"A Shared Vision" Part Three: Healthy People and Environment

Today we continue our four-part series on the important role of public investments in our state. The series is based on the Progress Index, a framework for analyzing the state budget that was developed by the Budget & Policy Center. The Progress Index utilizes four commonly-held values: education and opportunity, thriving communities, healthy people and environment, and economic security. Last week, I wrote about thriving communities.

Good health ensures that people can take advantage of the social, economic, and civic life in their community. Likewise, a healthy environment allows people to enjoy food, water, and outdoor recreation without fear of pollution or toxins.

The challenges of achieving good health for all are increasing. As unemployment rates rise, so do the numbers of people without adequate health insurance. And even people who do have insurance can find the costs of health care to be more than they can afford. In addition, pollution in the environment threatens to overwhelm the health and safety of our air, water, land, and wildlife.

Public efforts can make a difference towards improving health and the environment in Washington State. The Budget & Policy Center has identified four research-based goals to help us focus our efforts in this area. They are:

- Protect Public and Environmental Health
- Support Families and Protect Children
- Expand Health Insurance Coverage
- Care of People with Long-Term Health Needs

Most of the state's investment in healthy people and environment goes toward expanding health insurance, caring for people with long-term health needs, and protecting children and the environment. (See graph)


As health care costs have risen over recent decades, Washington has made significant efforts to provide health care coverage to people without private insurance. The state's Basic Health program is designed to fill the gap between public medical assistance and private insurance for lower income workers. Established in 1988, it was the first program of its kind in the nation. In 2007, state policymakers set a goal to provide health insurance to every child in the state by 2010, by passing the Cover All Kids legislation. These are investments that all Washingtonians can be proud of.

The current economic crisis facing our state poses a serious threat to our efforts to expand access to high quality health care. Not only are insurance benefits at risk, but also the availability of providers. Community Health Centers are a key component of the state health care infrastructure. They provide comprehensive health services to patients with or without health insurance. In 2008, one-third of the patients served by community health centers was uninsured. Cuts in public health insurance programs have a direct effect on community health centers, which are already strained because of economic and health care trends.

During these tough economic times, it is easy to forget the important role that state government can play in improving the quality of life for everyone. But these investments do matter. For example, the preservation and maintenance of the Cedar River Watershed has been a remarkable achievement in sustainable use of environmental resources. The watershed includes over 90,000 acres of protected forestland and is only one of six water sources in the country that does not need fabricated filtration. It provides two-thirds of King County's water supply and is also used for important environmental research.

Federal Stimulus Supports Washington's TANF program

The recent federal stimulus package offers states significant financial support for increased investments in economic security for vulnerable families. The American Recovery and Reinvestment Act of 2009 contains provisions for an emergency contingency fund within the Temporary Assistance to Needy Families (TANF) program. TANF is the federal program that supports state welfare programs, which in Washington is known as WorkFirst.

The new federal provisions:
- provide significant, unanticipated money to the state for TANF
- require that states experience increases in TANF caseloads and expenditures to access federal money

While the TANF block grant generally provides states with a fixed amount of money each year, the new emergency fund offers additional money to states that corresponds to increased TANF costs during the recession. The new provisions in the federal legislation are intended to help states respond to the rising need for government assistance during an economic crisis. They provide a very attractive 80 percent reimbursement for the increased costs associated with rising caseloads and innovative programs designed to assist families. (This means that for every 20 cents the state spends, it gets back 80 cents in federal assistance. In dollar terms, for every one dollar spent, Washington would receive four dollars back.)

Washington State stands to gain unanticipated extra federal dollars under this provision, but to take advantage of these funds lawmakers must resist the temptation to cut caseloads or benefits in order to deal with budget shortfalls. A state can only receive the new emergency funds for increased assistance costs if it has increased caseloads and expenditures. In other words, the program must be serving more people now than it did in 2007 - when the average monthly caseload was over 51,000 - and it is projected to do so. The Caseload Forecast Council predicted last November that the state will have close to 59,000 TANF recipients in 2011, a 14.5 percent increase over the June 2008 projection. (See graph) It is highly likely, given the escalating crisis in the economy and unemployment, that these regular assistance caseload numbers will be much higher.


Increased caseloads in Washington State will come primarily from the rising need of vulnerable families during the current economic recession. But additional caseload growth in Washington will also come from the Career Services program that the state recently created to support families trying to work their way off assistance. The state has been planning to expand this program later this year to include working families receiving food stamps. Because expenditures on this program qualify for the 80 percent reimbursement, Washington State is well-positioned to pull in extra federal dollars through the emergency fund for previously scheduled expenditures.

As state lawmakers move forward in the budget-writing process, it is important to consider that reductions in TANF benefits for basic assistance or steps taken to reduce caseloads will mean Washington will lose out on 80 cents in additional federal funding for every dollar that gets cut. Not only would this do harm to our collective effort to provide economic security to everyone in the state, it would also run counter to the purpose of the federal stimulus bill which seeks to increase spending in the overall economy. According to the Center on Budget and Policy Priorities, a Washington D.C.-based think tank, every federal dollar pulled into the state is expected to generate $1.38 in economic activity.

For more information on the TANF provisions in the federal stimulus bill, see this paper from the CBPP. Many thanks to Liz Schott at CBPP for her assistance with this post.

More Economists Sign Letter to Lawmakers

I'd like to take this opportunity to announce that economists Mark Long from UW and Kelly Cullen from Eastern Washington University signed on to our letter to lawmakers to consider all options in addressing the state budget crisis.

I'd also like to respond to Paul Guppy's blog post in which he claims that "nearly half of the [28] signers of economists' letter calling for a tax increase are not economists."

He counts 11 non-economists. I'm not sure I'd call that nearly half.

But more importantly, his claim is off-base. He doesn't name names, but he does describe the 11 and he seems to be including people who have degrees in Economics, teach Economics, and have been published in peer reviewed Economics journals. For example, Prof. Melissa Ahern, a well-respected economist at WSU who teaches Economics and has a PhD in Economics, but whose title reflects her specialization in health.

On other matters, we welcome a lively discussion on the merits of the letter.

TNT Asks: What To Do About the State Budget?

News last week of the dramatic increase in our state budget deficit - from roughly six to eight billion dollars - has prompted many to wonder how exactly we are going to get out of this mess. In a timely editorial, the Tacoma News Tribune has compiled the views of nine diverse movers and shakers on what should be done to fix the budget.

From the TNT: Earlier this month, we invited 24 current and former state officials, policy analysts and interest group representatives to suggest what lawmakers would do if they’re really serious about leveraging the economic crisis to make hard choices.

Remy Trupin, Executive Director of the Budget & Policy Center, is one of the nine. His written comments call for a balanced approach:

Economists recognize the vital role that spending must play in reviving our state’s staggered economy. If Olympia ignores this reality, it would do more than violate our shared values. It would have an anti-stimulative effect that will deepen and prolong the economic crisis we face.

A reasonable approach would combine surgical cuts with carefully calibrated revenue increases, Remy says. The goal is to protect critical public services without exacerbating the unfairness of our current state tax structure. For example, a temporary increase in the state sales tax or in sin taxes could be combined with a sales tax rebate to lower income working families. The Legislature passed the Working Families Rebate in 2008. If fully funded, it could fully offset the increase in taxes for lower income families

Remy is not alone in his thinking. A group of 30 state economists and public policy experts have joined the Budget & Policy Center in signing a letter calling for consideration of revenue increases by the Governor and state Legislature to address the growing budget crisis.

Our Deficit Is Among the Worst

With yesterday's preliminary revenue forecast, Washington State's deficit is now among the worst in the nation, as Andrew Garber pointed out today.

Data from the Center on Budget and Policy Priorities shows just how big of an impact yesterday's news will have.

Fiscal year 2009 - Before yesterday, our FY 2009 deficit was relatively small - 3% of the total budget. We were tied for 35th among the states. Now we're at 8% of the budget and only 12 states have larger relative deficits.*

Fiscal year 2010 - For 2010, we've moved from an 18% deficit to a 23% deficit. Here's the complete list of states with 2010 deficits above 20%:

Nevada (30%)
Arizona (30%)
California (26%)
New York (24%)
Washington (23%)
Connecticut (23%)
Florida (23%)
Louisiana (22%)
Vermont (21%)
Wisconsin (20%)

We're not that far from California (who finally passed a budget yesterday after running out of cash).

Few people down there are completely happy with the California budget. It includes deep and harmful spending cuts and imbalanced tax changes. But it is important to note that California considered the full range of options when balancing its budget rather than focusing exclusively on budget cuts.

If you missed the revenue forecast presentation, Dr. Raha's presentation can be viewed here.

* The data used here was last updated on February 10 for the other states.

UPDATE: Economists Speak Out on the Budget Deficit

UPDATES BELOW

Today, we'll be in Olympia hand-delivering a letter signed by over twenty economists and public policy experts from across the state that urges the Governor, the Speaker and the Senate Majority Leader to “consider the full range of options, including revenue increases, when deciding how to close the state budget gap.”

We will be meeting with Senate Majority Leader Brown to discuss the serious concerns outlined in the letter regarding the state's growing budget deficit.

This afternoon's preliminary revenue forecast is a wake-up call. It signals the need for a new approach to the economic crisis here in Washington. While the Budget & Policy Center has been calling on policymakers to consider all reasonable options for a long time, this forecast crystallizes the inadequacy of trying to address a budget deficit of this magnitude through cuts alone.

In terms of the state economy, the economists and policy experts note that "reducing government spending will have a more deleterious effect on Washington State's economy than would increasing revenue." In fact, as our Research Director Jeff Chapman notes, severe cuts to public investments in economic security and health would undermine the strong federal response that was just enacted into law on Tuesday.

What is needed now is a thoughtful discussion among policymakers that considers all options.

UPDATES:

1. Since the letter was released, six new economists signed on to the letter! The updated letter can be found here

2. The meeting with Senator Brown went very well.


(From left to right: Jeff Chapman, our Research Director, Peter Dorman from Evergreen, Senator Brown, Ralph Murphy from Evergreen, David Batker from Earth Economics, and me. Two more economists - Dr. Marjolein van der Veen from Bellevue & Shoreline Community Colleges and Alexander Rist from King County - were on the phone.)

"A Shared Vision" Part Two: Thriving Communities

Today we continue our four-part series on the important role of public investments in our state. The series is based on the Progress Index, a framework for analyzing the state budget that was developed by the Budget & Policy Center. The Progress Index utilizes four commonly-held values: education and opportunity, thriving communities, healthy people and environment, and economic security. Last week, I wrote about education and opportunity.

Thriving communities rely on public investments that maintain our state infrastructure and protect our natural resources. Public structures such as transportation, communications, justice, and the arts keep our state economy in motion, our neighborhoods safe, and our cultural life vibrant. To create thriving communities, we need to do more than address short-term needs. We need thoughtful, long-term planning and the sustainable use of resources.

The state can promote economic growth and the wise use of resources while also ensuring that business, education, and the arts serve the interests of all Washingtonians. The Budget & Policy Center has identified four research-based goals that will help us make progress towards creating a state we all want to live in.

- Promote Economic Growth and Sustainable Development
- Strengthen Public Transportation and Infrastructure
- Protect Public Safety and Implement an Equal Justice System
- Ensure Efficiency and Transparency in State Government

Close to half of the state's investments in thriving communities go towards public safety and the justice system. Another sizable chunk is dedicated to efficiency and transparency in state government. (See graph) Much of the state's transportation investments are made through the capital budget, which is not considered in the Progress Index.


As the population grows in Washington State, our forests, farms, and recreation areas are at risk of development. One important state investment, the Washington Wildlife and Recreation Program, works to preserve and protect these areas through grants to local governments. Since 1992, the program has funded over 920 projects across the state to create parks, protect wildlife habitat, and preserve working farms.

At the same time, innovative economic development programs create jobs that pay livable wages for workers throughout the state. Investments in education and worker training programs, the renewable energy economy, and research and development all contribute to broad economic development. For example, Washington Manufacturing Services is a state supported nonprofit that provides small manufacturers with low-cost consulting services to help them increase productivity and improve competitiveness.In addition, state contributions to renovations of local landmarks are important for creating communities in which businesses can thrive.

Making smart investments in public safety means more than building new prisons. It requires research-based approaches to improving outcomes for offenders. Washington has made efforts to reduce recidivism among youth offenders by investing in the Family Integrated Transitions (FIT) program, which includes mental health and substance abuse treatment that begins while youth are still incarcerated and continues during the transition period back to their community. FIT is currently available in nine counties. A Washington State Institute of Public Policy study found that while expensive, the costs of the program were easily outweighed by the savings to taxpayers by avoiding future incarcerations.

Finally, meaningful participation by citizens in the decisions of government requires publicly accessible information on government policies and programs. Washington State's budget process has consistently earned high marks in national studies of transparency in government. However, the state's system for reviewing tax exemptions, which amount to $13 billion of lost tax revenue for the state, could be more transparent by including the exemptions in the state's annual budget process.

$2.3 billion of bad news

I'm in Olympia at a session of the Economic and Revenue Forecast Council. The Executive Director, Arun Raha, is releasing a "early guidance" revenue forecast. As expected, the news is bad.

For the current biennium, the Council is now expecting $721 million less in general fund revenue than projected in November. For the 2009-11 biennium, they're expecting almost $1.6 billion less. That's a total decrease of $2.3 billion.

What does it mean? It means that our ability to continue our investments in education, communities, health, and economic security is threatened. It means the federal stimulus money may be swamped by declining state revenue. It means the conversation about what kind of revenue increase we should consider is even more urgent.

What's the total deficict? The number that has been used since December is $6 billion. Revenue is down by $2.3 billion. But adding those together doesn't give the complete picture. The need for public structures from health insurance to community colleges has increased since the $6 billion was published.

I'll post more details and maybe a graph or two tomorrow.

Note: Dr. Raha emphasized that this forecast is preliminary and unofficial. Economic conditions could change significantly before the official forecast on March 19. He also emphasized that the bad news is offset by the return of Ken Griffey. Jr.

Does the AWB Want an Income Tax?

Don Brunell frequently argues on his blog that state business taxes are too high. (As president of the Association of Washington Business (AWB), it's part of his job.) His recent blog post used a new study from the Council of State Taxation (COST) to emphasize his point about business taxation.

In the study, Washington State is ranked 12th among the 50 states by the share of state and local taxes that are paid by businesses. We noticed a commonality among the top-ranked states: most have little or no income tax.

The table below shows the 17 states that rank in the top third. Thirteen (including Washington State) have no personal income tax or a low personal income tax. If we had a personal income tax, we'd probably be lower on the list. The remaining four states either have no general sales tax or a relatively low reliance on property taxes.


Here's some more to chew on: Studies that measure the share of taxes paid by businesses versus individuals can be misleading because they don’t fully account for who actually pays the tax in the end.

In Washington State, this is particularly true because of our reliance on the business and occupation tax (the B&O) rather than a corporate income tax. Businesses are more able to pass the cost of the B&O to consumers. And since the tax is levied regardless of the business’s ability to pay, it falls disproportionately on individual small business owners.

Bottom line? Studies like the one cited on the AWB blog are hardly conclusive evidence that Washington State’s business taxes are too high. We need a more comprehensive conversation about how to improve our tax structure in ways that benefit all Washingtonians.

"A Shared Vision" Part One: Education and Opportunity

Broadly available education and opportunity is fundamental to the future of our state. Education opens doors to better job opportunities, higher wages, and greater job security. Success in today’s competitive, knowledge-based economy will require more than a basic education. Our children need schools that provide sophisticated, high-quality learning environments so they can graduate with the skills and knowledge to succeed in the global marketplace.

Education begins early and continues throughout adulthood. The Budget & Policy Center has identified four research-based goals within this value area so we can begin to measure our progress towards creating a just and equitable state.

- Invest in Early Learning
- Provide a High-Quality Education to All Students
- Prepare All Adults for Meaningful Careers
- Cultivate Opportunities for Higher Education

The state has a constitutional mandate to provide a basic education to all students. Most of the funds in the 2007-09 budget that were allocated to Education and Opportunity went towards the goal of providing a high-quality education to all students. The state’s public universities received the next highest amount, followed by workforce training, and then early childhood education. (see graph)


Research continues to show the importance of early childhood education to student success in later grades. A study from the Washington Learns committee (which was co-chaired by Governor Gregoire) found less than half of kids entering kindergarten in the state are adequately prepared for school. Parents generally pay for preschool and child care, which can equal up to 30 percent of a median family income. State and federal programs are designed to assist lower income families with these costs, but in 2006 funding was insufficient in Washington and 42 percent of eligible families went without services.

A high quality K-12 education system depends on good teachers, well-run schools, and challenging course work. Washington has close to 2,000 National Board certified teachers, a credential which requires educators to show a mastery of their subject matter, work closely with parents, and stay abreast of professional theory. The state provides incentives for teachers to achieve the certification and even more if they choose to teach in an under-resourced school.

The state is also working to improve instruction in math and science. Last school year, only half of seventh graders passed the math section of the Washington Assessment of Student Learning (WASL) and in 2006, forty-five percent of students who went directly from a state high school to a community or technical college were required to take remedial math classes. In 2008, the State Board of Education approved a plan to increase the math and science requirements for high school graduation to address these concerns.

Completion of one year of post-high school education and a credential can lead to a significant boost in earnings. A recent survey of Washington businesses found that the highest vacancy rates were for jobs that required more than a high school diploma, but less than a baccalaureate degree. One barrier to continuing education for workers is financial limitations. In 2006-07, the state extended “Opportunity Grants” to 843 lower income workers, most of whom were parents. The program was a success – 73 percent of the grantees completed a full year of school and the program was expanded statewide.

Likewise, affordability can be a significant barrier to lower income students who are interested in higher education. In 2007, Washington enacted a new College Bound Scholarship that notifies students in 7th grade from lower income families that the state will pay the full cost of tuition at any public college or university in the state if they pledge to graduate from high school.

Recent state investments in high quality teachers and improving access to worker training programs have resulted in meaningful progress in education and opportunity in our state. We still face challenges in expanding access to early childhood education and ensuring our students are fully prepared to meet the workforce needs of the new economy. These are investments that will have a lasting impact on the future of our state. We cannot allow the fiscal crisis we now face to derail those efforts.

$3 Billion for Washington State Fiscal Relief

The federal stimulus package, which may finally be a done deal, includes a number of provisions that will affect Washington State. The two that will have a significant direct effect on the state deficit are an FMAP boost (see my update on that) and the state fiscal stabilization fund. Together, the total is just over $3 billion.

The state fiscal stabilization fund is split into two portions. One is dedicated to education; the other is more flexible. The block grant for education (about $820 million for Washington State) can be used to stabilize state education funding, with any remaining money going to school districts.

The more flexible portion can be used to shore up state funding in other basic services and can also be used for school modernization, renovation, or repair.

More detail on the state fiscal stablization fund can be found here.

UPDATE: Federal Stimulus Requires State Investment in Health Care

NEW NUMBERS AND GRAPH BELOW
Public access to affordable health insurance is especially important during a recession. For many people, the loss of a job means the loss of health care. For those whose jobs didn’t provide health insurance, the loss of income makes health care even less affordable. Now is not the time to cut state investments in the health and well-being of people in Washington.

The federal economic recovery package that is being debated in Congress will likely include an increase in the Federal Medicaid Assistance Percentage (FMAP). This provision will ease some of the pressure on the state budget and allow us to protect other key health programs. But if we’re not careful, budgeting decisions could result in deep cuts in essential services and the forfeiture of some federal funding.

FMAP is the share of Medicaid spending that is covered by the federal government. (Medicaid is the primary source of public health insurance for lower income families across the country. It is funded jointly by states and the federal government.) Washington State’s FMAP is about 50%. So out of the roughly $4 billion spent annually on Medicaid in Washington, the state covers about $2 billion and the federal government covers about $2 billion.

If the recovery bill passes in its current form, federal dollars for Medicaid would rise. We will be able to reduce our state spending on Medicaid without reducing total spending. This would happen through an immediate increase in the state’s FMAP to 60% or perhaps higher. That would mean that the federal government would pay for 60% (instead of 50%) of our $4 billion Medicaid program. The state would only be required to pay 40% (see graph below).


In that scenario, we could reduce our state Medicaid spending from roughly $2 billion to roughly $1.6 billion without cutting people off the program or reducing benefits. This will free up money we would otherwise spend on Medicaid to protect other important health care programs. (Medicaid is only one piece of the health care system in danger due to the deficit.)

A word of caution, however: If we cut Medicaid spending any more than the FMAP increase will cover, we’ll kill the golden goose. Suppose we cut our Medicaid spending by an additional $100 million per year over the amount covered by the recovery package. Because the federal government will only fund 60% of the total funding, the federal share would also fall—by $150 million. We would lose $1.50 in federal funding for every additional $1.00 we cut. It would be a bad move for people suffering from the recession and it would be a bad move for the state economy.

UPDATE
Based on the latest estimates from the Government Accountability Office (GAO), the federal recovery package will increase federal Medicaid spending by $2.06 billion between now and the first quarter of 2011. The state will be able to reduce Medicaid spending by $2.06 billion over the three fiscal years while keeping total spending on the program constant. The money will be divided among fiscal years as shown in the graph below, according to the GAO.

A Shared Vision for Washington State: Four-Part Series

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.


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

Today 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

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).


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).



* 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

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.


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

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.


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. (In Oregon, the Governor's biennial budget proposal includes a biennial report.)

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.

Governor's New Online Tool Provides Opportunity to Explore Budget Options - Or Does It?

The Governor has unveiled a new online tool that allows us to dig into the budget and decide how it should be balanced.

As a bona fide budget wonk, I should be a big fan. An online calculator could be a useful public education tool and it's important to understand various trade-offs involved in budgeting. But I'm not a fan.

Why? Because any reasonable budget-setting process should consider both sides of the equation - spending and revenue. The online calculator set up by the Governor's office only allows spending cuts. Where there should be a place to explore various revenue options, it simply says "The Governor is committed to not raising taxes." Public consideration of revenue options is not permitted.

During the last big budget crisis, the Seattle Times gave us a more comprehensive calculator. It would be great to see an updated version.

* * *
By the way, I received a congratulations from the calculator for successfully balancing the budget. What was my trick? I eliminated all spending on "the Health of Washingtonians."

Big Budget News: Preliminary Revenue Forecast Set For February 19th

Given the continued slide in revenue collections and the announcements of major layoffs, the upcoming revenue forecast is expected to further widen the deficit. The official forecast isn't scheduled until March 19, but policymakers, advocates, and journalists are understandably anxious to see the numbers earlier.

The Economic and Revenue Forecast Council announced today that they will be providing a preliminary forecast at 4:30pm on February 19th. So mark your calendars and bookmark the TV-W website.

The ERFC is careful to emphasize the word "preliminary." The official March forecast may be quite different.

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

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.*


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).