Schmudget Blog


A Shared Vision for Washington State: Four-Part Series

Posted by staceys at Feb 13, 2009 06:25 AM |
Filed under: State Budget, BPC News

Later today schmudget will post the first in a four-part, Friday series that outlines a shared vision for Washington State. The Budget & Policy Center recently published a report called the Progress Index which sets up a new framework for evaluating the state budget based on shared values and goals. The framework reminds all of us that we have a shared responsibility to create the state we want to live in. Together we must ensure that our air is clean, our drinking water is safe, and our public schools provide an excellent education to all students. This is work we must do together because no one person can do it alone.

The Progress Index highlights four essential values: Education and Opportunity, Thriving Communities, Healthy People and Environment, and Economic Security. The report divides the 2007-09 state budget into these four value areas (see graph) and identifies research-based goals within each area.

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In these times of economic crisis, it is possible to lose sight of the important role of state investments in all our lives. We are all feeling the pinch of the recession, at home, at work, and in our state government. We must be thoughtful in our investments and make smart choices to protect the progress we’ve made and secure a better future for tomorrow.

You are welcome to read the report and share your thoughts with us. With this project, we hope to initiate a new conversation in Washington State about where we are, where we want to be, and how we can get there.

General Assistance: New Strategies for a Vital Program

Posted by staceys at Feb 11, 2009 10:00 AM |
Filed under: Economic Security

gauss.pngToday the Budget and Policy Center released a new policy brief on Washington State's General Assistance - Unemployable (GA-U) program. The paper, entitled, "General Assistance: New Strategies for a Vital Program," outlines the value of GA-U, which offers economic security and health care to over 20,000 working-age adults with disabilities in our state. The Governor has proposed eliminating the program, a proposal that would have a very detrimental effect.

In addition, the paper discusses how GA-U could better serve clients through implementing strategies that will improve outcomes and reduce costs. Included in these proposals are:

  • Provide a medical home for every GA-U client
  • Expand coverage for mental health and substance abuse treatment
  • Improve state facilitation of eligible GA-U clients to federal programs
To read the full text, go here.

Family Resources and Work Supports: An Online Tool

Posted by jeffc at Feb 10, 2009 07:50 AM |
Filed under: Economic Security

Public programs that ensure economic security can have a big influence on family budgets, as evidenced by an online tool that simulates the effects of work supports on the budgets of hypothetical families.

The Budget and Policy Center has partnered with the National Center for Children in Poverty (a think tank based at Columbia University's School of Public Health) on a "Family Resource Simulator" for Washington State. An updated version of the FRS was released this morning.

The Family Resource Simulator demonstrates the impact of work supports such as the Earned Income Tax Credit, child care subsidies, and public health insurance on a family budget. It allows the user to choose a location within the state, a marital status, the number and age of children in the family, debts, and assets. You can also decide which work supports you would like to consider. The calculator comes preloaded with typical expenses for areas such as transportation and health insurance, but also allows you to enter your own assumptions.

When you've entered all your choices, the simulator produces graphs that indicate how public supports would intersect with family budgets and how expenses and resources change as wages increase.

The example below shows the budget for a single mom with two young children living in Pierce County if she had no access to any work supports. According to the calculator, she would have to earn a considerable salary before resources are sufficient to meet expenses (over $50,000).

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This next graph considers the same family, but allows access to work supports in cases where the family is eligible.* Under this scenario, resources cover expenses at a much lower income level (about $24,000).

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* The two graphs (generated by the FRS) have different scales - the top one goes from $0 to $60,000 and the bottom goes from $0 to $70,000.

Note that the FRS is a public policy analysis tool. It shouldn't be used to determine a real family's eligibility for public assistance.

We Need a Strong Recovery, Quick

Posted by jeffc at Feb 06, 2009 12:10 PM |

For workers with lower and moderate hourly wages, the current recession comes at a precarious time. The losses in income that workers are expected to incur now come on the heels of an insufficient recovery from the last recession in 2001.

The graph below shows the growth in average hourly wages for the lower-earning half of the Washington State workforce. Wages are adjusted for inflation.

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There are three very different time periods:

BOOM: Low unemployment and robust job growth translated to strong wage growth in the last half of the 1990s.

BUST: After adjusting for inflation, there was no wage growth among lower and moderate wage workers.

BUSTED BOOM: When job growth started to rebound after the 2001 recession, wage growth improved, but stayed very anemic.

We only have comparable wage data through 2008 at this point, but it’s a safe bet that wages are taking another hit. Looking ahead, not only can workers not afford this recession, they can’t afford another recovery like the last one.

* Data is based on analysis of CPS-ORG microdata, following the methodology used in State of Working America. Want more detail? Let me know.

Tax expenditures - spending by another name

Posted by remyt at Feb 05, 2009 04:10 PM |
Filed under: State Revenue

Last week the Joint Legislative Audit and Review Council (JLARC) presented their recommendations on current tax expenditures to a joint meeting of the House Finance Committee and the Senate Ways and Means Committee. Stick with me, this is important.

First, what are tax expenditures? They are tax breaks that reduce the funds available for other priorities. In total, we will forego $13 billion of tax revenue in the coming two year budget cycle because of tax exemptions ($1.6 billion from those passed since 1995 alone). Some of these tax expenditures make clear improvements to the tax system. Others need to be reviewed to determine whether they are meeting their stated purpose and whether they are a priority when considered alongside other proposals.

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In Washington State, tax expenditures are treated quite differently from other expenditures in the budget process. We regularly review our spending on education, health care, and transportation, but not how to fund tax breaks. 

While we don't do an official biennial review as part of the budget process, in 2006 the Legislature created a process for a long term review. JLARC will conduct intensive reviews of each tax expenditure based on predetermined calendar and make recommendations about continuing or altering most of them (some were excluded from consideration). A Citizen's Commission for Performance Measurement of Tax Preferences then reviews JLARC's report and makes independent recommendations to the Legislature.

OK, back to last week. JLARC's review included 27 tax expenditures ranging from private school tuition to the processing of horticultural products. And they pretty much said to "stay the course" on each of them, with some minor tweaks.

The Citizen's Commission disagreed in one area. They did not endorse the JLARC recommendation full endorsement the property tax exemption for intangible property (primarily financial assets like stocks and bonds). They had this to say:

Given the magnitude of revenue impact of the exemption ($11 billion in 2008), the dramatic growth of intangible property in the New Economy, and the impact of such a large exemption on the adequacy, efficiency and fairness of the tax system, the Commission recommends that the Legislature study the exemption and consider how to appropriately treat intangible property.*

Is it a good idea to tax intangibles? I don't know. But the Commission is right that it should be on the table. Further, why not give consideration to tax expenditures every year as part of the budget-making process?

* The Department of Revenue doesn't think that repealing this exemption would raise that much revenue, in part because it would lower the property tax on tangible property, like houses.

In Most States, GA-U Fills Gaps in Economic Security and Health Care Systems

Posted by staceys at Feb 03, 2009 06:45 AM |

We all hope that if we were ever to face disability, we would have the supports necessary to maintain our economic security. The General Assistance-Unemployable (GA-U) program is designed to help fill that need for thousands of people in our state. It is an essential component of Washington State’s efforts to ensure economic security (pdf) and access to health care (pdf) for all residents.

GA-U provides financial and medical assistance to adults who are unable to work due to disability and are ineligible for other programs. For these adults, GA-U fills gaps that would otherwise exist in our support systems:

  • Unemployment insurance and workers’ compensation benefits often expire well before longer-term disability benefits become available.
  • Eligibility for other assistance programs is very limited for adults who do not have children at home, even for adults who are unable to work.

For these Washingtonians, GA-U provides some protection from deep poverty and homelessness that would otherwise not be available.

Governor Gregoire has proposed (pdf) the complete elimination of GA-U, including both financial and medical assistance. Such a decision would have a detrimental impact on the Washingtonians who rely on the program. As shown by a number of studies, it would also add significant costs with regard to health care and public safety systems in the state.*

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The proposed elimination would put us out of step with the rest of the country (see map). Most states in the nation recognize the importance of meeting this need. Thirty-one states across the country have statewide GA-U programs with financial and/or medical benefits. Another nine states have GA-U programs available in some counties, but not in others. In total, only 11 states (Oregon, Wyoming, and nine Southern states) do not have comparable programs.

This post is available as a one-page pdf handout.

 

* For example, see Mancuso, David, Ph.D., and Sharon Estee, Ph.D., Washington State Mental Health Services Cost Offsets and Outcomes: Technical Report, Washington State Dept. of Social and Health Services, Research and Data Analysis Division, Olympia, WA, Dec, 2003 and Wickizer, Thomas, Ph.D., M.P.H., The Relationship between Chemical Dependency Treatment and Criminal Activity among Clients on General Assistance-Unemployable (GA-U), Oct. 2005 (working paper).

Commentary: Keep Revenue Options On the Table

Posted by jeffc at Jan 30, 2009 09:45 AM |
Filed under: State Budget, State Revenue

We’ve offered one approach to state budget decision-making in our Progress Index report - identifying a long-term vision for the state and then using high-quality research to determine how to get there. But of course there are other approaches.

Richard Davis’ thoughtful column from Wednesday’s News-Tribune and The Herald presents two alternatives - "Priorities of Government" and the "Washington Monument Strategy" - and argues for the first.

He extols the "Priorities of Government" approach. This is a process developed by the Locke Administration in order to help them solve the last big budget crisis. A key aspect of this process is that it starts the budget-making process with the limitation that nothing can be changed about revenue. Davis argues for this approach and the Governor agrees. Her budget release states:

"In constructing the budget for 2009–11, Governor Gregoire began with one basic premise: Now is not the time to raise taxes on our residents and businesses."

As a "basic premise," this places a false limitation on our priority-setting process. A more productive budgeting process during these tough times would allow revenue increases and tax exemptions to be considered alongside spending cuts so that we can decide on our priorities from among a full range of options.

Unfortunately, the Legislature is bound from considering the full range of options because of a series of limitations put on them by ballot initiatives. In order for the Legislature to raise revenue, they are, practically speaking, required to put it on the ballot.

I agree with Davis; budgeting on the ballot is not ideal. I share his dislike of what he calls the "Washington Monument Strategy," (referring to the National Park Service using the threat of closing the monument to stave off budget cuts). It’s the budget equivalent of "If you don’t buy this magazine, we’ll kill this dog." It’s not a strategy that moves us toward a long-term vision.

But while Davis makes a well-reasoned argument against the Washington Monument Strategy in terms of spending, he makes a blanket statement about business taxes: "Any increase in the cost of doing business delays the recovery and places jobs and investment at risk." Hmmm. "If you raise this tax, we’ll shoot this recovery?"

The fact is that a budget that cuts billions of dollars from public investment does pose threats to the progress we have been making as a state on education, health, community vitality, and economic security. And while tax increases are not ideal, economic theory and experience shows that they are less harmful than deep cuts in state spending.

It’s time for a reasoned public discussion about the state budget that allows all options to be on the table.

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