Schmudget Blog

2016 Ballot Measures: What’s at Stake

Posted by Melinda Young-Flynn at Oct 20, 2016 09:40 PM |
By Misha Werschkul, executive director, and Andy Nicholas, associate director of fiscal policy

Voters in Washington state can impact the state’s future in a range of measures on the November 2016 ballot. Based on our extensive research and analysis into the economic costs and benefits of raising the minimum wage, the Washington State Budget & Policy Center endorses Initiative 1433 to raise the minimum wage and provide sick and safe leave.

Here, we provide analysis on Initiative 1433 as well as on specific components of other ballot measures. We do not have an organizational position on the other ballot measures. Our analysis is focused only on specific policy proposals within the measures that pertain to our research expertise. 

Initiative 1433: Raising the minimum wage and providing sick and safe leave

I-1433 would raise the statewide minimum wage over the course of four years to $13.50 per hour and provide up to seven days of paid safe and sick leave per year for Washington workers. According to Budget & Policy Center analysis, this initiative would raise the wage for more than 730,000 Washingtonians and directly benefit more than 360,000 Washington kids who live in families where one or more parents makes less than $13.50 per hour. 

Ultimately, this initiative would help Washingtonians better make ends meet. And because low-wage workers are likely to spend their increased wages on food, clothes, and other necessities, this initiative would infuse additional money into the economy. 

It would also help alleviate gender and racial pay disparities, given that nearly 30 percent of women workers and more than 40 percent of Black and Latino workers currently make less than $13.50 per hour. 

While the scope of our analysis focuses solely on the minimum wage component of Initiative 1433, we recognize that the sick and safe leave component of I-1433 also offers significant benefits to kids and families. For more information on how a sick and safe leave policy would strengthen the well-being of Washington’s families and communities, please see this analysis by Children’s Alliance and this analysis by the Economic Opportunity Institute

By approving Initiative 1433, we can take an important step toward advancing the well-being of Washington’s parents, kids, workers, and communities. 

Initiative 1464: Reforming statewide campaign finance rules and closing the nonresident sales tax exemption

While the Budget & Policy Center does not have a position on this initiative, our research (which is referenced in the Voter’s Guide) supports one aspect of the initiative: the closure of the nonresident retail sales tax exemption. This tax break allows visitors who come from Oregon or other states without a sales tax to avoid paying Washington sales tax on goods when they shop in our state. It costs the state approximately $30 million per year, and there is no evidence that the tax exemption creates jobs or stimulates business activity in Washington state.  

This initiative would redirect that $30 million in annual revenue toward helping pay for the changes it proposes in Washington state’s campaign finance law. 

Initiative 732: Taxing carbon emissions

The Budget & Policy Center has long supported policies aimed at equitably and effectively reducing carbon emissions and transitioning Washington state to a prosperous, low-carbon economy. Our expertise is primarily in fiscal policy and we have no organizational position on I-732. As such, our analysis focuses only on the revenue and budget implications of Initiative 732.

I-732 includes funding for the Working Families Tax Rebate (WFTR) to help directly offset the costs of transitioning to a low-carbon economy for people with lower incomes – a disproportionate share of whom are people of color or from rural communities. The WFTR was originally championed in this state by the Budget & Policy Center, and we think it’s a smart addition to any policy proposal aimed at reducing carbon emissions. (Of note, the tax rebate was enacted by the legislature in 2008, but the funding needed to get the program up and running has never been allocated.) 

This initiative would reduce the state sales tax and business and occupation (B&O) tax to offset the new carbon tax. As such, it has been billed as revenue-neutral. However, we are concerned that by replacing revenue from known sources with less certain carbon tax revenue, this initiative could create a sizable short- and long-term budget shortfall that would put funding for schools, parks, safety net programs, and other state investments at risk. While the authors of I-732 sought to have no impact on the state budget, an analysis by the Office of Financial Management that appears in the state’s Voter’s Guide finds that I-732 will reduce general fund revenue by $797.2 million during the first six fiscal years.

The issue is that I-732 attempts to perfectly offset the costs of reducing the state sales and B&O taxes as well as the costs of funding the WFTR with revenues from a new carbon tax. Even if the authors of I-732 have been able to achieve a perfect balance in the first year or two (the Office of Financial Management’s analysis suggests they haven’t), that balance won’t likely hold. In the long run, sales tax revenues, the number of households eligible for the WFTR, and the B&O tax will grow at different rates. The carbon tax isn’t designed to adjust accordingly.   

In addition, while a carbon tax could be a good tool for reducing air pollution and combatting climate change, many economists and public finance experts discourage using carbon taxes, cigarette taxes, and other “sin” taxes specifically for financing schools, health care, services for kids and seniors, and other ongoing investments. If new technologies or other unforeseen events lead to rapid transition to a low-carbon economy, revenues from a carbon tax could decline precipitously, threatening the funding for our schools and other important programs. 

Our takeaway is not that I-732 is either good or bad carbon policy; our takeaway is that the concerns being expressed about its potential impact to the state budget and vital social services are valid.

Non-Binding Advisory Votes 

This year’s ballot includes two non-binding advisory votes on fiscal issues. These advisory votes appear on the ballot because of Initiative 960, a 2007 Tim Eyman initiative that established cumbersome administrative requirements when the legislature takes action to close tax loopholes or raise revenue. 

These non-binding advisory votes do not actually serve to inform voters. Instead they restrict the scope of the information provided to voters about the purpose and impacts of enacted tax changes. Nor do advisory notes promote a balanced discussion about tax policy changes enacted by lawmakers. Rather, the law includes a required template for writing ballot titles and descriptions that uses biased language specifically intended to skew the vote in favor of repealing any tax change. The Budget & Policy Center would support legislation to remove these advisory votes from the ballots or to provide a greater amount of information to enable voters to make reasoned fiscal policy decisions. 

Nevertheless, both of the advisory votes on this year’s ballot reflect common sense fiscal policy changes that the legislature acted on in the 2016 session. 

Advisory Vote #14: Clarifying taxation of stand-alone family dental plans 

In the 2016 legislative session, the legislature overwhelmingly approved House Bill 2768, which clarified that some stand-alone family dental plans can be charged an insurance premium tax. This legislation is largely a technical change that allows the Washington Health Plan Finder to offer stand-alone adult dental insurance coverage through the state exchange. 

Advisory Vote #15: Modifying tax exemption criteria for clean energy cars

Also in 2016, a broad majority of legislators voted to extend and narrow an existing tax break for customers who buy clean energy cars (House Bill 2778). This tax break is intended to encourage the use of clean alternative fuel vehicles in Washington. The public policy objective of this tax exemption is clearly stated, and a tax preference performance statement is included. While the exemption previously applied to all plug-in and alternative fuel cars, even niche, luxury cars like Teslas selling for $100,000 or more, the 2016 legislation limited the exemption to cars selling for $35,000 per year or less. This change will save the state money by more efficiently targeting the benefit toward consumers for whom a sales tax exemption would make a difference in their purchasing decisions.

Census Data Highlights Disparities in Economic Well-Being for Children of Color

Posted by Melinda Young-Flynn at Sep 28, 2016 08:25 PM |
by David Hlebain, interim policy analyst

While 2016 U.S. Census data shows an overall slight decline in Washington residents living below the poverty line, a closer look at the numbers demonstrates persistent economic challenges of households and families with low incomes. Kids, especially children of color, are most likely to grow up in households with low incomes. 

Check out our new infographic, “A Look at the Economic Well-Being of Washingtonians with Low Incomes,” for additional Washington state data. 

Click here or on graphic to see to full PDF.

Economic Insecurity Census Graphic 2016

A closer look at the data shows that in Washington state:

  • One in 17 residents (nearly 6 percent) live in deep poverty, defined as 50 percent of the federal poverty line (a $10,080 annual income for a family of three).
  • Nearly two in five kids (more than 37 percent) live in households with low incomes, defined as 200 percent of the federal poverty line ($40,320 for a family of three). 
  • Economic disparities persist for kids of color. Sixty-six percent of Latino children, 57 percent of American Indian and Alaska Native children, and 57 percent of Black children live in households with low incomes.

Poverty can impede kids’ success in school, their overall health, and the stability of their family. This data underscores the importance of investing in policies to ensure that all of Washington’s kids and families can thrive. 


Raising Incomes for Home Care Workers Would Boost Economy

Posted by Melinda Young-Flynn at Sep 26, 2016 08:20 PM |
By David Hlebain, interim policy analyst

Raising incomes for low-wage home care workers would help strengthen our state economy, according to our new report, How Raising Incomes for Low-Wage Workers Boosts the Economy: A Study of Washington State’s Home Care Workforce. The report shows that if policymakers raise the base hourly wage of home care workers to $15, workers would be better able to meet the costs of basic needs for themselves and their families, leading to increased economic activity in the state. 

Home care report cover image 2016Home care workers play an essential role in the lives of tens of thousands of Washington’s seniors and people with disabilities – providing assistance with activities of daily living such as dressing, eating, and getting to and from medical appointments. In Washington, state-paid home care workers are compensated through the Medicaid program and either contract directly with the state as individual providers or provide services through private agencies.  

With an average hourly wage of $12.82 and a field of work that tends to be part-time because of fluctuating client needs, a typical individual provider home care worker makes $10,540 a year — below the federal poverty line for an individual, and less than half the poverty line for a family of four. This is far from sufficient for a person, let alone a family, to cover the cost of basic needs such as food, housing, and transportation. 

Raising the base wage for home care workers to $15 per hour would provide an annual increase of $2,200 to the more than 81 percent of workers who currently make less than that per hour. (1) This would go a long way toward helping these workers better make ends meet. 

Further, using REMI, a geographically-specific economic analysis tool, to model a wage increase for individual provider and agency-based workers, our analysis showed that: 

  • The additional spending that would result from these workers’ wage increases would generate $180 million in total economic stimulus annually in communities throughout Washington state – through both the projected spending by home care workers and the resulting money that businesses, individuals, and communities would acquire as a result of these workers’ increased spending. 
  • This economic stimulus would increase private-sector employment. As a result of this ripple effect of spending, private sector employment in Washington state would be projected to grow by more than 800 jobs annually through 2020.
  • Every $1 the state invests into a $15 base wage for home care workers making less than that will lead to a $4 economic stimulus. Given half the cost of home care wages are covered by the federal government through Medicaid, this form of economic stimulus is a smart investment of state resources. 

During the 2017 legislative session, legislators can help strengthen our state economy and the well-being of home care workers and their families by approving the proposed wage increases of individual provider home care workers (and a corresponding increase for agency-based home care workers as provided in the agency parity law), which were recently negotiated as part of a collective bargaining agreement. Further, this increase is not just good for the well-being of home care workers; it's also good for the economy. With this in mind, policymakers must continue to take steps to ensure that all hardworking Washingtonians make enough money to not just make ends meet, but to be able to get ahead. 

1. This calculation is based on actual wage data for the state’s more than 34,000 individual provider home care workers. Given contract parity mandates that wage increases for individual providers must also be applied to agency-based workers, this calculation is also applied as an estimate to the state’s more than 15,000 agency-based workers. 


McCleary Reality Check: Legitimate Solutions Required to Fully Fund Schools

Posted by Andy Nicholas at Sep 23, 2016 06:40 PM |

This is the second in a series of schmudget blog posts about property taxes in Washington state and the role they play in funding basic K-12 education. 

By Kelli Smith, policy analyst, and Andy Nicholas, associate director of fiscal policy

Complying with the state Supreme Court’s McCleary mandate to develop a dependable source of revenue to fund our K-12 schools should be lawmakers’ top priority when they gather in Olympia early next year. Lawmakers must not waste time promoting non-starter proposals like “revenue-neutral property tax levy swaps” that would generate none of the additional resources needed to build the education system our kids need to thrive. 

Under its 2012 McCleary decision, the Washington State Supreme Court ruled that it is the state’s duty to fully fund basic K-12 education. Yet school districts in our state have for years been relying on local property tax levy dollars to provide students with the basics that the state is supposed to be providing – such as textbooks, school supplies, transportation, salaries for teachers and nurses, and other essentials. Because of this, the court ruled that the state is failing in its paramount duty to fund education for all of Washington’s schoolchildren. 

To be clear, the court did not rule that local levies have to be reduced or eliminated. These levies can be kept in place to support the multiple services our schools provide beyond a basic education, such as after-school clubs and advanced placement programs. 

But opponents of providing new forms of revenue to pay for schools have been promoting the idea that local levies must be reduced or eliminated in order to fulfill the requirements of McCleary. And instead of finding equitable and dependable new sources of revenue to fulfill their duty, these lawmakers are fixating on revenue-neutral levy swap proposals. As we wrote previously, these swaps are complex shell games involving increases to the state property tax levy and decreases to local school districts’ levies. They generate no new resources overall.

Funding the basics can and should be accomplished with additional state revenue. In fact, in his July 2016 brief to the court, the state attorney general, who represents the legislature and the state government in the McCleary case, points out the various ways the legislature could fully fund basic education. The brief references numerous revenue proposals including taxing high-end capital gains, modifying a damaging law that restricts property tax revenue growth to a maximum of 1 percent per year, eliminating wasteful corporate tax breaks, and increasing the state property tax levy. 

The McCleary ruling is an enormous opportunity for policymakers to get to work on building a world-class education system for all of Washington’s children. The current levy swap proposals are intended to distract the legislature from making the most of this opportunity. Our kids will only get the education they deserve when lawmakers refocus on generating significant new tax revenues from equitable sources.


Slight Boost in Projected Tax Revenues Won’t Fix School Funding Crisis

Posted by Andy Nicholas at Sep 21, 2016 08:20 PM |

Although the newest state revenue projections anticipate a modest increase in available tax resources in the coming years, that uptick is minuscule compared to the billions of additional dollars needed to fund schools in Washington state.

In its September forecast, the Washington State Economic and Revenue Forecast Council projects that state tax revenues will increase, relative to the previous forecast, by $336 million (0.9 percent) for the remainder of the current two-year budget cycle ending in June 2017. In the next budget cycle, for 2017-2019, the council projects that state tax resources will increase by $134 million (0.3 percent). (1) These increases are largely attributable to higher-than-expected revenues from the sales tax and taxes on the sale of real estate.

Despite this boost in tax revenues, the council’s projections show that our state rainy day fund and other reserves will remain dangerously low at the end of the current budget cycle. They also show total budget reserves will be at about $1.8 billion by June 2017. That’s approximately 9.5 percent of annual state spending on public services, far below the 15 percent cushion that many economists and public finance experts recommend to ensure that schools, health care, and other important investments can be maintained when a recession or other state emergency strikes.

Lawmakers can’t depend on modest growth in existing tax resources to build the world-class education system that Washington’s kids will need to compete in this 21st century economy. To fulfill their obligation to our schoolchildren as mandated by the state Supreme Court, lawmakers must focus on raising additional new revenues from equitable sources. 

1. The revenue numbers reflect total state-only Near General Fund + Education Legacy Trust Fund + Opportunity Pathways Account


Census Snapshot: Too Many Washingtonians Still Struggling to Make Ends Meet

Posted by Melinda Young-Flynn at Sep 16, 2016 02:35 AM |
By David Hlebain, interim policy analyst

The new U.S. Census data shows that the number of Washington residents living below the poverty line declined 1 percent between 2014 and 2015. This welcome news is tempered by the fact that the data shows that hundreds of thousands of Washingtonians remain in poverty, with communities of color struggling the most. Given this, policymakers need to look beyond the immediate headlines touting our progress and make smart investments in creating a thriving economy that works for all of us.

The newly released Census data shows that in Washington state:

  • More than one in eight people (12 percent) live below the poverty line. This is down from 13 percent in 2014. For a family of three, the poverty line is defined as earning less than $20,160 per year.
  • Nearly one in seven children (15 percent) live below the poverty line. This is a decline from 17.5 percent in 2014. 
  • Deep disparities by race and ethnicity persist. More than 24 percent of American Indians and Alaska Natives, 23 percent of Black people, and more than 20 percent of Latinos live below the poverty line.
  • Although median household income continued to increase, when adjusted for inflation, median household income remains at 2007 levels despite the rising costs of meeting basic needs.  

This new data demonstrates how much more work there is to do to create a state economy with real pathways out of poverty and toward economic security. But it still doesn’t tell the whole story. Consider the fact that a single parent raising two kids in the state needs to make at least $59,000 to cover the costs of meeting all basic needs, including housing, food, child care, and transportation. (1) That means, beyond what the Census data tells us, families making three times as much income as those living at the official federal poverty level are also struggling to making ends meet.

Legislators must remember this big picture reality when they consider the policies they will advance in the 2017 legislative session. They must work to not only alleviate and prevent poverty throughout our state, but also to ensure that all Washingtonians can get ahead.

Voters and policymakers have the opportunity to take steps in the November election and the 2017 legislative session to help families get on the road to economic stability. Increasing the statewide minimum wage, ensuring access to paid sick leave, restoring funding to the Temporary Assistance for Needy Families program, and funding the Working Families Tax Rebate can all help provide greater economic security for Washington residents.

(1) Massachusetts Institute for Technology’s “Living Wage Calculator” estimates for Washington state


Raising the Minimum Wage Is an Investment in Washington’s Kids

Posted by Melinda Young-Flynn at Sep 14, 2016 07:25 PM |
By David Hlebain, interim policy analyst

In Washington state, a single parent with two kids working full-time at a minimum wage job has an income below the federal poverty level and far below what’s needed to meet the rising costs of basic necessities. (1) Raising the statewide minimum wage to $13.50 through Initiative 1433* on the November ballot will help change this and is an important step toward ensuring that all of Washington’s kids and families have the opportunity to thrive. 

A higher wage would help reduce poverty – something that is desperately needed right now. Child poverty in Washington increased nearly 30 percent between 2008 and 2014, with an additional 59,000 children growing up poor, according to KIDS COUNT. Even more troubling, only 31 percent of Black children, 31 percent of Latino children, and 26 percent of American Indian and Alaska Native children live in economically secure households (which is defined as 200 percent of the federal poverty line, or a $40,320 income for a family of three). 

Raising the minimum wage to $13.50 would improve the lives of these struggling Washington families. More than 360,000 Washington kids currently live in families where one or more parents make less than $13.50 per hour. (2) The proposed minimum wage increase would make a big difference for these families, providing an additional $700 per month for the average worker to help make ends meet. 

Further, raising the wage would increase the incomes of tens of thousands of families of color who are disproportionately likely to struggle economically as a result of historically racist policies that have excluded them from opportunities for jobs, education, homeownership, and more. 

By helping hundreds of thousands of Washington families lift themselves out of poverty, a $13.50 minimum wage would strengthen the economic and social well-being of Washington’s kids and families in three key ways:

Helping Kids Do Better In School

Children who experience instability at home because of poverty have a harder time concentrating at school. This can undermine children’s progress in the earliest stages of their education by impeding their cognitive, social, and emotional development. In fact, research demonstrates a significant gap in kindergarten readiness between children who grow up in poverty compared with kids from families with moderate and high incomes. 

If parents are earning higher wages, they have a greater ability to feed their family, pay the bills and rent, and maybe even afford enriching activities for their kids. As a result, their children are more likely to thrive at school. 

Healthier Kids

The economic security of families is critical to the health of kids. The lack of a safe, economically stable home can create toxic levels of stress for parents and kids. In fact, high-stress events experienced in childhood – including sustained economic hardship – are linked to poor health later in life, such as obesity, alcoholism, and depression. 

Because higher wages allow parents to put food on the table, a higher minimum wage can also help combat childhood hunger. Currently, more than 13 percent of Washington kids go hungry because their parents can’t afford to buy enough food, and those rates are even higher among children of color. Additionally, minimum wage increases have been shown to correlate with fewer babies born at low birthweights, one of the earliest indicators of the health of the next generation.

Strong Families and Homes

As mentioned previously, parents living in poverty can have heightened stress levels if they’re worried about paying rent and bills each month or having trouble dealing with unexpected costs, such as car repairs. This stress can detract from the necessary time and mental capacity for parents to fully engage with – and develop strong attachments to – their kids. Compromised parenting influences children in both the short term and the long term. Children who grow up in poverty are more likely to enter the child welfare system. And adversity experienced as kids can make transitioning to adulthood difficult.

Creating environments for kids to thrive requires policies that improve the well-being of parents and children. A higher wage for hardworking parents who make the minimum wage is a great investment in the strength of entire families and households.

The passage of Initiative 1433 would give more families the ability to improve their well-being. Indeed, it would allow more of Washington’s kids to have the chance to succeed in school, to have a healthy start in life, and to have their basic needs met. Raising the wage would help us build a better future for all of us. 

*Authors’ Note: The scope of this analysis focuses solely on the minimum wage component of Initiative 1433. The other component of I-1433, which provides sick and safe leave, also offers significant benefits to kids and families. For analysis on how a sick leave policy would strengthen the well-being of Washington’s families and communities, please see this recent press release published by Children’s Alliance and this report by the Economic Opportunity Institute. 

1. The 2016 federal poverty line for a family of three is $20,160. The Massachusetts Institute of Technology’s “Living Wage Calculator” estimates a single parent with two kids needs to earn $59,550 in order to cover costs of basic needs in Washington state. 

2. Economic Policy Institute analysis of Current Population Survey, Outgoing Rotation Group public use microdata 2014.




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