economy.

Washington state’s revenue system is:

Behind the times. Our state revenue system hasn’t substantially changed
since 1935. Seventy-seven years ago Washington state’s economy was based
on agriculture, manufacturing, and purchases of tangible goods. Today our
state produces advanced software and other high-tech goods and services that weren’t even imagined in the 1930s.

Losing pace. Just 40 years ago, our revenue system generated 6.9 cents of every dollar of personal income produced in the state. Today it generates only 4.9 cents per dollar of personal income. That’s a 30 percent decline that won’t abate without changes.

Upside-down. State taxes take a much larger bite out of family incomes among lower- and middle-income households compared to the richest households. As a share of their incomes, ordinary Washingtonians can pay up to eight times more in state and local taxes than those at the top of the income scale.

Bottom Line

Instead of de-funding our values with deep budget cuts, Washington state lawmakers should focus on making changes to our revenue system that will rebuild the economy to work for everyone.

Click for specific revenue recommendations.

IN PURSUIT OF PROSPERITY: Eight Strategies to Rebuild Washington State's Economy

Lori Pfingst — 2012-12-06T17:52:34Z

NOW IS THE TIME

This is an historic moment for Washington state. As we recover from economic, social, and fiscal challenges like none seen in most of our lifetimes, we have a tremendous opportunity to become a state where prosperity is widely shared, and children, families, and communities can thrive.

As our newly elected leaders reconvene for next legislative session and beyond, it is important they recognize that widely shared prosperity doesn’t happen by accident. History, supported by persuasive research, proves that prosperity happens when we deliberately invest in the foundations of a strong economy – broad and equal opportunity to build knowledge and skills, adequate compensation and support for workers, and adequate investments in conditions that foster economic growth.

But the opportunities that built a strong middle class – attending quality public schools, access to health care and transportation, affording a home and growing up in safe, healthy neighborhoods – are not as abundant as they need to be. Nor are they equally available to everyone. And even if everyone had access to such opportunities, Washington state simply does not have enough jobs that pay what’s needed for workers and their families to meet basic needs, let alone prosper. Over the last four years, an all-cuts budget approach to dealing with unprecedented declines in state revenue has made matters worse by eliminating jobs and limiting the opportunities Washingtonians need to get ahead.

When more people have a chance to reach their full potential and enough economic security to make investments in the future, our economy will grow. The good news is we know how to do this – we’ve done it before. If policymakers pursue a coordinated set of strategies to accomplish the long-term goals, shared prosperity will follow.

Opportunity for all. Opportunities that most Washingtonians need to prosper – access to high quality public schools, health care, transportation, clean environment, and work supports – are cost-effective and improve long-term outcomes for families, communities, and the economy.

Better jobs. A thriving middle class is dependent on having enough jobs that allow Washingtonians to get ahead, and policies that reward workers for productivity. In addition, public works jobs that maintain our physical infrastructure (construction and maintenance on schools, roads, bridges, transportation) and build knowledge and skills (teachers, job trainers, social workers) strengthen the foundation of a strong economy.

A productive, equitable revenue system. Ensuring abundant and equal opportunity and creating good jobs requires a revenue system that is adequate to sustain public investments. A more equitable revenue system would ensure Washingtonians from all income levels benefit from the economic activity they help generate.

PAVING A PATH TO PROSPERITY FOR ALL

In the period following World War II, the United States experienced an economic boom like no other country. Intentional public policy investments helped to grow a strong middle class and resulted in increased home ownership and educational attainment, a competitive workforce, personal income gains, and a growing number of families achieving economic security.[1]

History teaches a valuable lesson – public investments reap returns by providing the foundations for a strong economy. Every state, as well as every one of the United States peer nations, requires public investment for a thriving business sector, educating citizens, preparing their workforce, and remaining competitive in a global economy.

We have much to learn from this history of prosperity, but we must also acknowledge it was not shared by everyone, nor did we maintain the foundation to make it last. People of color, historically denied access to opportunities, were excluded from most of the economic gains, increasing racial and social inequality. And beginning in the 1980s, public investments that provided opportunity and supported workers and their families were slowly dismantled, hurting the middle class and increasing the number of low income families.[2]

Washington state’s economy will grow and thrive only if all Washingtonians have the opportunities and jobs they need. We’ve got work to do. In Washington state today:

Opportunity is neither abundant nor equal

According to the Opportunity Index,[3] a measurement of the economic, education, health, and civic opportunities for all U.S. counties, no county in Washington state gets a grade of “A” for comprehensive access to high quality education, adequate health care, affordable housing, and safe communities. Just six counties receive a grade of “B” or higher, and the remaining 31 counties receive a grade ranging between “B-“ and “D+” (data was not available for two counties). A different study specific to the Central Puget Sound found that access to opportunity is weak for the region, with people of color having the least access. Just four of every 10 residents in the Central Puget Sound region have access to high opportunity, and Black, Hispanic, and American Indian residents had less access than White and Asian[4] residents (Figure 1).

The job market is comprised of mostly low-paying work

Unemployment in Washington state remains high (8.5 percent),[5] largely because not enough jobs are available to meet the demand. While jobs have grown steadily since the recession officially ended in June 2009, fewer than half (48 percent) of the 154,000 jobs lost during the recession have been recovered.[6] Jobs in the private sector are increasing, but these gains have been partially offset by losses in the public sector, hurting our overall economic recovery.[7]

Equally important, most of the jobs available in Washington state do not pay what’s needed for workers and their families to get ahead. Fifteen of the 20 occupations with the most job openings pay below what a family of four needs just to meet basic needs, like having enough food, adequate housing, and affordable child care and health care. Eighteen out of 20 pay less than what a single parent with two children needs (Figure 2).

While meeting basic needs is an important benchmark, true progress would mean that more people have enough disposable income to invest in assets – a home, saving for retirement, or a child’s education – that build long-term wealth and economic security.

Unfortunately, that is unlikely to happen given the present composition of Washington state’s future labor market. Conservatively assuming families need 15 percent more than just a basic needs wage to actually step onto a path of prosperity, 71 percent of jobs in 2019 will not pay enough on average ($56,762) for a family of three to get ahead on one income (Figure 3).

Washington’s job market has a bright spot in that we are a leader in the nation for higher skill, higher paying STEM (Science, Technology, Engineering, and Mathematics) jobs,[8] but STEM occupations make up just 8 percent of the total labor market.

Our flawed revenue system cannot support investments that create opportunity and better jobs

Over the last 20 years, revenues as a share of Washington state’s economy have declined by 30 percent (Figure 4),[9] crippling policymakers ability to make investments that would build opportunity, create jobs, and strengthen our economy.

Washington state has a 1930’s tax system that is wholly inadequate for a 21st century economy. When our tax system was put into law during the 1930’s, the economy was largely driven by agriculture and the production and sale of manufactured goods. At the time, a sales tax on goods reflected most consumer activity. Over time, however, Washington state’s economy – like the rest of the nation – shifted away from manufacturing toward being a primarily service-based economy. Consumers have been spending more on services than manufactured goods since the 1970s, but there has been no significant corresponding shift to the tax code (Figure 5). Without reforms that reflect this and other changes in the economy, our revenue system will fall ever farther behind, starving the state of resources needed to support public investments in opportunities and jobs.

To make matters worse, our revenue system is “upside-down,” which means low- to middle-income families pay a far greater share of their income to support our state investments (17 percent and 11 percent, respectively) compared to wealthy families (5 percent) (Figure 6). Generating revenue through a tax system that places the responsibility on those who are least able to contribute is not only unjust, it doesn’t make economic sense. Substantial economic activity among wealthy families is not included. In addition, this flawed system increases income inequality by giving a big break to the highest income earners, while low- to middle-income families reap little reward from the economic activity they help generate (also Figure 6).

STRATEGIES TO BUILD SHARED PROSPERITY

Washington state is caught in a vicious cycle. We lack opportunity and good jobs, as well as the revenue needed to make investments that help to create opportunities and good jobs. Policymakers can reverse this cycle by ensuring opportunities are abundant and equal, creating better jobs, and fixing our flawed revenue system. Eight strategies can rebuild the middle class and make our economy work for everyone.

GOAL: Opportunity for All

People can’t take advantage of opportunities that don’t exist. Increasing public investment in equal opportunity lays the foundation for greater economic security for children and families, improved social well-being and health outcomes, and a well-educated, globally competitive workforce.

STRATEGY: Provide a high quality basic education to all students

Provide high quality universal preschool. Children who attend preschool are more likely to be school-ready and have better academic and social outcomes than children who don’t attend. Families and businesses benefit from having access to care for children so parents can work. High quality preschool is one of the most effective workforce development tools available, preparing the next generation of children to meet the demands of Washington state’s future economy.[10]

Target resources to close the K-12 racial achievement gap. Forty-four percent of babies born in Washington state are children of color.[11] Due to unequal access to opportunity and lower family economic security, these children – Washington’s children – fare worse than their white peers on nearly every indicator of well-being.[12] Ensuring that children of color and their families have the services they need to succeed in school is essential to their future, as well as our economy.

Investment in public universities and community and technical colleges. Washingtonians who attend college –especially those who obtain an Associate’s or Bachelor’s degree – are more likely to work full-time and have higher incomes[13] than those with a high school degree or less.[14] In addition, public universities and community colleges provide the labor market with students who have the training, knowledge, and skills to keep Washington state globally competitive.

STRATEGY: Protect public health and the natural environment

Fully implement the Affordable Care Act. Access to quality, affordable health care is key to Washington state’s economy because it creates a healthy workforce, reduces overall costs, and helps children do better in school. Full implementation of the federal Affordable Care Act, including the adoption of the federal basic health plan, Medicaid expansion, and the creation of the exchange, will provide coverage for 800,000 currently uninsured Washingtonians. Having more people insured will reduce the costs of uncompensated care, and save the state $200 million in the first two years of Medicaid expansion alone.[15]

Protect investments in clean air, water, and land. Living in communities with access to clean water, and free of air pollution and toxins are essential to maintain public health and quality of life.

STRATEGY: Support economic security of children and families during tough times

Increase access to food, housing, and support services. Helping families meet basic needs in tough economic times is essential for child and family well-being and more cost-effective than letting people slip through the cracks of a poor economy.[16] The State Nutrition Assistance Program (food stamps) and Home Security Fund and Housing Trust Fund (affordable housing) reduce hunger among children, and increase the stock of affordable housing so families have a foundation from which to rebuild. Support services for domestic violence, substance abuse, and mental health provide stability for children and families and connect people to life-saving resources.

STRATEGY: Reprioritize state spending to build thriving communities

Implement more stringent cost-benefit analysis of tax breaks. Hundreds of narrow tax breaks for a variety of industries and individuals amount to billions of dollars in foregone state resources each year – resources that would be far more effectively invested in the opportunities that benefit most Washingtonians. Many tax breaks have no proven economic benefit for the state. For example, state auditors recently reviewed a business tax credit aimed at improving employment in the high-tech industry, and found the credit raised employment in the high-tech sector by less than 1 percent, with a total price tag of $20 million per year or about $45,000 per job created.[17]

GOAL: Better jobs

Policymakers need to recognize that jobs overwhelmingly don’t pay enough to let families get ahead. People that work hard should be rewarded through adequate compensation and a guarantee of meeting basic needs for their family. Public investment supports jobs that pay middle-class wages, like teaching, nursing, firefighting, and law enforcement, and also strengthens communities by maintaining our state infrastructure.

STRATEGY: Invest in public works jobs

Fix infrastructure and build human capital.[18] Increasing investment in public works – like roads, bridges, schools, parks, and transportation systems – projects creates jobs and maintains the quality of the infrastructure that is critical to an efficient workforce and flow of goods throughout the state. In addition, investing in jobs that educate children and protect communities strengthen our workforce. Targeting public works job creation in areas hardest hit by unemployment can get people back to work quickly and stabilize low income communities.[19]

STRATEGY: Make work pay

Strengthen worker rights and work supports.[20] Policies that incentivize work and support employees in their relationships with employers are critical to rebuilding the middle class and an economy that works for everyone. Being in a union, for example, is associated with better wages and working conditions, particularly among workers in lower-paying fields. In addition, unions have reduced gaps in income inequality and improved workplace conditions for women and people of color, who are more likely to face wage discrimination. In addition, policies that support low income families in finding or keeping a job, like Temporary Assistance for Needy Families/WorkFirst and Working Connections Child Care, prevent people from slipping through the cracks of a weak economy.[21]

Fully fund the Working Families Tax Rebate (WFTR). The WFTR is Washington state’s version of a state Earned Income Tax Credit, one of the most powerful tools for rewarding the work of low income families. Passed in 2008, but yet to be funded, the WFTR is modeled after the highly successful federal EITC and will reduce taxes for about 400,000 working Washingtonians and their children once fully funded.[22]

Goal: A Productive, Equitable Revenue System

Washington state will not be able to make the investments in opportunity and jobs until we fix our flawed revenue system. We also can’t rebuild the middle class if we don’t ensure that people from all income levels benefit from the economic activity they generate.

STRATEGY: Modernize the tax system for a 21st century economy

Expand the sales tax to include more services. A sales tax that includes services would reflect today’s purchasing patterns and generate at least $100 million per year in additional revenue, depending on the number of services added. [23]

STRATEGY: Make the tax system equitable

Shift greater tax responsibility to those most able to pay. Flipping our upside down revenue system so that high income families pay a greater share of their income in taxes and low- and middle-income families pay the least could generate more resources for public investments in opportunity and help to reduce income inequality. Enacting a capital gains tax, for example, would generate some $700 million annually and only the top 2 percent of income earners in Washington state would pay it.[24] If paired with tax credits for low- to middle-income families, like a refundable state-level child tax credit[25] and property tax circuit breakers,[26] tax reform could help even more to reduce income inequality and promote prosperity.

CONCLUSION

Now is the time to rebuild Washington state’s economy and tap into the full potential of our residents. With an economy in recovery, a history to build upon, and a strategy to pursue we can put prosperity within everyone’s reach. Investing in the foundations of a strong middle class – abundant and equal access to opportunity, better jobs, and an adequate revenue system that promotes equality – will get us there.

Click below to listen to an audio presentation of this paper.

SOURCES

1. Reich, Robert (2010) Aftershock: The Next Economy and America's Future. Vintage Books/Random House.

2. Reich, Robert (2010) Aftershock: The Next Economy and America's Future. Vintage Books/Random House.

3. A measure created by Opportunity Nation, in partnership with Measure America and the Social Science Research Council, to capture the economic, education, health, and civic opportunities for all U.S. counties. Downloaded from opportunityindex.org on September 27, 2012.

4. Data systems do a poor job of collecting detailed information on people of color. The Asian category, in particular, hides significant disparities within the Asian population. For example, people who emigrated from Southeast Asia tend to fare worse on numerous indicators of well-being than people who emigrated from China, Japan, or India. The data presented on opportunity likely conceal these disparities and efforts should be made to better understand the barriers facing Asian residents in Washington as well as people from other racial and ethnic backgrounds.

5. Washington State Employment Security Department (September 2012) Monthly Employment Report downloaded on October 23, 2012 from https://fortress.wa.gov/esd/employmentdata/docs/economic-reports/current-monthly-employment-report.pdf.

6. Data is based on the loss of jobs between December 2007 and June 2009, and the number of jobs gained since the recovery started in June 2009. Data received from Chris Thomas, Labor Economist with the Washington State Economic Security Department.

7. B&PC analysis of seasonally-adjusted Historical Employment Statistics from Washington State Employment Security Department and Bureau of Labor Statistics data.

8. Economic Modeling Specialists (June 20, 2012) The Number and Proportion of STEM Jobs by State downloaded on October 9, 2012 from http://www.economicmodeling.com/2012/06/20/the-number-and-proportion-of-stem-jobs-by-state/. The definition of STEM consists of eight high-level categories (see here for all 93 five-digit occupations): computer specialists (SOC 15-1); mathematical science occupations (15-2); Engineers (17-2); drafters, engineering, and mapping technicians (17-3); Life scientists (19-1); Physical scientists (19-2); Social scientists and related occupations (19-3); Life, physical, and social science technicians (19-4).

9. We measure the size of our revenue system over time by dividing total revenues per year by aggregate personal income per year.

10. Bainbridge, Jay, Marcia K. Meyers, Sakiko Tanaka, and Jane Waldfogel. 2005. "Who Gets an Early Education? Family Income and the Enrollment of Three- to Five-Year-Olds from 1968 to 2000*." Social Science Quarterly 86:724-745; Bhargava, Deepak , Timothy Casey, John Cavanagh, Karen Dolan, Peter Edelman, Barbara Ehrenreich, Sarita Gupta, Dedrick Muhammad, Diana Pearce, Steve Savner, and Kevin Shih. 2010. "Battered by the Storm: How the Safety Net Is Failing Americans and How to Fix It." Institute for Policy Studies, Center for Community Change, Jobs with Justice, & Legal Momentum, Washington, DC; Cancian, Maria and Daniel R. Meyer. 2004. "Alternative Measures of Economic Success among TANF Participants: Avoiding Poverty, Hardship, and Dependence on Public Assistance." Journal of Policy Analysis and Management 23:531-548; Edelman, Peter B. 2009. "Changing the Subject: From Welfare to Poverty to a Living Income." Northwestern Journal of Law and Social Policy 4:14-29; Greenberg, Mark, Indivar Dutta-Gupta, and Elisa Minoff. 2007. "From Poverty To Prosperity: A National Strategy To Cut Poverty In Half." Center for American Progress, Washington, DC; Heckman, James J. 2011. "Invest in Early Childhood Development: Reduce Deficits, Strengthen the Economy." The Heckman Equation.

11. B&PC analysis of U.S. Census Bureau’s 2011 Population estimates.

12. For a sampling of data showing disparities between children of color and their white peers, visit the KIDS COUNT Data Center at http://datacenter.kidscount.org/wa.

13. Washington State Board of Community & Technical Colleges (2005) Building Pathways to Success for Low-Skill Adult Students: Lessons for Community College Policy and Practice from a Longitudinal Student Tracking Study (The “Tipping Point” Research) (http://www.sbctc.ctc.edu/docs/data/research_reports/resh_06-2_tipping_point.pdf)

14. Mirowsky, John, and Catherine E. Ross. 1998. "Education, Personal Control, Lifestyle and Health: A Human Capital Hypothesis." Research on Aging 20:415-49.

15. Washington State Budget & Policy Center (June 18, 2012) Series on Health Care Reform (http://budgetandpolicy.org/health-reform-will-increase-care-reduce-costs)

16. Edelman, Peter B. 2009. "Changing the Subject: From Welfare to Poverty to a Living Income." Northwestern Journal of Law and Social Policy 4:14-29.

17. Washington State Budget & Policy Center (2011) Every Dollar Counts: Why it's Time for Tax Expenditure Reform (http://budgetandpolicy.org/reports/every-dollar-counts-why-its-time-for-tax-expenditure-reform/pdf_version); Bartik, Timothy, Kevin Hollenbeck. 2012 "An Analysis of the Employment Effects of the Washington High Technology Business and Occupation (B&O) Tax Credit" Washington Joint Legislative Audit and Review Committee

18. Bhargava, Deepak , Timothy Casey, John Cavanagh, Karen Dolan, Peter Edelman, Barbara Ehrenreich, Sarita Gupta, Dedrick Muhammad, Diana Pearce, Steve Savner, and Kevin Shih. 2010. "Battered by the Storm: How the Safety Net Is Failing Americans and How to Fix It." Institute for Policy Studies, Center for Community Change, Jobs with Justice, & Legal Momentum, Washington, DC.; Cancian, Maria and Sheldon Danziger. 2009. "Changing Poverty and Changing Antipoverty Policies." Pp. 1-31 in Changing Poverty, Changing Policies; Danziger, Sheldon. H. 2007. "Fighting Poverty Revisited: What Did Researchers Know 40 Years Ago? What Do We Know Today?" Focus 25:3-11.

19. Dillahunt, Ajamu, Brian Miller, Mike Prokosh, Jeannette Huezo, and Dedrick Muhammad. 2010. "State of the Dream 2010: Jobless and Foreclosed in Communities of Color." United for a Fair Economy, Boston, MA; PolicyLink (2012) America’s Tomorrow: Equity is the Superior Growth Model

20. Bhargava, Deepak , Timothy Casey, John Cavanagh, Karen Dolan, Peter Edelman, Barbara Ehrenreich, Sarita Gupta, Dedrick Muhammad, Diana Pearce, Steve Savner, and Kevin Shih. 2010. "Battered by the Storm: How the Safety Net Is Failing Americans and How to Fix It." Institute for Policy Studies, Center for Community Change, Jobs with Justice, & Legal Momentum, Washington, DC.

21. Edelman, Peter B. 2009. "Changing the Subject: From Welfare to Poverty to a Living Income." Northwestern Journal of Law and Social Policy 4:14-29; Greenberg, Mark, Indivar Dutta-Gupta, and Elisa Minoff. 2007. "From Poverty To Prosperity: A National Strategy To Cut Poverty In Half." Center for American Progress, Washington, DC.

22. Washington State Budget & Policy Center (2012) Working Families Tax Rebate Would Promote Success in School and Work (http://budgetandpolicy.org/schmudget/working-families-tax-rebate-would-promote-success-in-school-and-work/?searchterm=working families tax rebate) and Washington State Budget & Policy Center (2009) Working Families Tax Rebate: A Tool for Economic and Fiscal Recovery (http://budgetandpolicy.org/schmudget/working-families-tax-rebate-a-tool-for-economic-and-fiscal-recovery/?searchterm=working families tax rebate)

23. Washington State Budget & Policy Center (2010) Modernizing the Sales Tax (http://budgetandpolicy.org/schmudget/modernizing-the-sales-tax/?searchterm=sales tax)

24. Washington State Budget & Policy Center (2012) A Capital Reform: Using Capital Gains to Fuel Job Creation and Economic Prosperity in Washington State (http://budgetandpolicy.org/reports/a-capital-reform-using-capital-gains-to-fuel-job-creation-and-economic-prosperity-in-washington-state/?searchterm=capital gains)

25. Edelman, Peter B. 2009. "Changing the Subject: From Welfare to Poverty to a Living Income." Northwestern Journal of Law and Social Policy 4:14-29; Greenberg, Mark, Indivar Dutta-Gupta, and Elisa Minoff. 2007. "From Poverty To Prosperity: A National Strategy To Cut Poverty In Half." Center for American Progress, Washington, DC.

26. Washington State Budget & Policy Center (2007) Balancing Equity and Reform with a Prosperty Tax Circuit Breaker (http://budgetandpolicy.org/reports/balancing-adequacy-and-equity-with-a-property-tax-circuit-breaker/?searchterm=property tax circuit); Institute on Taxation and Economic Policy, (ITEP). 2010. "Credit Where Credit is (Over) Due: Four State Tax Policies Could Lessen the Effect that State Tax Systems Have in Exacerbating Poverty."

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.

Special session should focus on revenue and reform

Tara Lee — 2011-06-13T22:34:04Z

The Legislature resumes its work today with a special session. In addition to a number of policy bills, the most pressing task before legislators is to finalize and pass a budget for the 2011-2013 biennium.

There are a number of things the Legislature should do in the Special Session to help meet our short-term fiscal goals and ensure the long-term prosperity of our state.

Take a balanced approach to solve our current budget crisis

Curtail special tax breaks to preserve essential services--

All options must be on the table if we are to address our ongoing economic problems in a balanced and responsible way. In addition to enacting painful but necessary budget cuts, policymakers must also find new sources of revenue. Eliminating even a small fraction of the billions of dollars spent each year on special tax breaks would free-up resources needed to preserve our core investments in health care, education, and safe communities.

Several bills have been introduced to close targeted tax breaks to fund education, healthcare, mental health services, and other public priorities.

While none of these bills would solve the entire revenue shortfall, passing one or several of them would be a step in the right direction.

Some have argued that I-1053 – which requires that any new revenues be approved by a supermajority (two-thirds) vote of the legislature or a vote of the people – prevents a balanced approach to the economy's impact on the state budget. However, given the magnitude of the cuts under consideration, two-thirds of legislators ought to agree on a package of sensible revenue enhancements to stave off the worst of the cuts. Failing that, the legislature should send such a package to the voters for approval in November.

Make long-term reforms that would make our state budget process stronger

Reform how special tax breaks are reviewed and evaluated--

As we have highlighted many times, our current state budget process fails to account for the billions of dollars spent each year on tax breaks or “tax expenditures” – the hundreds of special credits, exemptions, deductions and other tax preferences. The failure to do so has led to a distorted and incomplete view of our spending priorities as a state.

This year, the Legislature has an opportunity to enact common-sense tax expenditure reforms that would bring greater accountability and transparency to our state budget process.

Key reforms that would allow policymakers to routinely balance the costs and benefits of tax expenditures against other public priorities include:

• Establishing routine oversight by requiring expiration dates for all tax expenditures;
• Improving fiscal management by allowing tax expenditures to be modified via a simple majority in the legislature;
• Fostering transparency through an executive tax expenditure budget;
• Ensuring tax expenditures are cost-effective by enhancing audit and review structures; and
• Enforcing accountability by enacting strict eligibility requirements for businesses that receive tax expenditures.

Without long-term tax expenditure reform, policymakers will not have the flexibility or the tools needed to make practical and balanced choices.

Read more about tax expenditure reform in our policy brief, “Every Dollar Counts: Why It’s Time for Tax Expenditure Reform,” which provides detailed analysis on how we can reform our tax break system.

Account for the costs of cuts --

Our current state budget process does not fully account for costs associated with cuts. As policymakers evaluate the pros and cons of legislation, one factor that weighs heavily is the cost or savings expected to result from a particular policy decision. Senator Nick Harper has sponsored a bill (SB 5872) that would require state agencies to estimate how cuts to one program impact other areas of the budget. For example, cuts to in-home care services for the elderly and people with developmental disabilities can lead to increased usage of nursing homes, which cost nearly three times that of services provided in a client’s own home.

SB 5872 would allow legislators to evaluate the full impact of cuts. Legislators should make choices that don’t undermine our future prosperity or leave us unprepared for the next recession. The reforms contained in Senator Harper’s bill would be a step in the right direction.

Make changes to the Rainy Day Fund--

Washington’s Budget Stabilization Account or “Rainy Day Fund” (RDF) was created to secure our essential public structures during recessions, natural disasters, and other state emergencies. Our current state RDF does not adequately support education, health care, and other important public priorities in times of need.

Legislators could make sensible, long-term reforms that would make our state rainy day fund more adequate and accessible during future state crises.

These reforms could include:
• Improving the adequacy of the RDF by increasing annual deposits;
• Fostering improved access and accountability by eliminating the supermajority requirement and applying strict limitations; and
• Ensuring the rainy day fund does not hinder recovery efforts by modifying deposit requirements.

For more analysis on how we can create a more robust rainy day fund, read the Budget & Policy Center Analysis, “Strengthening the Rainy Day Fund.”

Whether the special session is two weeks or 30 days, lawmakers are not just solving a short-term problem. The decisions they make now will impact our state for years, perhaps even decades to come.

Communities of Color Face High Underemployment in Washington

Andy Nicholas — 2010-02-11T22:17:47Z

As a result of the Great Recession, some 16.2 percent of Washington’s workforce was underemployed in 2009. Yesterday, we posted an analysis of new Bureau of Labor Statistics (BLS) data showing growth in the unemployment and underemployment rates in Washington since 2007. (We also described the differences between the two indicators.) Today we provide a deeper analysis of the new data, which show that underemployment was alarmingly high among certain communities of color in Washington State last year.

The graph below shows the 2009 underemployment rate by race and ethnicity in Washington. As the graph shows, white and Asian Washingtonians experienced average underemployment rates of 15 percent and 13 percent, respectively – significantly lower than the statewide rate. At the same time, underemployment among African Americans stood significantly above the statewide average at 21 percent. Finally, 26 percent of Hispanic workers were underemployed last year.

One-sixth of Washingtonians Were Underemployed in 2009

Andy Nicholas — 2010-02-11T00:24:46Z

On average, 16.2 percent of Washington’s workforce were underemployed in 2009, according to a Budget & Policy Center analysis of data from the U.S. Bureau of Labor Statistics. This is a dramatic increase from 8.8 percent two years earlier.

The underemployment rate provides a broader perspective on labor force weakness than the unemployment rate, a more commonly reported labor force statistic. The unemployment rate includes only those workers who are actively looking for, but unable to find, work. Along with the unemployed, the underemployment rate also captures workers that are marginally attached to the labor force (such as those who have given up looking for work because they are discouraged) and workers who are working part-time for economic reasons, such as being unable to find fulltime work.

The graph below shows both the unemployment and the underemployment rate in Washington from 2007 to 2009. The graph shows that both indicators rose dramatically during this period as a result of the national recession. It also shows that the gap between the two measures has widened.

Tomorrow’s post will examine underemployment among communities of color in Washington.

Important Work Support in Jeopardy

Jeff Chapman — 2010-01-29T17:02:43Z

The Governor’s budget proposals would make it more difficult for lower income parents to be employed. Both of her proposals would result in significant cuts to Working Connections Child Care (WCCC), a program that helps lower income working families pay for child care. The Governor’s first budget proposal (“Book 1”) proposed an $89 million reduction in WCCC. A cut of that size would affect an estimated 17,000 families by the end of June 2011. Her “Book 2” proposal would also make significant cuts—$49 million.

Without work supports such as WCCC, maintaining employment can be difficult if not impossible. According to the state Department of Early Learning, the average cost of a child care center for two children is about $1,177 per month.* As shown in the graph below, that is over half of the total monthly income for a family earning $24,000 per year.

To make matters worse, the cuts also come at a time when finding and maintaining employment is especially difficult. In 2009, the unemployment rate for single parents averaged 10.4 percent, compared to 6.2 percent just two years earlier (see the graph below). (The unemployment rate is the share of the labor force that is looking for, but unable to find, work.)

By making it more difficult for families to remain employed, cuts to Working Connections Child Care violate the value Washingtonians place on work. Preserving this important work support is yet another reason consideration should be given to strategies to increase state revenue.

* Assuming one toddler and one school-age child.

Thanks to Karen Tvedt, Lauren Platt, and Lori Pfingst.

Investing in Washington’s Workforce

Jeff Chapman — 2010-01-15T19:26:31Z

Emerging out of the recession with our economic competitiveness intact will require an investment in workforce training. As the economy begins to grow, we will need to have workers whose skills match up with the needs of employers in the fields of green energy, health care, life sciences, accounting, and engineering.

The Worker Retraining Program, operated through our state’s community and technical colleges, provides training for dislocated and unemployed workers to gain the new skills and knowledge needed to successfully re-enter the workforce. The program pays for instructors, curriculum, as well as financial aid that helps pay for tuition, books, fees, and other related expenses for individuals who lost their jobs due to economic changes.

The program is effective. Over 80% of participants find jobs within three quarters of completion.* Workers who were in high paying jobs were able to recover 87% of their previous income within that time period. Workers who were in lower wages job were able to recover 118%.*

The graph below, from the Washington State Board for Community and Technical Colleges, shows how enrollment in the program has spiked along with the unemployment rate and is expected to increase to 16,000 by 2010-11.*

In response to the growing need, Governor Gregoire has proposed funding the Worker Retraining Program for an additional 2,500 (FTE) Washington workers. This is a step in the right direction, but it still leaves thousands of unfunded slots and other applicants being turned away. And at the same time, her budget proposes other reductions in funding for community and technical colleges on top of last year’s cuts that will strain their ability to provide education and training. Additionally, deep cuts in health care, child care, and other areas will also harm workers.

Maintaining our edge in a growing and changing economy will require a state budget that invests in Washington’s workforce.

* Worker Retraining Program Accountability Report

EOI releases "The State of Working Washington 2009"

Stacey Schultz — 2009-12-18T19:13:42Z

Today the Economic Opportunity Institute is releasing its annual report, "The State of Working Washington." The 2009 edition focuses on economic security and the increasing difficulties that Washingtonians face to afford home ownership, health care, college tuition, and retirement savings. The report also highlights diminishing median amily income over the last decade and reductions in employer provided benefits for many Washington workers.

To access the report, click here.

New Census Poverty Data Reveal Deep Disparities throughout Washington

Andy Nicholas — 2009-12-17T20:29:25Z

According to new data from the U.S. Census Bureau, nearly 730,000 Washingtonians lived in poverty in 2008. In total, 11.3 percent of the state’s population had incomes at or below the federal poverty line last year. The overall poverty rate in 2008 remained statistically unchanged from the previous year, signaling that the data does not capture the full impact of the recession. Data for 2009, when the economic crisis worsened dramatically, is likely to show a disturbing increase in the number of Washingtonians living in poverty.

Poverty among Minority Communities in Washington

Poverty rates varied significantly across communities in Washington, with certain minority groups and counties experiencing higher rates compared to the general population. For example, last year members of Native American, African American, and Hispanic households were more than twice as likely to be impoverished compared to the population as a whole. The graph below shows that the poverty rate among Native American households stood at 26.1 percent. Similarly, African American and Hispanic communities experienced poverty rates of 22.9 and 23.5 percent, respectively. At the same time, Asian (9.2 percent) and White (9.9 percent) households were significantly less likely to be in poverty compared with the general population.

Poverty by County

Poverty rates in 2008 also varied significantly among Washington’s 19 largest counties – those with populations above 65,000. Compared to the statewide average, sparsely-populated counties tended to see higher poverty rates. The graph below shows that the poverty rate was highest in Franklin County (20.5 percent), followed by the counties of Yakima (18.3 percent), Grant (15.7 percent), Whatcom (14.7 percent), and Spokane (13.7 percent).

Conversely, residents in the counties of Snohomish (7.9 percent), Island (8.0 percent), King (9.1 percent), and Clark (9.6 percent) were significantly less likely to live in poverty compared with the statewide general population.

The poverty rate was not significantly different from the state average in Benton, Chelan, Clallam, Cowlitz, Grays Harbor, Kitsap, Lewis, Pierce, Skagit, and Thurston counties.

2009 Data Likely to Be Much Worse

Today’s 2008 data does not capture the full impact of the current recession. While the unemployment rate in Washington averaged 5.3 percent in 2008, that number jumped to 9.2 percent by August 2009. Overall, 66,000 jobs have been lost in Washington since the start of 2009. Nationwide, the recession has taken a greater toll on communities of color. In the U.S., the unemployment rate among white workers was 8.9 percent in August; but among African American and Hispanic workers, the rates was 15.1 and 13.0 percent, respectively.

In Franklin and Yakima Counties, 28 Percent of the Population Lacked Health Insurance in 2008

Andy Nicholas — 2009-12-16T19:32:12Z

According to new data from the U.S. Census Bureau, 13.1 percent of Washington’s population went without health coverage last year. Among the state's 19 largest counties – those with populations over 65,000 – there was significant variation, with more than one of every four Washingtonians in Franklin County and Yakima County lacking health insurance.

Counties with larger populations generally experienced lower uninsured rates compared to the state average. Yet even in King County, one of every 10 residents (10.6 percent of the population) was uninsured in 2008. In addition to King County, Island County (9.5 percent), Thurston County (10.9 percent), and Spokane County (11.8 percent) all experienced uninsured rates significantly lower than the statewide average. In Benton, Clark, Kitsap, Lewis, Pierce, Snohomish, and Whatcom counties the uninsured rate was about the same as the state average.

Of Washington’s most populous counties, Franklin County and Yakima County had the highest uninsured rates in 2008, which stood at 27.7 percent and 27.5 percent, respectively. Residents in the counties of Grays Harbor (16.0 percent), Clallam (16.6 percent), Cowlitz (16.7 percent), Skagit (16.7 percent), Chelan (19.7 percent), and Grant (20.5) were also significantly more likely to lack coverage compared to those in rest of the state.

While today’s data sheds much-needed light on the disparities in health coverage throughout Washington, next year’s data are likely to be far worse. In 2008, the unemployment rate averaged 5.3 percent in Washington. However, the economy deteriorated dramatically in 2009. As of August, the unemployment rate in Washington stood at 9.2 percent, and nearly 66,000 jobs have been lost in the state since January. A BPC analysis of the census health coverage data in 2007-08 shows the employer-based coverage weakened significantly during that period – a trend that will certainly continue throughout 2009.

For information on the uninsured rate among children in Washington State counties, click here to view an analysis from Washington Kids Count and the Children's Alliance.

Editor’s note: The Census Bureau originally planned to release single-year estimates of all indicators included in the 2008 American Community Survey (ACS) today. Due to a coding error, however, ACS poverty estimates will not be released until September 29, 2009. That morning, the Budget & Policy Center along with Washington Kids Count will release an analysis of the latest poverty data from the ACS.

Nearly 1 in 6 Washington Workers Were Underemployed in First Half of 2009

Jeff Chapman — 2009-12-15T23:57:05Z

In the first half of 2009, 16.2 percent of Washington’s potential workforce was underemployed each month on average. Two years earlier, before the recession, the underemployment rate was 9.4 percent.

The underemployed includes workers who:

Are unsuccessfully looking for work (the unemployed),
Are marginally attached to the labor market, such as workers who have given up looking for work because they have become discouraged,
Are working part-time for economic reasons, such as an inability to find fulltime work.

Struggling to Make Ends Meet

Jeff Chapman — 2009-12-15T23:57:43Z

Today, the Northwest Area Foundation released the findings from a national survey of 4,000 adults called "Struggling to Make Ends Meet." The findings are easily accessed using an interactive tool. Findings from Washington State include:

31% of respondents reported that they or a family member lost a job in the last 12 months.
35% had their hours (or those of a family member) cut at work in the last 12 months.
61% report cutting back on spending as a result of the recession.

Other topics include awareness of available services, ability to pay for basic needs, the scope of and explanations for hardship in local communities, and views about elected officials.

Income Inequality Grew Steadily from 2002-07

Andy Nicholas — 2009-12-17T01:44:48Z

The top one percent of wealthiest households in the U.S. saw almost unprecedented income growth between 2002 and 2007, with income rising ten times faster than it did for the bottom 90 percent of households. As a group, the richest one percent of households saw their incomes grow by 62 percent during this period, after adjusting for inflation. By comparison, the bottom 90 percent of Americans (those with annual incomes below $110,000) experienced income growth of only four percent.

According to a new analysis of IRS data by economists Thomas Piketty and Emmanuel Saez (summarized by CBPP), income growth skewed in favor of the wealthy during the 1920’s, but then turned towards the middle class during the post-WWII era. As the graph below shows, in the early 1980’s income growth again began to concentrate in the upper tiers of American households.

Income gains have been even more pronounced among those at the very top of the income scale. The CBPP report shows that incomes in the top one-tenth of one percent of U.S. households grew by about 94 percent ($3.5 million per household) from 2002 to 2007.

The report does not show the impact of the current economic recession. Even though it is expected that income concentration will fall in 2008-09, once the recovery begins economists predict income inequality trends will continue.