Schmudget Blog


State legislators should focus on advancing shared prosperity during 2018 legislative session

By Misha Werschkul, executive director

As legislators convene in Olympia for the start of the 60-day state legislative session, the Washington State Budget & Policy Center encourages them to approach every budget-related policy decision this year by answering one critical question: Does this policy help put our state on a path toward an inclusive economy that promotes shared prosperity and advances racial equity?

At the Budget & Policy Center, our 2017-19 legislative agenda aims to meet that goal. We know that in order to build prosperity and to advance equity in our state and our economy, policymakers must keep the well-being and economic security of all Washingtonians top of mind. 

We are pleased that a number of our policy priorities advanced during the 2017 legislative session. In particular, elected leaders rightly strengthened supports for families to meet basic needs, closed outdated tax breaks like the sales tax exemption for bottled water and a tax break that largely benefited oil refineries, and approved paid family and medical leave. This progress is thanks in no small part to the work of community organizations, advocacy groups and everyday Washingtonians from across the state. [See the links at the end of this post for more details about our policy priorities that advanced in the 2017 session.]

Now, in 2018, elected leaders must take additional steps to ensure our state budget delivers on the values of our great state. They can no longer leave undone the important task of cleaning up our upside-down tax code – in which the wealthiest people pay the least state and local taxes as a share of their incomes. Cleaning up the tax code will help ensure our state has the revenue to pay for investments in great schools and strong communities. The stakes are higher than ever given that the U.S. Congress has passed new tax breaks benefiting the wealthy and profitable corporations and hasn’t acted to reauthorize funding for the Children’s Health Insurance Program.

When legislators convene in January, they should:

  • Ensure there is ample and equitable funding to raise the salaries of public K-12 teachers, as required by the state Supreme Court, in time for the 2018-19 school year.
  • Support strong investments in our communities and the well-being of Washingtonians into the future by: helping more kids get access to our successful state preschool program, the Early Childhood Education and Assistance Program, by expanding eligibility; passing “breakfast after the bell” legislation that supports student health and readiness through nutrition; increasing supports for people experiencing economic insecurity, homelessness, and behavioral health challenges; protecting health care funding provided by programs like the Affordable Care Act and Apple Health for Kids; and taking steps to correct the short-sighted fixes and accounting gimmicks from the 2017-19 biennial budget.
  • Enact long-term solutions to fix our upside-down tax code by: closing the tax break on capital gains; making the tax on sales of real estate more equitable by reducing the tax rates on the sale of lower-valued properties and increasing the rates applied to properties that sell for more than $1 million; and boosting the incomes of hardworking families through the Working Families Tax Rebate

As a result of the special election in November, the makeup of the legislature, the leadership in the Senate, and the people on the budget-writing committees are different than at the close of the last legislative session. This legislature has a fresh opportunity to set our state on a path toward prosperity and an inclusive economy through our state budget. 

See our Progress in Washington 2018 report, “Building an Inclusive Economy,” for more details on how our state is faring when it comes to building an inclusive economy. And read more about our policy priorities that advanced in the 2017 legislative session in the following schmudget blog posts:

 

*************
Want to receive the latest news, updates, and analyses from the 
Washington State Budget & Policy Center in your inbox? Sign up here.
*************

Governor’s proposal to salvage community investments shows need for systemic tax reform

Posted by Kelli Smith at Dec 15, 2017 12:30 PM |
Filed under: State Budget
By Kelli Smith, policy analyst, and Andy Nicholas, associate director of fiscal policy

In his 2018 supplemental budget, Governor Inslee proposes to make progress on funding investments that support communities across Washington state. In an attempt to patch up the legislature’s flawed 2017-19 budget, the governor resorts to drawing down reserves to meet immediate needs, but he also plans to raise much-needed additional revenue through a new proposed tax on carbon emissions. Although the governor’s proposal is a reasonable step forward, the funding shortfalls the state is currently facing were foreseeable. The need to reduce the essential rainy day fund could have been avoided had lawmakers used the many opportunities they’ve had over the last several years to enact long-term solutions to fix our broken tax code.

Some highlights of the governor’s proposal

The governor’s proposed budget contains some promising investments. In the area of education, he proposes raising teacher salaries during the next school year. The legislature’s failure to fund adequate salaries for educators in the current state budget prompted the state Supreme Court to intervene and require salaries to be boosted by September 2018. Under the governor’s proposal, total funding for schools would increase by about $950 million compared to current funding levels. Around $600 million of that additional investment is generated by a one-time accounting trick – reducing the amount of funds that will be allocated to school districts in the coming school year with an offsetting funding increase in the following, 2019-20 school year, which falls just outside the current state budget period. 

To support healthy people and communities, the governor proposes to inject more than $100 million in additional resources to help ensure Washingtonians can access effective mental health treatment. Most of the funding would be used to improve care at state psychiatric hospitals, which have been under the scrutiny of the courts and the federal government after years of chronic underfunding led to inhumane conditions at those facilities. The legislature added funding for psychiatric hospitals in the current budget, but not enough to comply with federal standards. The governor’s proposed supplemental budget is a reasonable step toward meeting our state’s mental health needs, but significantly more funding will be needed in the years ahead to build a reliable and adequate mental health system.

The foreseeable shortfalls from the legislature’s budget

In late June, after multiple special legislative sessions and months of stalemates, lawmakers hastily enacted the current 2017-19 budget. That budget penciled out with the use of short-sighted fixes and temporary accounting gimmicks. For example, the legislature assumed they’d see about $100 million in unrealistic savings from efforts to reduce the costs of prescription drugs and provide health care to Washingtonians with low incomes. In addition, lawmakers underestimated the cost of efforts to fight wildfires by at least $40 million. The governor addresses all of these flaws in his 2018 supplemental budget, mostly by tapping budget reserves.

Most important, legislators failed to enact any long-term reforms to equip our tax code to meet the changing needs of our communities. Until it is reformed, our inadequate tax code will continue hampering efforts to build thriving communities in every corner of Washington state. While the state economy and the capacity to fund important investments has grown enormously since the Great Recession, the tax code has made it impossible to do so.

The truth about school funding and community investments 

In the last several years, lawmakers made significant investments in public schools, but the reality is that those boosts don’t represent actual increases relative to economic growth. And even with the additional investments included in the governor’s proposal, state spending remains near historic lows. In today’s dollars, the proposed levels of overall community investments in our state are actually lower than Recession-level spending. As the chart below shows, education spending in the governor’s proposed budget for the 2017-19 budget cycle will not even reach the level it was at a decade ago. And investments in every other value area have dropped significantly since then. This is the big picture that lawmakers must focus on when they meet again in January.

[Click on image to enlarge.]

gov_2018_budget

The governor’s proposal is a measured step forward given the limited good choices available to meet our state’s pressing needs. But the need to resort to drastic measures like tapping the rainy day fund could – and should – have been avoided. Had lawmakers come together and used their many chances to enact long-term reforms to the tax code, the budget picture would be much brighter. To his credit, the governor announced that he will unveil a revised proposal to tax damaging carbon emissions in January 2018. That proposal could help create a more sustainable state budget in the short term while reducing air pollution in the long run. The governor’s previous calls to close the tax break on high-end capital gains would also help bring more balance to our inequitable tax code while generating billions of dollars in additional resources for schools and other priorities in the years ahead. 

Cleaning up the tax code now – including forward-thinking proposals like closing the tax break on capital gains and enacting a carbon tax – would preserve and bolster funding for investments that benefit all Washingtonians. If lawmakers start taking steps to fix the tax code this coming session, it could also save future legislatures from having to drain reserves in order fund the needs of our schools and communities.

*************

Want to receive the latest news, updates, and analyses from the 
Washington State Budget & Policy Center in your inbox? Sign up here.

*************

New report: An inclusive economy is essential for all Washingtonians, our economy, and the future progress of our state

Washington is poised for great economic progress. By many measures, a better future for all people in our state is within our grasp. And yet, economic growth is not reaching all Washingtonians. There are persistent and deep disparities based on race, ethnicity, nativity, class, and geography across every measure of economic progress. Progress is meaningful only if it’s felt by everyone and prosperity is shared by all Washingtonians. To create real progress, our state must have an inclusive economy in which everyone, especially people with low incomes and people of color, can participate in growth and benefit from it. Those are the primary findings of our “Building an Inclusive Economy” report (the first in our Progress in Washington 2018 series of reports).

Inclusive Economy carouselShared economic prosperity is one of the best measures of how our state and country are progressing, but economic growth has not been broadly shared in our state. Gains in income have been concentrated at the top while wages for low- and middle-income people have stagnated or declined. This rise in inequality is the result of many state and federal policy and budget decisions by legislators that have negatively impacted certain Washington state residents. Decades of regressive taxation, deregulation, privatization, cuts to the safety net, as well as the decline of collective bargaining have all played a role in rising inequality.

Washington state’s own upside-down tax code has contributed to the problem. Hardworking families in our state pay as much as seven times more than the wealthiest pay while corporations and the ultra-wealthy benefit from unnecessary tax breaks, making it hard for our state to have the revenue it needs to invest in the foundations that serve us all, such as great schools, quality health care, and other public priorities that make Washington a great place to live. Policymakers must fix our broken tax code. Doing so will allow our state budget to have sustainable sources of revenue to build an inclusive economy and to invest equitably in our communities in the short and long term.

Prosperity should be within reach of all Washingtonians
Making sure all Washingtonians have access to opportunity and resources is essential to ensuring prosperity is within reach of all residents. Across many indicators of economic progress, the data show that people with low incomes and people of color are starting off on unequal footing and are facing greater barriers in large part because of the impact of harmful historical housing, economic development, and financial policies. As Washington grows more racially and ethnically diverse, the future well-being of all of us hinges upon erasing the deep and pervasive racial imbalances that exist across these measures. By 2050, our state population will be majority people of color. Washington state’s young people are already at the forefront of this demographic transformation. Forty-three percent of children are kids of color.

 [Click on graphic to enlarge.]

WA_Demog_1980to2050

In an inclusive economy, all Washingtonians – regardless of race, ethnicity, nativity, income, or community of residence – would be able to access quality jobs and have financial security and stability. Our education system would be preparing students and workers for good jobs and jobs of the future. And all Washingtonians would be able to live healthy lives in vibrant communities so they can better connect to and participate in the economy. However, data trends highlighted in our report indicate economic prosperity is out or reach for many residents in three key areas – economic security; education and job readiness; and healthy people and communities. For example:

  • Economic security: Although economic growth holds the promise of prosperity for working people across the state, rising employment has not reached all communities. While unemployment in Washington state has overall dipped to 4.5 percent, for many communities of color – such as Pacific Islanders, American Indians, and Blacks – unemployment rates remain at or near 10 percent. There are geographic differences as well: the unemployment rate has remained high in many rural counties. In Ferry County, the unemployment rate is the highest in the state at 9.1 percent, and in Pacific and Wahkiakum counties, unemployment remains at just above 6 percent.
  • Education and job readiness: While the state’s Department of Early Learning’s goal is for 90 percent of kids to start kindergarten with the skills they need to succeed, currently only 47 percent of kindergartners are meeting that threshold, and there are significant differences by income and race. Only 33 percent of kids with low incomes, 27 percent of Pacific Islander kids, 30 percent of Latino kids, and 32 percent of American Indian kids were kindergarten ready in 2016.
  • Healthy people and communities: In Washington state, many low-income communities, communities of color, and rural communities experience worse health outcomes when it comes to chronic diseases, life expectancy, obesity, and more. Thirteen percent of households in Washington struggle with food insecurity – the inability to have three meals on the table every day as a result of lack of resources. Among 10th graders, Pacific Islander, Latino, and Black students have the highest likelihood of living in families that had to reduce meal sizes or skip meals compared to overall state average.

 [Click on graphic to enlarge.]

Food_Insecurity_10th_graders

Note about data: Disaggregated data is presented to provide a preliminary understanding of disparities by race, ethnicity, and nativity. On its own, the data throughout the report tells a limited story about the population it represents. We encourage users of this data to engage with communities of color to develop a more accurate and meaningful understanding than the data allows.

These and other trends highlighted in the report point to the fact that much work remains to be done for policymakers and all of us to advance shared prosperity and progress for generations to come. Our state budget and tax code are powerful tools to make this happen and to build an inclusive economy. In the upcoming 2018 legislative session and beyond, policymakers can choose to advance shared prosperity by making sure our state budget and policies increase economic security, promote racial equity, ensure all kids have access to great schools, and build thriving communities for everyone.

Stay tuned for the next publications in the Progress in Washington series, which will explore policy solutions that address the barriers to opportunities described in the “Building an Inclusive Economy” report.

“Building an Inclusive Economy” is the first report in our Progress in Washington 2018 series. The report is intended to offer a framework for understanding the challenges before us. To reach the goal of an inclusive Washington state economy with shared prosperity for everyone, we need to know where we are, where we need to be, and how we can get there.

*************

Want to receive the latest news, updates, and analyses from the 
Washington State Budget & Policy Center in your inbox? Sign up here.

*************

Statement: Washington’s Representatives must reject tax bill that would devastate the middle class and our state economy

Posted by Melinda Young-Flynn at Dec 02, 2017 11:28 AM |

From Misha Werschkul, executive director of the Washington State Budget & Policy Center, regarding the U.S. Senate passage of the GOP tax bill:

“Both the Senate and House tax bills are costly new giveaways to the wealthy and major corporations at the expense of working families, including tens of millions of low-income and middle-class Americans who actually would face a tax increase. Senator Patty Murray and Senator Maria Cantwell did the right thing for Washington state by voting against this dangerous bill. We now call on Washington’s 10 Representatives to stand with their constituents, demand a full conference process, and reject the final tax bill.

Both tax bills would explode deficits, strain our state budget, and almost certainly force cuts to everything from nutrition assistance for families to education, Medicare and Medicaid, and infrastructure. The Senate bill goes further, increasing the number of uninsured people by 13 million to pay for even larger corporate tax cuts. Both bills also eliminate the state and local income and sales tax deduction, which would only make matters worse by increasing pressure on our state budget, making it harder for state legislators to make investments in kids and strong communities. 

Small changes won’t fix the bills’ fundamental flaws. And the merged tax bill that comes out of a conference committee will be more of the same – offering nothing to most working families and ultimately hurting many. Instead of tax cuts that help those who need it the least, legislators should work to advance tax policies that invest in working families while ensuring that any tax bill is paid for by closing tax loopholes or other responsible tax changes.”

 

Media Contact: Melinda Young-Flynn, melinday(at)budgetandpolicy(dot)org 

 

                                                                                                               

###

 

Governor’s initiative on economic security is a big win for Washington’s families

Posted by Julie Watts at Nov 29, 2017 03:15 PM |

Governor Inslee has created a new inter-agency work group on family economic security that is a big step in the right direction to help families move themselves out of poverty in our state. The work group will be tasked with developing a 10-year strategy for poverty reduction in Washington state, based on an intergenerational approach to addressing poverty.

Intergenerational approaches to poverty promote the economic well-being of whole families across generations so that children can thrive and reach their full potential. The approach is centered around coordinated support for families across five key areas: high-quality early childhood education; higher education and career pathways; asset building; health and well-being; and social capital.

Family economic security

Nationally, similar initiatives that focus on economic success of families, as opposed to a focus on children or adults alone or in silos – are gaining momentum and showing very promising results. In Colorado, Utah, Connecticut, Massachusetts, and Oklahoma – to name just a few states – early investment in intergenerational programs are paying off and are leading to living-wage careers for parents, better education outcomes for kids, and a low rate of return to social benefit programs. 

The governor’s directive to create this work group is an important step to help families move out of poverty. It is also an important step to grow the middle class so that more residents can benefit from economic growth. As more families move out of poverty permanently and contribute to economic activity, that will pay dividends for the state economy.

The directive was the result of bipartisan efforts advance intergenerational strategies to address poverty in Washington. The creation of the work group is a sign that Washington’s leaders are turning a new page on how we go about policy development on economic security. The initiative calls for broad participation by state agencies, stakeholders, employers, people who are in poverty, and other communities that have historically not been included in conversations on public policy. 

Advancing poverty reduction policies using an intergenerational approach has long been a priority of the Washington State Budget & Policy Center. We look forward to continuing to work with the governor and his staff as well as with legislators and other key stakeholders to develop specific data-driven policy recommendations to reach poverty-reduction goals. This is a monumental step toward ensuring that every child, parent, and grandparent in Washington is able to reach their full potential and thrive.

 

Updated State Revenue Projections Show Legislators Need to Do More in 2018 to Fulfill their Obligations to Communities

Posted by Kelli Smith at Nov 20, 2017 02:10 PM |
Filed under: State Revenue

The new Economic and Revenue Forecast Council report shows our state has $319 million more to invest over the current biennium than lawmakers previously expected. This small change will have a negligible effect on lawmakers’ ability to pay for K-12 schools per the Supreme Court’s McCleary mandate and to balance the books in the 2018 legislative session. Revenues are still just barely at Great Recession levels when we account for economic growth (see chart below) – and that’s despite this year’s historic increases in resources. While those increases were a step in the right direction, the Supreme Court still says the legislature’s school funding plan is about $1 billion short of fully funding schools. And legislators also can’t lose sight this session of other critical areas of the budget, such as early learning and behavioral health. 

The revenue growth from the latest revenue forecast won’t come close to filling the $1 billion McCleary gap, let alone ensure other areas of the budget are fully supported. Lawmakers can’t continue to ignore the reality that our tax code still isn’t built to support the needs of our state. They must take action to ensure that we have adequate revenue to fund schools and other community investments, and that starts with cleaning up the tax code.

[Click to enlarge.]

Nov_2017_revenue_forecast

 

The good news is that our legislature has an opportunity in January to make meaningful progress on McCleary in the right way, by its 2018 school-year deadline, in a way that also supports strong investments in our communities into the future. If lawmakers can get real about fixing our upside-down tax code – one in which Washingtonians with low and middle incomes pay up to seven times more in state and local taxes as a share of their income than the wealthiest 1 percent – then our state will not only benefit from a tax code that better reflects our values, but it can also have more resources to support thriving communities.

Lawmakers can take steps next session to start building on the progress they made earlier this year. They should prioritize implementing common-sense, lasting fiscal policies – not short-sighted, one-time fixes. These are a few policies they can begin work on as soon as they get to Olympia in January: 

  • Eliminating the 1 percent property tax revenue cap that threatens resources for our schools; 
  • Making a tax on sales of real estate more equitable by reducing the tax rates on the sale of lower-valued properties and increasing the rates applied to properties that sell for more than $1 million; and
  • Closing the tax break on capital gains, which would both begin to rebalance our tax code and bring in much-needed revenue to close the gap on McCleary

By taking these steps, lawmakers can set up a bright future for Washington state by ensuring that our state can invest in the things we all value: excellent schools, of course, but also things like child care, long-term care for seniors and people with disabilities, and mental health and homelessness supports. Our state’s challenges are surmountable, and solutions are within reach if lawmakers get serious about reforming our tax code so that it provides for the well-being of all Washingtonians.

*************

Want to receive the latest news, updates, and analyses from the 
Washington State Budget & Policy Center in your inbox? Sign up here.

*************

Supreme Court’s McCleary Decision Shows that Lawmakers Should Clean Up Tax Code to Invest in Schools

Posted by Kelli Smith at Nov 15, 2017 03:55 PM |
Filed under: State Revenue, Education
Statement by Misha Werschkul, executive director:
 
The Washington State Supreme Court has made it clear that the legislature must take more steps to fulfill its McCleary mandate to amply fund schools. Although lawmakers did smartly enact some new investments as part of their school funding plan this past session, the court has determined that the legislature must do more to set up every kid and every classroom for success by the 2018-19 school year. The way to strengthen investments in K-12 schools while supporting investments in other priorities that strengthen our communities – like behavioral health, health care, and early childhood education – is to clean up our tax code, not rely on more short-sighted, one-time fixes.

The Budget & Policy Center continues to recommend common-sense reforms that would clean up the tax code, such as: eliminating a harmful property tax limit that arbitrarily restricts resources available for schools (see our amicus brief to the Supreme Court on the topic); making the real estate excise tax more equitable; and closing the tax break on capital gains.
 

Ultimately, lawmakers must take steps to invest in our schools and our communities during the 2018 legislative session. The court has given the legislature until the end of the session to ensure that students, classrooms, and teachers have what they need on the first day of classes in 2018. The solutions are within reach if lawmakers get serious about cleaning up the tax code.

Document Actions
HIGHLIGHTS

Save the date!

Our Budget Matters 2018 policy conference will take place on November 13 at Seattle Center. john a. powell from the Haas Institute for a Fair and Inclusive Society is the keynote. Stay tuned for more details. 

Our policy priorities

Washington state should be a place where all our residents have strong communities, great schools, and the chance for a bright future. Our 2017-2019 Legislative Agenda outlines the priorities we are working to advance.

Testimonies in Olympia

Misha TVW
Watch our 2018 legislative session testimonies on TVW: