Climate Series #4: Utilities are a Limited Option for Offsetting Increased Energy Costs

As noted in previous posts, Congress is considering legislation to implement a cap-and-trade program to restrict greenhouse gas emissions in order to curb climate change. Although such a program would have a positive impact on the environment and the health and well-being of communities, it would also cause regressive energy cost increases for lower income households.

Relying on utility companies for consumer assistance has emerged as one strategy to offset the costs. However, according to a recent report by the Center on Budget and Policy Priorities there are limitations to this approach.

For starters, utility bills will account for less than half of the total rise in energy costs for lower income households. As illustrated in Figure One, over 50 percent of the cost impact experienced by lower income consumers would be due to increases in the price of gasoline, home energy bills other than utility bills, and energy-intensive products, such as food.


Importantly, a utilities approach would reduce the incentive for lower income consumers to conserve energy. A key goal of a cap-and-trade system would be to motivate consumers to reduce their energy consumption by modestly raising prices. Because lower income households’ utility bills would be reduced under a utilities strategy, these households would have less of an incentive to conserve energy.

And finally, lower income households whose utilities are built into their rents, might not receive adequate compensation. Instead of a utilities approach, see our post on an alternative rebate strategy proposed the Center on Budget and Policy Priorities.

Climate Series #3: Offsetting Increased Energy Costs for Lower Income Households

A cap-and-trade system is being considered at the federal level as a strategy to reduce and regulate greenhouse gas emissions. Although such a system will be good for the environment, it is expected to cause a modest increase in the price of energy and energy intensive products.

Current energy costs consume a disproportionate share of income for lower wage households. As illustrated in Figure One, households in the bottom fifth of the income scale spend about 21 percent of their income on energy compared to four percent for the wealthiest households.



The Congressional Budget Office estimates that a 15 percent reduction in greenhouse gas emissions will lead to more than a three percent increase in energy costs for lower income consumers. By contrast, the same reduction of emissions will only lead to less than a two percent increase for the wealthiest households.

Existing tax and benefit systems can be used to mitigate a cap-and-trade program’s regressive effects on lower income households. The Center on Budget and Policy Priorities has introduced such a proposal in which qualifying households would receive a climate rebate to help offset the increased energy costs. The proposal represents an efficient and effective strategy to protect lower-income consumers and should be considered in any federal climate policy.

It should be noted that left unhindered, greenhouse gas emissions will likely result in higher costs to consumers. A recent report by the Climate Leadership Initiative at the University of Oregon has projected that in Washington State alone, households will experience $1,250 in additional costs on average as a result of climate change per year by 2020 if no action is taken to reduce greenhouse gas emissions.

Up Next in the Series: The limitations of using utility companies to protect lower-income consumers.

Climate Series #2: Why Cap and Trade?

Climate change caused by the emission of greenhouse gases presents a serious threat to the environment, the health and well-being of communities, and the economy. Congress has acted to address climate change through a national cap-and-trade policy proposal recently introduced in the House Energy and Commerce Committee.

The creation of a national cap-and-trade program has the potential to curb climate change while simultaneously creating new opportunities and supporting economic security in communities across the nation. The purpose of a cap-and-trade program is to establish concrete greenhouse gas emission reductions and to generate market-based incentives for consumers and companies to conserve energy. For a comprehensive report on how a cap-and-trade program would work, check out the Sightline Institute’s cap-and-trade policy primer.

Spokesman-Review Editorial Debunks Myths on Taxes and Spending

The legislative session officially ended yesterday. State lawmakers settled on an all-cuts budget that will cut $4 billion out of state investments in education, health care, community infrastructure, and economic security.

Using data from the Budget & Policy Center, Gary Crooks from the Spokesman-Review’s editorial board wrote a nice piece pointing out some of the core problems with our state’s fiscal structure. He also called for action, stating:

They better get started, because the amounts raised by the current taxes clearly do not match the needs of the state. And as Dr. Phil might ask lawmakers, “How’s that workin’ for ya?”

UPDATE: A Longer-Term Perspective on State Budget Proposals

UPDATE: The graph below has been updated to reflect the budget agreement released today, which would impose significantly deeper budget cuts relative to the economy than any other budget over the period shown.

When looking at state fiscal trends, the standard methodology is to compare state spending and revenue to total personal income.* This provides insight on the resources we have to fund public investments and also recognizes that the cost of government grows along with economic and demographic trends.



This graph looks at spending (the green line) and revenue (the blue line) as a share of personal income from 1995-97 to the legislative budget proposals for 2009-11. Some key facts to note:

• Revenue had been eroding before the current economic recession because of significant tax cuts, spending limitations, and a tax system that doesn’t grow along with the economy even during good times.**

• The decrease in revenue in the current biennium is twice as large as previous declines.

• State spending has been fairly flat for a decade.

• The proposed budget cuts for 2009-11 are significantly deeper relative to the economy than any other budget over this time. They would result in a much smaller investment in public priorities.
  

*Personal income is an estimate of the total income received by all Washingtonians from all sources (employment, dividends, interest, etc.). For more, see the Bureau of Economic Analysis.

**Wonder why revenue increased in 2005-07? The housing market.

Comparison of Budget Agreement to House and Senate Budgets

The overall structure of the 2009-11 budget agreement, the details of which were released today, is similar to previous proposals from the House and Senate, although there are key differences in how the budget cuts are distributed. The table below gives an overview of the total cuts and a comparison with the previous House and Senate budgets.


For more details, click here.

A Fair Sales Tax for Health and Economic Security

The House Health and Human Services Appropriations Subcommittee passed a referendum to temporarily raise the state retail sales tax from 6.5 to 6.8 cents to generate revenue for essential health care investments. The proposal includes implementing the Working Families Tax Rebate to offset the costs of the tax increase for lower income families. This policy protects the health and well-being of lower income adults and children in Washington during the economic recession and recognizes the need for progressive tax reform in our state.

To read a statement by the Budget & Policy Center on this policy proposal, click here.

For more information on the Working Families Tax Rebate, click here.

Earth Day Kicks Off New Climate Series on Schmudget

Seattle is the birthplace of Earth Day, celebrated every year on April 22. It is also home to the first national coordinator, Dennis Hayes. For nearly 40 years Earth Day has been a time to appreciate and raise awareness on environmental issues.

The environmental movement’s most basic premise is to ensure the earth, water and air are clean for our basic survival. But these issues are also central to improving the economic security and social opportunity of all. Indeed, global warming, one of the biggest environmental debates is just as much about energy independence and the economy as it is about clean air.

Since last summer we have worked to shape the recommendations of the Western Climate Initiative, a regional program to take action on climate change. Our interest is to ensure people with lower- and moderate-incomes are part of the new energy economy and to make sure these consumers are protected as we reduce our dependence on fossil fuels.

Our analysis and collaborative work in Washington State resulted in Western Climate Initiative recommendations that include protections for low-income people. Legislation introduced by the Governor would have prioritized auction revenue from a “cap and trade” system to protect low-income consumers.

With less than a week left in the session, the Governor’s legislation is still moving, but it’s not as strong as originally proposed. President Obama has made strong climate legislation a signature piece of his budget proposal and legislative action is beginning to heat up in Congress.

There is much discussion about Green Jobs in the context of climate legislation. If done right, an effective climate bill could create jobs for low- and moderate-income people, along with a commitment to energy efficiency. Unfortunately some of the proposals currently under consideration in Washington, DC do not sufficiently address the disproportionately negative financial impact climate change policies will have on lower-income households.

In the coming week, we will be doing a series on our blog on climate to give you information and analysis. The series will cover:

• What’s the impact on low- and moderate-income consumers?
• How can federal policy offset the financial impact on low- and moderate-consumers? What are our options, what works, what doesn’t?
• What are the proposals before Congress?

You can also visit our website and read a joint letter to Governor Gregoire signed by the Budget & Policy Center along with environmental groups, the faith community, low income advocates, and organizations representing communities of color.

How Much Would You Get? A Working Families Tax Rebate Calculator

Washingtonians who are eligible for the federal Earned Income Tax Credit (EITC) and have lived in the state for six months would be eligible for the Working Families Tax Rebate.

The calculator below lets you see how much the credit would be worth based on filing status, number of children, and the amount of earned income. (This assumes the credit will be equal to five percent of the EITC and is for tax year 2009.)

For example, a married couple with two kids and $20,000 in wages would receive $251 dollars. A single parent with one child would receive $152. The minimum credit for those who are eligible is $25.



* The basic requirements for EITC eligibility are 1) a valid Social Security number, 2) residence in the United States for more than half the year, 3) less than $3,100 in investment income, 4) some earned income, 5) a U.S. citizen or resident alien, 6) between ages 25 and 65 or have a qualified dependent, 7) a filing status other than married filing separately.

A Tax Cut for Lower Income Working Families

A sales tax increase from 6.5 cents per dollar to 6.8 cents has been proposed as a way to avoid making deep cuts in important health care investments. The proposal has linked the sales tax increase with a Working Families Tax Rebate, which will refund a portion of the sales tax for lower and moderate income families.

A 0.3 cent increase in the retail sales tax would cost lower income families with kids (those earning $28,000 or less) about $38 annually (see graph below). Upper income families would pay about $163 per year.


While upper income families would pay more in absolute terms, an increase in the sales tax would cost lower income families more as a share of their income. The Working Families Tax Rebate is an important tool for revenue policy because it can offset the impacts of a tax increase for families who are struggling to make ends meet during the recession.

The graph above also shows the net impact of a sales tax increase combined with a Working Families Tax Rebate. Families with kids whose income is $28,000 or less would actually see a net decrease in sales tax. The rebate would also significantly lower the cost of the sales tax increase for the next bracket of earners (those earning between $28,000 and $52,000) so that their total tax increase would be about $29 annually.

Note: Because of the structure of the federal EITC, the Working Families Tax Rebate primarily benefits families with children. Adults without children can qualify for the EITC, but they receive a much smaller credit. The source for these data is the Institute for Taxation and Economic Policy Microsimulation Model.

Working Families Tax Rebate by Legislative District

The proposal to raise the state retail sales tax by 0.3 cents includes the Working Families Rebate. This rebate will refund a portion of the sales tax to lower income working families. The total amount is estimated to equal $68.5 million. Click here (PDF) to see how your legislative district would fare.

The ten districts that would benefit the most would be:

1. 15th (Klickitat and Skamania counties, south Yakima County, and an eastern portion of Clark County) - $2.9 million
2. 14th (Yakima, Union Gap, Selah, Gleed, Naches, Tieton, Ahtanum, Cowiche, Tampico, and all of western Yakima County)- $2.4 million
3. 29th (South Tacoma, Parkland, and portions of Lakewood and University Place) - $2.3 million
4. 16th (Columbia and Walla Walla counties and of parts of Benton and Franklin Counties) - $2.2 million
5. 3rd (Spokane, extending to the North Side and South Hill) - $2.2 million
6. 13th (Kittitas County and parts of Grant and Yakima counties) - $2 million
7. 7th (Ferry, Lincoln, Pend Oreille, and Stevens counties, and parts of Okanogan and Spokane counties) - $1.9 million
8. 12th (Chelan and Douglas County and parts of Grant and Okanogan counties) - $1.9 million
9. 49th (Clark County, including Vancouver west of Interstate 205, and Hazel Dell) - $1.8 million
10. 28th (DuPont, Fircrest, University Place, Lakewood, Steilacoom, Tillicum, and West Tacoma; Anderson, Ketron and McNeil Islands) - $1.8 million
    

UPDATE: Revenue for Health Care and Tax Rebate Proposed

A new proposal to temporarily raise the state retail sales tax by 0.3 cents has been officially introduced passed the House Health and Human Services Appropriations Subcommittee. It dedicates revenue from the tax to essential health care investments and funds the Working Families Tax Rebate.

The Subcommittee amended the proposed appropriations by decreasing the amount spent on the Working Families Tax Rebate and shifting that funding to the Basic Health Plan, community mental health services, and the addition of vision and hearing services.


The $484 million appropriated in the bill is divided as follows:

• $105 $69 million for the Working Families Tax Rebate, which refunds a portion of the state sales tax to lower income working households.

• $167 $187 million for the Basic Health Plan, a program that provides affordable health insurance to lower income Washingtonians.

• $77 million for long-term care and nursing homes, including adult day health programs.

• $75 million to provide funding for hospitals.

• $24 $28 million for community mental health services.

• $13 million for children's health.

• $19 million for Healthy Options, a managed-care health program.

• $10 million for core public health services.

• NEW - $5 million for vision and hearing services

*Appropriations are only made for the 2009-11 biennium, but the temporary sales tax increase is scheduled through December 2012.

Updated Estimates on Revenue from Sales Tax Increase

House Bill 2377 proposes a referendum raising the state sales tax by 0.3 cents with the following stated intent:

An unprecedented shortfall in state general fund revenues has threatened the state's ability to fund vital health services and has harmed working families. For this reason, the legislature is asking the voters to approve temporary tax increases in order to fund health care and to support working families during this time of revenue shortfalls.

As the graph below shows, the referendum would raise an estimated $1.1 billion dollars over three years. $486 million will be available for the 2009-11 biennium. Most of the revenue raised will pay for health care including the Basic Health Plan. Twenty-two percent will be refunded to lower income working families.


Note: The bill does not specifically appropriate funds for the 2011-13 biennium.

Crosscut Article on General Assistance Unemployable

Yesterday we published an article on Crosscut about the importance of the General Assistance Unemployable (GAU) program to the economic security and health of lower income Washingtonians with disabilities who are unable to work. The article describes reforms that could be made to improve the program that would save money for the state and better serve the needs of GAU recipients.

To read the full article, click here.

Working Families Rebate would Benefit Families with Children

About 97 percent of the total Working Families Tax Rebate that was proposed today would flow to working families with children.



*The percentages don't sum to 100 percent because of rounding.

Sales Tax Increase Would Be Offset on Federal Return

There’s growing discussion about a state sales tax increase to pay for essential health care investments. Being April 15th, I wanted to point out that for some Washingtonians, an increase in the state sales tax will be partially offset when they file their federal tax return. How? Congress just made the sales tax deduction permanent. The size of that deduction will rise if voters approve an increase in the state sales tax rate.

Of course, that only helps people who itemize their deductions (mostly homeowners and higher income households). This emphasizes the importance of including funding for the Working Families Tax Rebate (WFTR) in any tax increase proposal. The WFTR will refund a portion of the state sales tax to lower income working families (more info here).

Speaking of the WFTR, it's also timely to mention that one of the advantages of the idea is that it piggybacks on the federal tax return process. That means that the IRS will be doing a significant share of the administration. It also means that the application process will be simple and straightforward. More on that here.

Seattle Times Op-ed on State Budget Decisions

The legislative session will be wrapping up in the next two weeks and state lawmakers still have important decisions left to make on the budget. Our Executive Director Remy Trupin published an op-ed yesterday on the Seattle Times web site calling for a more inclusive approach to state budget decisions.

In the article, he writes:

"The quality of life we enjoy in Washington is directly related to the investments we have made over decades in our public systems. Our hope for the future relies on the choices state lawmakers are making today. The economic crisis at hand is very serious and will require thoughtful consideration, tough decisions and leadership. But choosing between cutting one essential investment and another is harmful at best and devastating to our economic growth at worst.

Instead we must consider all the options available to us, including finding new revenue. It's essential to protect the gains we have made in our public system and keep them functioning well, now and into the future."

To read the full op-ed, click here.

Federal Estate Tax: Examining the Impact on Small Farms and Businesses in Washington

What is the impact of the federal estate tax on mom and pop shops and small family farms? This question has been central to the debate around changes to estate tax law likely to be taken up by Congress later this year. According to new analysis from the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution, only one hundred small farms and businesses across the country would owe any estate taxes in 2011. This would be under President Obama's proposal to freeze the estate tax at 2009 levels ($3.5 million exemption per individual and a 45 percent tax rate).

The Center also did a rough state-by-state analysis using IRS data on estate tax returns filed in 2007 to provide a gauge for how those 100 family-owned farms and businesses would be divided. (This isn’t a perfect measure because the exemption was $2 million in 2007.) What is Washington's share? Assuming a freeze at current levels, roughly two small farms and businesses in Washington State would owe estate tax in 2011.

The Senate Budget Resolution, which was passed on April 2, includes an amendment that would raise the exemption to $5 million per individual and lower the tax rate to 35 percent. Under this proposal, the Tax Policy Center estimates that the number of small businesses and farms would be reduced to 40 nationwide in 2011.

If enacted into law, this policy change would cost the federal government close to $100 billion in lost revenue over ten years.* Any action on the estate tax this year will play an important role in budget considerations because the estate tax provides a substantial revenue stream to the federal government.

*This is an updated figure. See this paper from the Center on Budget and Policy Priorities.

Four Facts About GA-U#4: What Will Happen If It's Gone?

Today is the last installment in a special series on General Assistance-Unemployable, a state program that provides assistance to adults who cannot work because of disability and are not eligible for other programs.

We all hope that if we become disabled or struggle with a mental illness, we will have the economic security and support we need to recover, get back to work, and maintain a modest quality of life. The General Assistance-Unemployable program provides that for thousands of people in our state.

Washington lawmakers have proposed eliminating or reducing the state's GA-U program as a cost-saving measure. But what will happen in Washington if there is no General Assistance for adults with disabilities?

Recipients of GA-U have serious health problems that require ongoing medical care. The GA-U program offers health benefits in the form of fee-for-service medical coupons, or in Pierce and King Counties, a managed care plan. Without these benefits, GA-U clients are more likely to seek care in hospital emergency rooms and community health clinics which are required to provide health care regardless of a patient's ability to pay. This is not a cost-efficient choice for the state: Non-reimbursed health care in a hospital ER, for example, costs the state up to four times as much as an average doctor's visit.

The loss of medical benefits is also likely to lead to a worsening of physical and mental problems for GA-U clients. At the very least, this will prolong the time they are unable work and at worst, could lead to dire outcomes for clients.

What about eliminating the cash assistance provided to GA-U clients? Currently GA-U recipients receive $339 per month to help pay for basic needs. This includes rent for low-income housing, food, and medicine. With no income, some GA-U clients are likely to lose their ability to maintain housing, which will have an impact on their health and future employment status.

Eliminating General Assistance is not the right way for our state to go. Oregon, which got rid of its GA program in 2003, is in the process of reinstating its General Assistance program with support of the Governor’s office. Without assistance, disabled Oregonians found themselves in emergency rooms and on the streets, unable to become healthy and work. We are likely to see the same outcomes here in Washington.

Four Facts About GA-U#3: GA-U Benefit Has Not Changed in 18 Years

Today is the third installment in a special series on General Assistance-Unemployable, a state program that provides assistance to adults who cannot work because of disability and are not eligible for other programs.

GA-U financial assistance provides modest help in meeting immediate needs for housing, food, and other basic necessities. The stipend offered by the state is $339 per month; an amount that has not changed since 1991 and does not account for the increased cost of living over that 18-year span.


As a way of comparing the GA-U benefit with the rising cost of living, the graph above shows the $339 monthly stipend compared to the fair market rent for a studio apartment in Pierce County. In 1991, the stipend would have been enough to pay the rent on a modest studio apartment. In 2009, it would cover just over half the cost.

Accessing Federal Stimulus Money for Unemployment Insurance

Like many states in the nation, Washington is facing the problem of growing unemployment. Over the next year, the Economic and Revenue Forecast Council has projected that the state unemployment rate will rise to ten percent, the highest level since 1983.

As the economy falters, the need for a robust state Unemployment Insurance (UI) program grows. In recognition of this need, the American Recovery and Reinvestment Act includes provisions (a.k.a. the UI Modernization Act) to update and improve state UI programs. Here in Washington, the new federal dollars could bring in over $150 million, money that would provide a direct boost to the state economy.

States have to meet certain criteria in their UI policies in order to draw down the extra federal money. Currently, Washington is eligible for one-third of its total allotment. In order to access the rest of the money – nearly $100 million - Washington must make two meaningful improvements to our state policies.

The Legislature is already moving to adopt one reform – allowing unemployment benefits for workers who must leave their job in order to follow a spouse who has obtained new employment. There are two options being considered in the Legislature for the other policy change that would allow us to receive the remaining federal funding. They are:

- Expanding eligibility for people who can only work part-time hours
- Extending benefits to all UI recipients who participate in worker training programs

Part-time
Washington currently allows eligibility for some unemployed workers who are seeking part-time work, but the state’s policies are too restrictive to meet the federal criteria. As it stands, Washington only allows benefits for workers seeking part-time work if they were previously employed for 17 hours or less per week. Laid-off workers that were previously employed for more than 17 hours per week must be available to work full-time hours or lose their UI eligibility.

In order to qualify under the federal criteria, Washington would need to change its part-time eligibility rules to include workers who seek employment of 20 hours per week or more. This change is expected to particularly benefit lower income and women workers.

Worker Training
The extension of UI benefits while recipients are in worker training programs is important because it enables people to develop skills in areas of employment with high demand and it can set them on a path for higher wages in the future. The state has already committed to some policy changes regarding extended benefits for UI recipients in worker training programs. As of September 2009, eligibility will not only include those who work in declining occupations, but also honorably discharged military veterans, people who have been injured and can no longer do their previous work, and lower income workers.

But in order to meet the federal criteria, our program will have to be even more inclusive and easier for UI recipients to navigate. The changes would mean many more unemployed workers would have access to twice the number of weeks of benefits – up to a year as long as they remain in a training program.

Working Families Tax Rebate Administration Would be Straightforward and Efficient

The Working Families Tax Rebate (WFTR) was signed into law last year. The state budget included modest funding to allow the Department of Revenue (DOR) to begin developing the necessary infrastructure. Once the rebate is fully funded and implemented, it will refund a portion of the state retail sales tax to as many as 370,000 Washington households.

But how will it work? One of the great things about the rebate is how straightforward and efficient the administration will be.

It will build on the federal Earned Income Tax Credit (EITC), so that everyone who is eligible for the federal credit will also be eligible for the state rebate. The benefit of building on the EITC is that the IRS does a significant portion of the administration and enforcement. They will annually send a database to DOR which will contain a list of all Washington households who received the EITC and are therefore eligible for the state rebate. The database will also include the amount of EITC received by each family. The state rebate will simply be calculated as a straight percentage of the federal credit.

The Department of Revenue still has a significant role to play, of course. Last summer, I was part of an advisory group that met with DOR staff to discuss how applications for the rebate could be collected. Their work has been put on hold because of the budget crisis, but the direction they were taking was encouraging. They were developing a web-based application that would allow people to easily apply for the WFTR. It promises to be very user-friendly and accessible. The screenshot below is an example of the kind of thing the DOR was working on before the program was put on hold. It's the first of only four steps the applicant will have to follow. It’s not by any means a final version, but it gives an idea of how the application would work.


The next step for DOR would be to match the state database with the IRS data, which would already be vetted and audited. If the two match, the applicant is eligible and the DOR can process the payment.

There will need to be an outreach effort to ensure that families are aware of the rebate. This effort would build on existing programs. There is already an organized joint campaign by the state government, philanthropy, and community organizations such as the United Way to ensure that eligible people apply for the federal EITC. Those outreach materials (such as this video featuring the Governor) could easily notify people about the Working Families Tax Rebate as well. Paid and volunteer tax preparers could process WFTR applications alongside federal tax returns.

While the program would be relatively simple to administer, the benefits would be significant to households and communities across the state.

Four Facts About GA-U#2: In Fact, Other States Do Have GA-U Programs

Today is the second installment in a special series on General Assistance-Unemployable, a state program that provides assistance to adults who cannot work because of disability and are not eligible for other programs.

Yesterday, we talked about how GA-U fills an essential role in our state's health care infrastructure. Today, I want to point out (again) that similar programs exist in most other states. In fact, thirty-one states have statewide programs and another nine states have programs that are available in some counties, but not others. In total, only 11 states do not provide similar assistance.

We've blogged on this before, but I feel the need to do it again because lawmakers continue to claim that Washington’s program is unique. On Tuesday, for example, a State Representative claimed in an executive session debate that Washington is “one of very few states" that have a GA-U program. He then went on to say that "no surrounding states have this program."

Let's be clear about this:

• Almost every Western state has a similar program. California, Nevada, Idaho, Utah, Arizona, Colorado, and New Mexico all have programs statewide and Montana has county-level programs.
• In the Great Plains: Kansas, Nebraska, and South Dakota all have statewide programs and North Dakota has county programs.
• Every state north of the Mason-Dixon Line has general assistance (Wisconsin being the only one without a fully statewide program).
• Six Southern states have county-level general assistance programs: Kentucky, Tennessee, Virginia, North Carolina, Georgia, and Florida.
• Alaska, Hawaii, and DC all have general assistance.
• Twenty-nine states also provide medical assistance along with basic living assistance.

To be honest, I've never understood why the idea that other states do not have general assistance would be an effective argument against our state’s program, even if it were true. The parent in me wants to ask, "If all your friends jumped off a bridge . . ." We should do the right thing in Washington State because it’s consistent with our values, not because most everybody else is doing it. (Even though most everybody else is doing it.)

Four Facts About GA-U#1: GA-U is an Important Part of Our Health Care System

Today is the first installment in a special series on General Assistance-Unemployable, a state program that provides assistance to adults who cannot work because of disability and are not eligible for other programs.

State investments in health and economic security ensure that everyone can meet basic needs in times of financial hardship. The General Assistance-Unemployable (GA-U) program provides temporary assistance to Washingtonians that are unable to work due to disability. The program plays an important role in the state’s health care and economic security infrastructure by providing medical benefits and modest financial assistance to those who are not served by other public assistance programs.

The medical benefits provided to GA-U clients are part of a larger systemic effort in Washington to broaden access to health insurance. This effort includes lower-income workers who receive benefits through Basic Health to children who are covered under the state’s Apple Health for Kids. Maintaining funding for GA-U reflects our state’s long term goal of expanding access to the uninsured to improve health outcomes and better manage costs.

GA-U clients range from those who suffer from physical ailments stemming from injuries to others with debilitating mental illnesses. Health issues are a primary concern for clients in the GA-U program, many of whom suffer from co-existing physical, mental, and substance abuse problems. There are 21,000 people enrolled at any given month in the GA-U program and clients can be found in every county of the state.

Importantly, GA-U fills gaps that would otherwise exist in our state’s health care infrastructure. Eligibility for other assistance programs is very limited for adults who do not have children at home, even if they are unable to work to support themselves. And federal programs do not cover adults whose disability is considered to be temporary. For these Washingtonians, GA-U provides access to much-needed medical help and the chance to avoid deep poverty and homelessness.

Budget Cuts Hurt Working Families

With unemployment expected to rise to record levels, opportunities to achieve economic security through employment are diminishing. Families who are struggling during these difficult times need state investments in health, education, and economic security more than ever. The proposed budget cuts in the Governor's and Legislature's budgets will come as a double-hit to working families who may no longer have market-based resources to rely on. Two examples are health care and education:

• Health Care - Job loss is often accompanied by loss of health insurance. And during recessions, employers may eliminate coverage in order to save costs. Losing health insurance could have a devastating impact on the health and finances of working families. The proposed state budget cuts would remove access to affordable health insurance for many Washingtonians. For example, Basic Health, a state-funded health insurance program that provides coverage to lower income families is facing cuts that would eliminate coverage for 40,000 people.

• Education -Rising unemployment often increases the demand for workforce training and higher education. These programs have long term benefits for workers and the economy. Even one year of higher education can increase an individual’s lifetime salary and help workers meet the needs of employers when the economy recovers. But the proposed deep cuts to funding for community colleges and public universities will reverse this trend by reducing access to higher education for students and workers in the state.
  

Maintaining Our Priorities
Deep budget cuts are not the only solution to our state's fiscal problems. Washington lawmakers should consider raising revenue to avoid dismantling our important public infrastructures and use the Working Families Tax Rebate to offset the disproportionate impact a regressive tax increase would have on lower income families.

Federal legislation will give a $250 billion tax cut to wealthy estates

Last week during floor debate of the budget resolution, the U.S. Senate narrowly approved a $250 billion reduction in the federal estate tax. While not binding, the vote could set a precedent for the direction that estate tax legislation will take in Congress later this year.

The tax cut came in the form of an amendment to the budget resolution. It was proposed by Senators Lincoln (D, AR) and Kyl (R, AZ) and passed by a 51-48 margin. Washington Senators Patty Murray and Maria Cantwell joined ten other Democrats and Senate Republicans in approving the measure.

Current federal estate tax law allows a $3.5 million exemption for individuals and $7million for couples with a flat tax rate of 45 percent (although the average effective rate is much lower at 16.5 percent*). At this level, only three in every one thousand estates owe federal taxes. President Obama and the House of Representatives both called for freezing the estate tax at 2009 levels in their budget proposals.

The Lincoln-Kyl amendment increases the estate tax exemption to $10 million per couple and $5 million per individual with a lower rate of 35 percent. Over ten years, it would result in $250 billion in lost revenue for the federal government.

*Source: Tax Policy Center

False Choices on GA-U

The proposed budget cuts in state funding for public schools are indeed "unnecessarily deep." That's a quote from today's Seattle Times editorial. Unfortunately, the rest of the editorial argues in favor of school funding at the expense of the General Assistance-Unemployable program, which provides medical care and a bare standard of living for adults with disabilities who, as the Times acknowledges, have no other options.

Like our support for public education, our state's GA-U program reflects our priorities and values. The Seattle Times says that we currently invest in the program because Washington is "a humane state." But we can't consider ourselves humane if we provide economic security to our most vulnerable during good times and leave them with no support when times are bad.

There is a better option than pitting the elimination of state funding for school districts against core supports for people in need. These are both important public priorities. It's long past time we had a real public conversation about how to pay for them both.

Working Families Tax Rebate: Benefits by Legislative District

Last Friday the Budget & Policy Center released a paper on the benefits of the Working Families Tax Rebate for economic and fiscal recovery in Washington State.

The Working Families Tax Rebate will refund a portion of the state retail sales tax to the 350,000 Washington households that qualify for the federal Earned Income Tax Credit. Statewide, 12 percent of households were eligible for the EITC in 2006 and would have therefore been eligible for the WFTR. The map below shows the share of tax filers who would have been eligible for the WFTR by legislative district. The districts with the highest percentages of eligible Washingtonians live in rural and small metropolitan areas. For example, one in four tax filers in the Yakima area would have been eligible for the WFTR. In general, all communities in Washington would benefit.


Click on map for larger version.

Working Families Tax Rebate: A Tool for Economic and Fiscal Recovery

The Budget & Policy Center is releasing a new policy brief today on the Working Families Tax Rebate. The paper details the need for revenue increases to address the state's historic budget deficit and the importance of implementing the Working Families Tax Rebate.

The Working Families Tax Rebate is an effective tool the state can use as part of a strategy for economic and fiscal recovery. It builds on the highly successful federal Earned Income Tax Credit, which lifts millions of people out of poverty nationwide each year. Washington lawmakers should consider raising revenue to avoid deep budget cuts that will harm the state and use the Working Families Tax Rebate to offset the disproportionate impact a regressive tax increase would have on lower income families.

To read the full report, please click here.

Update on Basic Health Cuts

We argued in a previous post that despite some claims, the proposed cuts to Basic Health will require disenrolling thousands of currently insured members. Steve Hill, the head of the Washington State Health Care Authority agrees that disenrollment will be necessary (see video from TV-W below). They will begin by identifying members who are eligible for Medicaid, but it is likely that many others will become uninsured.

UPDATE: "The High Cost of Subprime Lending"

UPDATE: Our report on subprime lending was covered on King 5 yesterday. Click here to watch.


Today, the Budget & Policy Center is releasing a new report on the "High Cost of Subprime Lending in Washington State." We will be blogging on the topic throughout the week. You can read the entire report by clicking here.

In Washington State in 2006, African-American and Hispanic homeowners were most likely to pay a higher premium for their mortgage than whites or Asians.*

The effect on household finances of having a high-cost mortgage can be significant. The cost of a $230,000 mortgage can easily be $600 higher per month, or over $200,000 over the course of a 30-year loan. In the middle of the current housing crisis, having a high-cost mortgage also suggests a higher likelihood of foreclosure.

The graph below shows the share of mortgages that were high-cost in 2006 by the race/ethnicity of the borrower. The differences were stark. Over 40 percent of the mortgages lent to African Americans and Hispanics were high-cost, compared to around 22 percent for non-Hispanic whites and Asians.


It is unlikely that factors such as credit scores, debt-to-income ratios, and loan-to-value ratios can explain a gap of this magnitude. The blue bars show the high-cost mortgage rate for households with high incomes. Even among borrowers whose incomes were twice the area median, 39 percent of African-Americans and 37 percent of Hispanics had high-cost loans.

The difference in loan pricing suggest that the impact of further deterioration in the housing market will likely fall disproportionately on African Americans and Hispanics.


*The federal Home Mortgage Disclosure Act (HMDA) classifies mortgage as “high-cost” based on the loan’s annual percentage rate (APR). The APR is a better measure of the total cost than the contract interest rate alone because it includes points, fees, and other finance charges. Mortgages with APRs above designated thresholds are defined as “high-cost.”

Impact of Recovery Act in Washington: Making Work Pay Credit and Unemployment Benefits

Last week I wrote a post on the increase in food stamp benefits slated for April 1, and the likely impact on our state’s economy. Two other important components of the federal recovery package are also kicking in today, the Making Work Pay Credit and an increase in unemployment benefits for eligible workers.

The Making Work Pay Credit
This is a tax credit worth up to $400 for a worker and $800 for a married couple. In most cases, the credit will be administered by employers and will reduce the amount withheld from an employees’ paycheck, increasing their take-home pay. It is available to all workers earning up to $95,000 and all married couples earning up to $190,000. In Washington State, an estimated 2,360,000 workers are eligible for the credit.

Increase in Unemployment Benefits
The economic recovery package also gives unemployed workers an extra $25 a week and extends the number of weeks they can receive jobless benefits. The National Employment Law Project estimates that more than 400,000 unemployed workers in Washington will receive the increase in benefits.

Much like food stamps, unemployment benefits are a proven form of economic stimulus. According to the U.S. Labor Department, one dollar in unemployment benefits generates $2.15 in economic activity.