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2010-01-19T11:10:00.000-08:00

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Some recent posts you may have missed:

Governor’s “Book 2” Budget Still Emphasizes Cuts over Revenue

Increasing the Sales Tax and Funding the Working Families Tax Rebate

Modernizing the Sales Tax

Governor Gregoire's Tax Proposals

Investing in Washington’s Workforce

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2010-01-13T14:17:00.000-08:00

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A Balanced Approach: Increasing and Modernizing the Sales Tax

2010-01-13T13:56:00.000-08:00

In our new Policy Brief, the Budget & Policy Center offers a balanced approach to dealing with the recession's impact on the state budget. To maintain our economic competitiveness and essential services for struggling families, we recommend that policymakers generate additional resources by modernizing and temporarily increasing the state sales tax -- Washington's largest source of revenue -- and funding the Working Families Tax Rebate.

Our proposal would generate an additional $1.2 billion in resources that could be used to prevent further economically damaging cuts. The remaining deficit could be closed through a combination of additional revenue strategies, an extension of federal recovery funds, and one-time transfers and changes (including accessing the Rainy Day Fund).

It is important to note that tax increases under this proposal would remain a modest share of total actions taken to close shortfalls during the FY2009-11 biennium. The graph below shows that tax increases under the proposal would account for barely one-sixth of total measures taken to balance the budget over the course of the biennium. Budget cuts, federal funds, fund-transfers and other changes, would each constitute larger shares of total budget solutions.

Click here to read the entire report.

New Policy Brief: Increasing and Modernizing the Sales Tax

2010-01-12T13:18:00.000-08:00

Washington has responded to our national recession thus far with
$3.5 billion in cuts. Facing a new $2.6 billion shortfall, even deeper
cuts are being proposed that would harm our ability to have an educated
workforce, a strong health care infrastructure, and economic security.

A more balanced approach is needed. One option is to modernize and
temporarily increase our state's major revenue instrument--the sales
tax—and pair it with the Working Families Tax Rebate.

For more detail on this proposal, see our new policy brief.

FY09-11 Budget Would Cut Economic Security Spending by 23%

2010-01-05T09:00:00.000-08:00

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Cuts in the Governor's supplemental budget proposal combined with already enacted spending reductions would amount to a 23 percent drop in funding for programs that help people meet their basic needs.

According to a new analysis by the Budget & Policy Center, the Governor's budget would reduce state funding for programs that provide child care assistance to working families, eliminate the General Assistance - Unemployable program, which provides financial and medical support to people who are unable to work due to disability, and more.

The table below details the cuts in the Governor's supplemental budget in the area of economic security.

FY09-11 Education Budget Cuts Would Total 14% - Higher Ed Gets 23% Hit

2010-01-04T09:00:00.000-08:00

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The Budget & Policy Center recently released an analysis of the Governor's supplemental budget proposal that includes $1.6 billion in cuts to vital state programs and services. To read the entire paper, click here.

In the area of education and opportunity, the total budget cuts, including the enacted cuts and the Governor's supplemental budget cuts for the 09-11 biennium, would amount to a 14 percent reduction in spending from preschool to universities. Higher education and worker training would be hit particularly hard, with a 23 percent cut in total.

The table below details the Governor's proposed budget cuts in efforts to improve education and opportunity in the state.

FY09-11 Budget Cuts to Health and Environment Would Total 15%

2009-12-31T09:00:00.000-08:00

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Yesterday the Budget & Policy Center released an analysis of the Governor's supplemental budget proposal that details cuts in health and the environment, education, and economic security. To read the entire report, click here.

Every area of the budget has been affected by the enacted budget cuts and will continue to suffer under the Governor’s supplemental budget proposal. Taken together, the enacted cuts and the Governor’s supplemental budget proposed cuts include a 15 percent reduction in efforts to maintain healthy people and a clean, safe environment.

The tables below detail the budget cuts in the area of healthy people and the environment. These cuts span public and environmental health; child and family services; health insurance access and affordability; and long-term care, developmental disabilities, and mental health. In the following days, we will continue to highlight specific cuts in areas throughout the Governor's budget proposal.

Governor's Budget Shows Need for Balanced Approach

2009-12-30T09:27:00.000-08:00

Today the Budget & Policy Center is releasing an analysis of Governor Gregoire's supplemental budget for the FY09-11 biennium. For the second year in a row, the Governor’s budget proposes deep cuts to core public services in response to the continuing economic and fiscal crisis in the state. Combined with the cuts already enacted in the current biennium, the Governor’s supplemental budget proposal would result in a nearly 14 percent reduction in the state’s investments in education, health care, and economic security.

The damage to our education system, health care infrastructure, public safety, and environmental protections would impact all Washingtonians. The Governor’s supplemental proposal would also create immediate harm for many. For example:

* Over 65,000 people will lose access to affordable health insurance;
* 16,000 children will lose health insurance coverage;
* Over 20,000 people who are unable to work due to disability will lose financial and medical assistance;
* 12,300 students from lower income families will lose an important source of financial aid;
* 10,000 working families per month will lose child care assistance;
* 1,500 three-year-olds will lose access to early learning opportunities.

Relying heavily on deep cuts represents one potential approach to the budget shortfall. Over the coming months other ideas will be presented, including more balanced approaches that propose raising revenue to avoid drastic cuts that will harm our state’s residents and economy.

Click here to read the entire paper and come visit us at our new web site, www.budgetandpolicy.org.

Failing to Extend Federal Recovery Funding will Cost Jobs

2009-12-18T08:43:00.000-08:00

Federal fiscal relief to states is set to expire at the end of 2010, but state fiscal shortfalls (including Washington State's) are expected to last into 2012 or longer. A new round of fiscal relief could help offset the damaging cuts proposed in the Governor's recent budget and provide a boost to the recovery. In order to be of use to Washington State, Congress must act soon so these funds can be included in the budget process.

In Washington State, there has been record drops in state revenue at the same time as dramatic increases in the need for public structures that provide health care, economic security, and job retraining. We are not alone. At least 38 other states have mid-year deficits that have opened up after balancing their budgets earlier this year (more detail). The actions that states must take to close these deficits could cost the economy as many as 900,000 jobs.

In the last round of deficit-closing, most states including Washington State relied heavily on federal fiscal relief. These funds helped stave off even deeper cuts in health care and education and provided a boost to the economy. The graph below shows how much of the total state fiscal gap was closed through federal recovery funds. It also shows how deficits continue into fiscal year 2012, after the federal relief has ended.

Governor's Budget would Reduce Opportunity for Students from Preschool to University

2009-12-16T14:02:00.000-08:00

The table below lists key budget cuts in education from the Governor's proposal released last week. (Click on it for a larger version.)

Governor’s Forthcoming Revenue Proposal Only a Drop in the Bucket

2009-12-11T07:35:00.000-08:00

In the 2010 legislative session, Washington State will have to address the continuing effects of the economic recession. Governor Gregoire has signaled a willingness to take a more balanced approach between cuts and revenue enhancements. In the context of the total size of the fiscal impacts of the recession, however, her revenue proposal will only be a drop in the bucket and will not save crucial services.

During the last session, the state cut $3.6 billion in public services—cuts that will hurt state priorities such as the quality of education at every level, the availability of affordable health insurance, and the quality of our health care infrastructure. There were a few pieces of legislation that raised revenue, but no meaningful tax increases.*

The Governor’s budget proposal that was released on Wednesday follows in the same vein, with no revenue increases and $1.6 billion in cuts. However, the Governor also announced that she would introduce a second budget in January that would include roughly $1 billion in cuts and $700 million in revenue increases.

The Governor's proposal is a start to the conversation, but a bolder, more balanced approach is needed.

First of all, the $700 million would do nothing to save programs that help working families pay for child care, prevent costly health problems by supporting at-risk pregnant women, and clean up toxic sites. These are just a few of many cuts proposed in the Governor’s first budget proposal that she has not signaled will be protected in her second proposal.

And even with the Governor’s forthcoming revenue proposal, the approach the state has taken to the total budget shortfall will still be severely imbalanced. Combining the Governor’s proposal with the previously enacted revenue policy, revenue increases would only make up eight percent of the total solution to an over $11 billion problem (see graph below). Cuts in core public services will total 40 percent.

* Revenue legislation passed in the 2009 session gave the Department of Revenue more oversight of purchases for resale, authorized multi-state lottery agreements, increased out-of-state auditing, and opened new liquor stores.

Governor's Budget will Create Costly Problems Down the Road

2009-12-10T09:12:00.000-08:00

The budget cuts released yesterday by the Governor include several items that would only end up creating more costly problems down the road. This approach will diminish the quality of life for thousands of Washingtonians now and in the future. It also defers higher costs to the state that will inhibit our economic recovery going forward.

Budget cuts to state investments that focus on prevention and other longer-term benefits include the following:

The budget would suspend all funding ($13.9 million) for non-emergency dental care for adult clients of Medicaid. This will have a direct impact on the health of 120,000 Washingtonians. Further, by not funding prevention and early treatment, the budget will likely increase the need for more expensive emergency dental care in the future.

The budget proposes eliminating all state-funded early learning programs for three-year olds from lower income families ($10.5 million), directly affecting 1,500 children. High quality early learning programs set the stage for success in life and are expected to confer economic benefits to the state in the future.

The budget significantly reduces funding for the Water Quality Program, a cut that will damage our ability to plan for healthy water. Ensuring the quality of our water through preventing and cleaning up water pollution has a direct impact on human and environmental health in communities throughout the state. Neglecting this government responsibility will be costly to reverse.

The budget would mean that over 65,000 people would lose health coverage by eliminating the Basic Health program ($160.6 million) and sharply limit the availability of childcare assistance ($88.5 million) to working families. State investments in health insurance and childcare help to encourage and support employment for families that are struggling to stay out of poverty.

Family preservation services seek to preserve or reunite families. They assist families in crisis by improving parenting skills and family functioning. Children are protected while being able to remain in their own families. The Governor’s budget would slash funding for these programs in half ($5.9 million).

The budget would eliminate funding ($28.1 million) that reduces premature births and infant mortality by providing support for lower-income women with at-risk pregnancies. Without these support services, families and the state will inherit more costly problems down the road.

An Imbalanced Budget

2009-12-09T10:39:00.000-08:00

Governor Gregoire released her 2010 supplemental budget proposal this morning. It includes $1.6 billion in cuts to essential public structures that promote health, education, economic security, and safe and thriving communities.

As required by law, the budget works inside existing revenue constraints. The Governor acknowledged her concern over this budget and plans to release a second budget that will include necessary revenue increases in order to avoid the most damaging cuts.

The Governor is right to be concerned about the effects this budget would have on Washington’s economy and people during these tough economic times. A balanced approach that includes meaningful revenue increases is a better alternative.

The budget released today proposes completely eliminating or suspending efforts including (this is only a partial list):

Basic Health, which provides affordable health insurance to 65,000 people.
General Assistance for the Unemployable, which provides help to people who are unable to work because of disability.
Health insurance coverage for 16,000 lower income children.
Benefits for Medicaid clients including vision, podiatry, physical therapy, occupational therapy, speech therapy, prescription drug assistance for elderly patients, hospice care, dental, and maternity support.
Funding to send more than 1,500 3-year-olds to preschool.
State support for all-day kindergarten in high-poverty areas.
Class size reduction efforts.
A program that equalizes school funding between wealthy and poor school districts.
Tuition assistance for over 12,000 lower-income students.

Stay tuned to schmudget for more analysis of the Governor’s budget.

Raising Taxes Would Prevent Economically Damaging Budget Cuts

2009-12-07T07:00:00.000-08:00

Later this week, the Governor is expected to release her supplemental budget to close the $2.6 billion deficit that is a result of the ongoing economic crisis. State lawmakers will have difficult decisions to make in the upcoming months, as they find a way to balance the state budget. We encourage them to take a balanced approach that includes revenue enhancements as well as spending reductions to protect essential public structures such as health care and education.

Raising revenue is a better alternative for our state economy than budget cuts. In a paper for the Center on Budget and Policy Priorities, Nobel Prize winning economist Joseph Stiglitz and Peter Orszag, now director of the Office of Management and Budget, wrote, “In the short run (which is the period of concern during a downturn), the adverse impact of a tax increase on the economy may, if anything, be smaller than the adverse impact of a spending reduction, because some of the tax increase would result in reduced saving rather than reduced consumption.”

Last February, the Budget & Policy Center released a letter signed by over 20 economists and public policy experts in Washington State urging lawmakers to take a balanced approach, including revenue increases, when addressing the state’s budget deficit. “Implementing deep cuts in government spending and declining to raise revenue through tax increases is not an effective strategy to guide Washington State out of this recession,” the letter states.

The letter remains a potent reminder to lawmakers to consider all options for balancing the budget in the challenging months ahead. We certainly hope that they will.

The Unprotected Budget

2009-12-03T17:04:00.000-08:00

Primarily as a result of the recession, Washington State, like most states, is now facing a large deficit ($2.6 billion). As we pointed out in our recent slideshow on the state economic and fiscal outlook, most of the budget is off-limits to cuts. This means that an all-cuts budget would require elimination of entire programs and services.

A new presentation by the Senate Ways and Means Committee staff provides more detail on this issue. They estimate that only $7.7 billion of the state budget is vulnerable to cuts in the coming session, with programs that provide economic security for lower income Washingtonians being especially exposed.

They break down the $7.7 billion into three categories: 1) timing (nearly $10 billion will already be spent by the time the new budget is signed), 2) legal restrictions such as state constitutional requirements, federal law, and debt and pension obligations, and 3) strings attached to the federal recovery funds.

The graph below breaks down the vulnerable part of the budget into program areas.

They also provide a possible scenario (see table below) to illustrate what $2.6 billion in cuts could mean. It includes elimination of financial aid, the Basic Health Plan, in-home services for clients with long-term care needs or developmental disabilities, and money that is used to equalize school funding between rich and poor districts.

EOI releases "The State of Working Washington 2009"

2009-12-01T09:58:00.000-08:00

Today the Economic Opportunity Institute is releasing its annual report, "The State of Working Washington." The 2009 edition focuses on economic security and the increasing difficulties that Washingtonians face to afford home ownership, health care, college tuition, and retirement savings. The report also highlights diminishing median family income over the last decade and reductions in employer provided benefits for many Washington workers.

To access the report, click here.

35 States Face New Budget Shortfalls, More Federal Fiscal Relief Needed

2009-11-24T11:50:00.000-08:00

A new analysis from the Center on Budget and Policy Priorities (CBPP) finds that 35 states – including Washington State – face new budget shortfalls in the current 2010 fiscal year as a result of the national recession.* Each of these 35 states had already acted to close significant budget shortfalls, but have seen new gaps open up as the economic outlook worsened over the summer and fall.

Even after the economy begins to recover, state fiscal problems are likely to linger for several years as a result of persistent unemployment. According to the report, “High unemployment and economic uncertainty, combined with household’s diminished wealth due to fallen property tax values, will continue to depress consumption, thus sales tax receipts also will remain low. These factors suggest that state budget gaps will continue to be significantly larger than in the last recession, and last longer.”

The graph below shows the total size of state budget gaps closed during the recession of the early 2000s and current recession. In aggregate, states are projected to face sizeable shortfalls at least through 2012.

It is important to note that the measures taken to fill state budget gaps earlier this year – that is, cuts in services and tax increases – would have been much more severe were it not for state fiscal relief provided as part of the federal American Recovery and Reinvestment Act (ARRA), also known as the federal stimulus act.

However, the state fiscal relief provisions of ARRA are scheduled to expire on December 31, 2010. Another recent CBPP analysis calls for extending these provisions into 2011. “By taking action now to extend ARRA assistance to states into 2011, lawmakers can reduce the drag that very large state budget cuts and tax increases would otherwise impose on economic activity and jobs and thereby give the recovery a better chance of gathering strength.”

* The size of Washington State’s deficit has grown significantly since this report went to press. It will be updated in the next edition.

New Slideshow on State Economic and Fiscal Outlook

2009-11-20T13:57:00.000-08:00

Watch the 12-minute slideshow (audio included) below to get a better understanding of the state economic and fiscal outlook, including ideas for a balanced solution to the budget shortfall.

Click on the green “play” button on the bottom to begin the narrated slide show. The large black arrow on the right-hand side just skips forward to the second slide.

Note: if you cannot see the presentation try using the Firefox browser instead of Internet Explorer.

The economy wreaks more havoc on the state budget

2009-11-19T10:39:00.000-08:00

Today’s updated revenue forecast only made it more essential for the governor and lawmakers to take a balanced approach between spending cuts and revenue increases this upcoming legislative session.

The new forecast lowered the state’s expected revenue by another $760 million, bringing the total shortfall to $2.6 billion.

The continually worsening outlook comes at a time when Washingtonians need public structures more than ever. With the unemployment rate at its highest level since 1984, the need for the health care system, education and job training, and income supports become more important than ever.

We need a balanced approach to dealing with impacts of the recession on the budget, one that combines careful cuts with smart revenue increases, such as a combination of a retail sales tax increase with the Working Families Rebate.

We’ll have a lengthier analysis of the economic and budget situation tomorrow.

Wait list for the Basic Health Plan now exceeds enrollment

2009-11-18T17:22:00.000-08:00

There are now more Washingtonians waiting to receive health coverage through the state’s Basic Health Plan (BHP) than are actually enrolled in the program. As of today, the number of people on the wait list for the program reached 79,013, while the number of enrollees stands at 78,830.

The Basic Health Plan provides affordable health insurance coverage for low-income adults in Washington State. According to the Bureau of Labor Statistics, nearly 130,000 jobs have been lost in Washington since the start of the current recession, which began in December of 2007. The BHP provides a crucial backstop for Washingtonians that have lost employer-sponsored health coverage.

Though demand for BHP coverage continues to rise, monthly premiums and annual deductibles charged to enrollees are scheduled to increase sharply in January as a result of budget cuts enacted earlier this year.

Revenue Forecast Tomorrow Will Show Growing Deficit

2009-11-18T14:24:00.000-08:00

The Economic and Revenue Forecast Council will release tomorrow their latest projection of how much revenue the state will raise in the 2009-11 biennium. It will likely be the ninth straight revenue forecast that has brought bad news to Washington State, revealing a deficit that could be as high as $2.5 billion.

Over the last six months, the ongoing economic recession has pummeled away at our state’s budget outlook. Last May when the Governor signed the current budget, lawmakers expected an ending fund balance of nearly half a billion dollars plus $250 million in the rainy day fund for the 2009-11 biennium. Since then, the recession and other factors have instead combined to create a $2 billion shortfall.

This forecast is particularly important because it will set the parameters for the Governor’s budget proposal, which is expected to be released in about three weeks. Because of the worsening outlook, the Governor’s budget will likely propose deep cuts in core public structures, on top of those already passed last session. These cuts come at a time when Washingtonians can least afford them.

It's time to talk about a more balanced solution that includes revenue in order to protect our essential investments in public priorities.

Stay tuned for new analysis of the state budget and possible solutions in the coming days.

BPC hires new Communications Manager

2009-11-10T15:12:00.000-08:00

Hi. After 19 years in journalism - most recently at the Seattle Post-Intelligencer -- I'm joining the Washington State Policy & Budget Center, as the Communications Manager. I'm looking foward to sharing with you all the excellent policy analysis the analysts here at the center do.

I wrote extensively about politics during my journalism career, covering such issues as welfare and health care reform as state government for The Seattle Times. I also covered City Hall and the monorail measure for the P-I. I also founded a news site, seattlepostglobe.org, with other former P-I journalists.

New BPC report: Federal Estate Tax Supports Public Priorities

2009-11-10T14:47:00.000-08:00

The federal estate tax provides billions a year for essential priorities like education, the environment and national security. It’s also the most progressive of federal taxes, applying to only the wealthiest two of every 1,000 estates.

But misconceptions surround the tax. And efforts are afoot in Congress that would weaken it.

The tax has already been steadily weakened since the Bush tax cuts in 2000, as rising exemptions have meant that less of an estate’s value is subject to the tax. In 2000, the exemption was $675,000. Only two of every 100 estates nationally were subject to the tax. The exemption is now $3.5 million for an individual, and only one in every 500 estates across the country owes any tax.

While, the rhetoric is that the estate tax hits the little guy, the reality, according to an analysis by the Tax Policy Center (TPC), is this: only about 110 small farms and busi¬nesses across the country would owe any estate tax in 2011, if the 2009 parameters were made permanent. In Washington State, only two small family farms or businesses would owe any estate tax in 2011, under those parameters.

Now some proposals in Congress would weaken the tax even more. According to an analysis by the Washington State Budget & Policy Center, only the wealthiest estate owners would stand to benefit from a proposal by Senators Blanche Lincoln and John Kyl (along with a similar proposal from Representative Shelley Berkley in the House).

For estates valued at $20 million, it would mean an average tax cut of $3.5 mil¬lion. This would cost the nation $153 billion more in lost revenue and increased interest on the higher national debt than a more fiscally responsible proposal by President Obama.

Read the entire report here:

DSHS Budget Proposal would Harm Health Care, Cost Federal Funding

2009-11-04T14:25:00.000-08:00

Even with the specter of I-1033 behind us, the state budget situation is bleak because of the lingering impact of the economic recession. The deficit facing the Governor as she prepares her budget could be as high as $1.8 billion.

A recent memo from the Department of Social and Health Services' Health and Recovery Services Administration—written in response to the Governor’s request for budget reduction proposals—helps illustrate the size of the problem. Acknowledging that “these are serious cuts, and cuts on top of cuts,” the Department proposed deep reductions in key health care programs:

The largest reduction ($69.2 million) would come by eliminating important benefits for lower income adults receiving Medical Assistance, including maternity support services, hospice, hearing, non-emergent dental, vision, podiatry, physical therapy, occupational therapy, speech therapy, interpreters for medical services, and Medicare Part D (prescription drugs) copays. Funding for school-based Medicaid services would also be eliminated ($5.6 million).

The proposal would eliminate access to state programs that provide health care to lower income children between 205 percent and 300 percent of the federal poverty line, taking a step backward on the state’s commitment to “Cover All Kids” in order to save $11.6 million.

Reductions in mental health care ($12.9 million) would include eliminating funding for the Program for Adaptive Living Skills and eliminating funding for community support services for individuals discharged from state hospitals.

The proposal would also eliminate drug and alcohol treatment for all low-income adults not enrolled in a separate DSHS program ($5.5 million).

There are also $8.3 million in administrative cuts and staff reductions included in the proposal.

The reductions in state spending are only part of the story. These proposed cuts would cost the state an estimated $101.4 million in federal matching funds.

24 of 31 Local Health Jurisdictions Cut Public Health Programs

2009-10-22T14:50:00.000-07:00

Yesterday the Budget & Policy Center issued a report detailing the impact of budget cuts on public health in the state. The report was co-released by the Washington State Public Health Association and the Washington State Nurses Association.

The Budget & Policy Center and the Washington State Association of Local Public Health Officials independently surveyed local public health agencies to get a sense of the impact of recent budget cuts on public health programs and services, staff, and funding. The Budget & Policy Center received responses from 15 of 35 local health jurisdictions; WASLPHO received answers from 31.

As the map below indicates, 24 of 31 local health jurisdictions, which are the primary providers of public health services, have cut vital programs as a result of budget cuts. These include services to support the health of lower income pregnant women, vulnerable children, and seniors through prevention and education programs.

Other key findings from the report include:

-- Lay-offs of public health professionals in 23 of 31 LHJs

-- Drops in funding for 24 of 31 LHJs, for example, over $780,000 in Spokane, $1.4 million in Snohomish, and $1.75 million in Thurston Counties

Budget Cuts Have Negative Impact on Public Health Infrastructure

2009-10-21T15:10:00.000-07:00

The Budget & Policy Center released a new report today on the impact of state and local budget cuts on public health in Washington State. Public health programs help to promote healthy communities and lifestyles, reduce the spread of communicable diseases and provide rapid responses to public health emergencies.

Local health jurisdictions (LHJs) across the state are feeling the effects of millions of dollars in reduced public health funding from the state and local governments.

The Budget & Policy Center and the Washington State Association of Local Public Health Officials independently conducted surveys of officials at local health jurisdictions--the primary providers of public health services in the state--to get a clearer picture of the impact of these budget cut decisions.

The paper, which was co-released with the Washington State Public Health Association and the Washington State Nurses Association, discusses the findings, including details of cuts in programs, lay-offs in staff, and reductions in funding.

New CBPP Report: I-1033’s Problematic Measure of Inflation

2009-10-16T14:57:00.000-07:00

Initiative 1033 proposes to limit revenue collections at the state, county, and city levels according to a formula based on the rate of population growth plus inflation. A key feature of Colorado’s TABOR amendment, this formula is deeply flawed because it fails to keep pace with the costs of providing essential public services such as health care and education. Under I-1033, the inflation component of this formula would limit revenue growth according to the “implicit price deflator for personal consumption expenditures” (IPD).

A new analysis from the Center on Budget and Policy Priorities shows that using the IPD to restrict revenue growth would do great harm to basic public structures in Washington. The report explains that the IPD only reflects changes in costs faced by consumers; it does not reflect the ongoing costs of providing state and local public services. The costs of education, for example, rise faster than the general rate of inflation. Education accounts for only two percent of expenditures for the typical consumer. For the state government, however, K-12 and higher education account for 53 percent of expenditures in Washington. As a result, restricting state and local revenues to growth in the IPD would lead to severe cuts in education and other core public services.

The CBPP report also shows that the IPD is even more restrictive than the measure of inflation that was used in Colorado under the TABOR amendment. Under TABOR, state and local spending was restricted to the rate of inflation as measured by the Denver Consumer Price Index (CPI). The graph below shows that from 1993 to 2005 – the period in which TABOR was in effect – the CPI grew at an annual rate of 3.4 percent while the IPD averaged 2.2 percent.

Yet even under the faster-growing CPI, TABOR lead to devastating cuts in education, health care, and other vital services in Colorado, prompting voters to suspend the amendment in 2005. According the CBPP report, “if Colorado had been operating under an I-1033-style IPD-based formula, the state would have had to cut services by an additional 10 percent beyond what the state enacted under the actual CPI-based formula.”

The view the entire report, click here.

Special Series: The Impact of I-1033 on Yakima County

2009-10-14T16:19:00.000-07:00

I-1033 would do great harm to basic public services in Yakima County. An analysis of historical revenue data from the Yakima County Auditor’s Office shows I-1033 would have cost the county nearly $45 million, had it been in place from 1996-2008. In particular, investments in public safety and criminal justice would likely have been significantly reduced, as 80 percent of the current operating budget in the county is dedicated to these essential services.

The graph below shows how I-1033 would have lead to progressively higher revenue losses each year from 1996 to 2008 in Yakima County. In 2008 alone, the county would have lost $5.9 million, or about 11 percent of the general fund budget.

To put this into context, $5.9 million in the 2008 Yakima County general fund budget would have been equivalent to:

Two-thirds of expenditures on the Sheriff’s Office ($8.3 million);

Eighty-four percent of the combined budgets for the District Court, the Superior Court, and the county clerk ($7.0 million);

More than the combined general fund expenditures on indigent defense, juvenile justice, and the Washington State University extension program ($5.0 million).

As a result of the ongoing national recession, revenue collections among local governments in Washington have fallen dramatically in the past year. In Yakima County, officials had to draw down reserve funds and eliminate more than 30 vacant positions in order to keep the 2009 budget in balance.

Revenue collections continue to decline in Yakima County, however. The county also faces rising costs and increased demand for services. For example, the county jail has experienced a recent influx of new inmates which drives up the cost of providing corrections services. Together, lower revenues and increased costs are resulting in a $3.3 million deficit going into the 2010 budget cycle in Yakima County. To fill this gap, county officials may have to lay off as many as 60 county government employees.*

It is important to note that 2009 would become the basis for all future budgets in Yakima County under I-1033. As a result, all of the cuts enacted this year and in 2010 will be locked into place, making it impossible to restore services even after the economy recovers.

Editor’s Note on Methodology: There has been much debate about which revenue sources would be subject to the population-growth-plus-inflation cap under I-1033. For this analysis, we assumed that general fund revenue -- including general fund tax revenues, revenues from permits and licenses, and revenues derived from charges for government services -- would have been subject to the I-1033 limit. It is important to note that expanding the scope of revenues subject to the I-1033 limit would substantially increase the estimates of annual revenue losses as well as expand the scope of county services negatively impacted under the initiative.

*David Lester, “Budget gap may force Yakima County to make 60 layoffs,” Yakima Herald-Republic, October 10, 2009.

Special Series: The Impact of I-1033 on Clark County

2009-10-13T11:58:00.001-07:00

This year, Clark County officials have struggled to maintain basic county services amidst the deepest national recession since the 1930s. If I-1033 is enacted, spending on law and justice, public safety, and other essential county services would be frozen at 2009 levels. And in future years, Clark County would face rising revenue shortfalls, forcing deep cuts in these services.

Clark County would have lost more than $115 million had I-1033 been in place from 1995-2008, based on an analysis of historical general fund revenue data from the Clark County Office of Budget and Information Services. As the graph below illustrates, during the 2007-08 biennium the county would have lost about $30.3 million (11 percent of the general fund budget).

In the 2007-08 Clark County general fund budget, $30.3 million would have been equivalent to:

Nearly 60 percent of expenditures on the Sheriff’s Office ($51.5 million);

Eighty-seven percent of the budget for the county jail ($34.7 million);

More than the combined expenditures on parks and public works ($7.0 million), community corrections programs ($11.6 million), and indigent defense services ($9.6 million).

The national recession has caused severe budget deficits, impacting local governments throughout Washington. During the current crisis, Clark County officials have struggled to keep the county budget in balance without reducing essential services or laying-off scores of county government employees. So far, this has been accomplished through the use of across-the-board budget cuts and one-time measures -- such as extending the lives of county patrol cars and diverting revenues from the county road fund.

Yet even with these actions, Clark County continues to face a projected $12.7 million budget deficit for the remainder of the 2009-10 biennium.* With few remaining options, county officials may be forced to completely eliminate services in order to fill the current gap. Under I-1033, the 2009-10 budget would form the basis for all future budgets in Clark County and it would be virtually impossible to restore services even after the economy recovers.

Editor’s Note on Methodology: There has been much debate about which revenue sources would be subject to the population-growth-plus-inflation cap under I-1033. For this analysis, we assumed that general fund revenue -- including general fund tax revenues, revenues from permits and licenses, and revenues derived from charges for government services -- would have been subject to the I-1033 limit. It is important to note that expanding the scope of revenues subject to the I-1033 limit would substantially increase the estimates of annual revenue losses as well as expand the scope of county services negatively impacted under the initiative.

* Clark County Office of Budget, General Fund 2009-10 Projections, October, 2009.

Special Series: The Impact of I-1033 on Spokane County

2009-10-12T08:47:00.000-07:00

Under I-1033, Spokane County would face erosion in basic public services. An analysis of historical revenue data from the Spokane County Auditor’s Office shows the initiative would have cost the county about $105 million in general fund revenues, had it been in effect from 1996 to 2008.

The graph below illustrates the annual impact. Under the initiative, Spokane County would have lost $16.6 million in 2008 alone.

To put that in perspective, in Spokane County $16.6 million was more than the combined general fund expenditures on the District Court ($5.8 million), the Superior Court ($6.6 million), and the county medical examiner ($1.4 million) in 2008. In relation to other services, $16.6 million was equivalent to half of the general fund expenditures for the Sheriff’s Office ($33.2 million), 90 percent of the combined budgets of the county prosecutor and public defender ($18.8 million), and 85 percent of all general fund spending on county jails ($19.6 million).

Under I-1033, 2009 would form the base year for future county budgets in Washington. However, the current recession has caused serious revenue shortfalls in Spokane County and throughout Washington. To balance the 2009 budget, Spokane County officials have already used about $3.4 million in budget reserves, enacted another $3 million in spending cuts, and instituted a hiring freeze that eliminated 56 county government positions. But despite these actions, the county currently faces a projected $12.5 million budget shortfall in 2010.* If enacted, I-1033 would make it impossible for Spokane County to restore services to pre-recession levels.

Editor’s Note on Methodology: There has been much debate about which revenue sources would be subject to the population-growth-plus-inflation cap under I-1033. For this analysis, we assumed that general fund revenue -- including general fund tax revenues, revenues from permits and licenses, and revenues derived from charges for government services -- would have been subject to the I-1033 limit. It is important to note that expanding the scope of revenues subject to the I-1033 limit would substantially increase the estimates of annual revenue losses as well as expand the scope of county services negatively impacted under the initiative.

* Jim Camden, "Budget woes may force Holmberg's closer," The Spokesman-Review, August 4, 2009.

Special Series: The Impact of I-1033 on Snohomish County

2009-10-09T12:35:00.000-07:00

I-1033 would be a disaster for Snohomish County, requiring deep cuts in essential public services. If it had been put in place in 1996, the initiative would have led to severe revenue shortages in each subsequent year. In total, Snohomish County would have lost about $245 million in general fund revenues between 1996 and 2008 under the initiative (see graph below).

In 2008 alone, Snohomish County would have lost about $33.5 million -- 16 percent of the general fund budget. By way of illustration, $33.5 million in the Snohomish County general fund budget would have been equivalent to:

Seventy-three percent of the general fund spending for the Sheriff’s Office ($46.1 million);

More than the combined general fund budgets for the District Court and the Superior Court ($31.6 million);

Ninety-one percent of spending on the Department of Corrections ($37 million);

Three times the general fund budget for the Parks and Recreation Department ($10 million);

Twice the amount of general fund spending on the Prosecuting Attorney ($15.2 million).

In total, 70 percent of the general fund budget in Snohomish County was devoted funding for the law and justice services in 2008. Deep cuts in these services and others would have been unavoidable under I-1033.

More troubling, I-1033 would be implemented during the deepest recession of the post-World War II era. Under the initiative, 2009 would become the base for all future budgets in Snohomish County. The current recession has already taken a heavy toll on the current county budget. Last year, in crafting the 2009 budget, Snohomish County lawmakers faced a budget deficit totaling $21 million. To fill this gap, Snohomish County lawmakers implemented a hiring freeze and eliminated dozens of vacant county government positions.

In early 2009 the economy worsened, forcing the county to close an additional $6.7 million shortfall in April. To fill this gap, the county extended the hiring freeze and instituted a series of 11 unpaid furlough days, amounting to a four percent pay cut for affected county government workers. Yet, the budget situation in Snohomish County remains grim. To balance the next year’s 2010 budget, Snohomish County Executive Aaron Reardon recently proposed increasing the number of furlough days to as many as 15, and decreasing pay for jail workers and Sheriff’s deputies.

Editor’s Note on Methodology: There has been much debate about which revenue sources would be subject to the population-growth-plus-inflation cap under I-1033. For this analysis, we assumed that general fund revenue -- including general fund tax revenues, revenues from permits and licenses, and revenues derived from charges for government services -- would have been subject to the I-1033 limit. It is important to note that expanding the scope of revenues subject to the I-1033 limit would substantially increase the estimates of annual revenue losses as well as expand the scope of county services negatively impacted under the initiative.

Special Series: The Impact of I-1033 on Counties

2009-10-08T10:08:00.000-07:00

Washington State’s 39 counties play key roles in our public infrastructure, including public safety, public health, transportation, parks, and libraries. The recession has hit county budgets hard and many are facing deep budget cuts.

If Initiative 1033 were to pass, it would have a disastrous impact on county governments and on the services they provide, at a time when they can least afford it. According to the Office of Financial Management, counties stand to lose a total of $694 million by 2015, as shown in the graph below.

Tomorrow, schmudget will begin a series outlining the potential impacts of I-1033 on individual counties. We'll begin tomorrow with Snohomish County.

New Census Poverty Data Reveal Deep Disparities throughout Washington

2009-09-29T14:52:00.000-07:00

According to new data from the U.S. Census Bureau, nearly 730,000 Washingtonians lived in poverty in 2008. In total, 11.3 percent of the state’s population had incomes at or below the federal poverty line last year. The overall poverty rate in 2008 remained statistically unchanged from the previous year, signaling that the data does not capture the full impact of the recession. Data for 2009, when the economic crisis worsened dramatically, is likely to show a disturbing increase in the number of Washingtonians living in poverty.

Poverty among Minority Communities in Washington

Poverty rates varied significantly across communities in Washington, with certain minority groups and counties experiencing higher rates compared to the general population. For example, last year members of Native American, African American, and Hispanic households were more than twice as likely to be impoverished compared to the population as a whole. The graph below shows that the poverty rate among Native American households stood at 26.1 percent. Similarly, African American and Hispanic communities experienced poverty rates of 22.9 and 23.5 percent, respectively. At the same time, Asian (9.2 percent) and White (9.9 percent) households were significantly less likely to be in poverty compared with the general population.

Poverty by County

Poverty rates in 2008 also varied significantly among Washington’s 19 largest counties – those with populations above 65,000. Compared to the statewide average, sparsely-populated counties tended to see higher poverty rates. The graph below shows that the poverty rate was highest in Franklin County (20.5 percent), followed by the counties of Yakima (18.3 percent), Grant (15.7 percent), Whatcom (14.7 percent), and Spokane (13.7 percent).

Conversely, residents in the counties of Snohomish (7.9 percent), Island (8.0 percent), King (9.1 percent), and Clark (9.6 percent) were significantly less likely to live in poverty compared with the statewide general population.

The poverty rate was not significantly different from the state average in Benton, Chelan, Clallam, Cowlitz, Grays Harbor, Kitsap, Lewis, Pierce, Skagit, and Thurston counties.

2009 Data Likely to Be Much Worse

Today’s 2008 data does not capture the full impact of the current recession. While the unemployment rate in Washington averaged 5.3 percent in 2008, that number jumped to 9.2 percent by August 2009. Overall, 66,000 jobs have been lost in Washington since the start of 2009. Nationwide, the recession has taken a greater toll on communities of color. In the U.S., the unemployment rate among white workers was 8.9 percent in August; but among African American and Hispanic workers, the rates was 15.1 and 13.0 percent, respectively.

UPDATE: Editorial Board Discussions in Seattle, Yakima, and Olympia

2009-09-29T11:46:00.000-07:00

Update: also watch our discussions with editorial boards from the Yakima Herald-Republic and the Olympian.

I met with the Seattle Times editorial board yesterday to discuss I-1033. The other discussants were Tim Eyman, the initiative’s sponser, and Phil Bussey from the Seattle Chamber of Commerce.

You can watch the entire video (an hour long) here or click below to watch a three-minute clip of Mr. Bussey explaining why the Seattle Chamber of Commerce is opposed to I-1033.

In Franklin and Yakima Counties, 28 Percent of the Population Lacked Health Insurance in 2008

2009-09-22T14:45:00.001-07:00

According to new data from the U.S. Census Bureau, 13.1 percent of Washington’s population went without health coverage last year. Among the state's 19 largest counties – those with populations over 65,000 – there was significant variation, with more than one of every four Washingtonians in Franklin County and Yakima County lacking health insurance.

Counties with larger populations generally experienced lower uninsured rates compared to the state average. Yet even in King County, one of every 10 residents (10.6 percent of the population) was uninsured in 2008. In addition to King County, Island County (9.5 percent), Thurston County (10.9 percent), and Spokane County (11.8 percent) all experienced uninsured rates significantly lower than the statewide average. In Benton, Clark, Kitsap, Lewis, Pierce, Snohomish, and Whatcom counties the uninsured rate was about the same as the state average.

Of Washington’s most populous counties, Franklin County and Yakima County had the highest uninsured rates in 2008, which stood at 27.7 percent and 27.5 percent, respectively. Residents in the counties of Grays Harbor (16.0 percent), Clallam (16.6 percent), Cowlitz (16.7 percent), Skagit (16.7 percent), Chelan (19.7 percent), and Grant (20.5) were also significantly more likely to lack coverage compared to those in rest of the state.

While today’s data sheds much-needed light on the disparities in health coverage throughout Washington, next year’s data are likely to be far worse. In 2008, the unemployment rate averaged 5.3 percent in Washington. However, the economy deteriorated dramatically in 2009. As of August, the unemployment rate in Washington stood at 9.2 percent, and nearly 66,000 jobs have been lost in the state since January. A BPC analysis of the census health coverage data in 2007-08 shows the employer-based coverage weakened significantly during that period – a trend that will certainly continue throughout 2009.

For information on the uninsured rate among children in Washington State counties, click here to view an analysis from Washington Kids Count and the Children's Alliance.

Editor’s note: The Census Bureau originally planned to release single-year estimates of all indicators included in the 2008 American Community Survey (ACS) today. Due to a coding error, however, ACS poverty estimates will not be released until September 29, 2009. That morning, the Budget & Policy Center along with Washington Kids Count will release an analysis of the latest poverty data from the ACS.

Nearly 1 in 6 Washington Workers Were Underemployed in First Half of 2009

2009-09-18T09:00:00.000-07:00

In the first half of 2009, 16.2 percent of Washington’s potential workforce was underemployed each month on average. Two years earlier, before the recession, the underemployment rate was 9.4 percent.

The underemployed includes workers who:

Are unsuccessfully looking for work (the unemployed),

Are marginally attached to the labor market, such as workers who have given up looking for work because they have become discouraged,

Are working part-time for economic reasons, such as an inability to find fulltime work.

Struggling to Make Ends Meet

2009-09-17T12:43:00.000-07:00

Today, the Northwest Area Foundation released the findings from a national survey of 4,000 adults called "Struggling to Make Ends Meet." The findings are easily accessed using an interactive tool. Findings from Washington State include:

31% of respondents reported that they or a family member lost a job in the last 12 months.
35% had their hours (or those of a family member) cut at work in the last 12 months.
61% report cutting back on spending as a result of the recession.

Other topics include awareness of available services, ability to pay for basic needs, the scope of and explanations for hardship in local communities, and views about elected officials.

More Bad News for State Revenue

2009-09-17T10:58:00.000-07:00

Today’s new revenue forecast from the Economic and Revenue Forecast Council widens the current state fiscal gap by $238 million.

The balance sheet included in the forecast shows the general fund deficit for the current biennium to be $430 million with a balance of $245 million in the rainy day fund. Those numbers do not include an adjustment for the most recent caseload forecast. Including the caseload forecast would increase the deficit by about $250 million.

While the sizable current deficit is a matter of concern, of greater concern are:

The 2011-13 biennium, which could face a deficit reaching into the billions of dollars when federal recovery funds being used to support education, health care, and public safety are no longer available.
The potential passage of I-1033, which could cost the state nearly $6 billion by 2015.

Details:

The $238 million in decreased revenue expectations breaks down as follows:

$109.6 million is due to a weaker forecast for consumer spending.
$46.1 million is due to a State Supreme Court case which will lower B&O collections.
$82 million is due to lower-than expected revenue collections since the last forecast.

Washington Families Risk Losing Housing Assistance

2009-09-16T08:52:00.000-07:00

Thousands of low income families in Washington could face painful reductions in housing assistance if Congress fails to approve additional funding for a critical federal voucher program. The Housing Choice Voucher Program provides rental support for about two million low income families throughout the United States. The program, however, faces a large budget shortfall for the remainder of 2009. Left unfilled, this shortfall could force hundreds of state and local housing agencies, serving 500,000 families, to curtail or eliminate rental assistance administered through the voucher program. Here in Washington, as many as 11,550 families could see reductions in housing vouchers.

According to a new analysis from the Center on Budget and Policy Priorities (CBPP), the shortfall in the voucher program immediately threatens rental assistance in about 400 state and local housing agencies. Cumulatively, these agencies will need an additional $130 million in funding for vouchers in 2009 to avoid drastic cuts in rental assistance and to restore assistance where cuts have already been made.

As of May 2009, shortfalls among housing agencies in Washington totaled nearly $1.6 million, leaving vouchers for 404 families completely unfunded.

The CBPP report goes on to show that states will have few good options should congress fail to approve additional funds for the voucher program. These options include:

Denying vouchers to eligible families on waiting lists, even when slots become available;

raising rents on voucher families;

reducing rents paid to property owners; and

terminating vouchers for participating families.

Income Inequality Grew Steadily from 2002-07

2009-09-14T11:11:00.000-07:00

The top one percent of wealthiest households in the U.S. saw almost unprecedented income growth between 2002 and 2007, with income rising ten times faster than it did for the bottom 90 percent of households. As a group, the richest one percent of households saw their incomes grow by 62 percent during this period, after adjusting for inflation. By comparison, the bottom 90 percent of Americans (those with annual incomes below $110,000) experienced income growth of only four percent.

According to a new analysis of IRS data by economists Thomas Piketty and Emmanuel Saez (summarized by CBPP), income growth skewed in favor of the wealthy during the 1920’s, but then turned towards the middle class during the post-WWII era. As the graph below shows, in the early 1980’s income growth again began to concentrate in the upper tiers of American households.

Income gains have been even more pronounced among those at the very top of the income scale. The CBPP report shows that incomes in the top one-tenth of one percent of U.S. households grew by about 94 percent ($3.5 million per household) from 2002 to 2007.

The report does not show the impact of the current economic recession. Even though it is expected that income concentration will fall in 2008-09, once the recovery begins economists predict income inequality trends will continue.

Public Insurance Keeps Uninsured Numbers from Rising, New Census Data Shows

2009-09-10T09:50:00.000-07:00

New Census data shows that while the overall share of Washingtonians who lacked health insurance went down between 2000-01 and 2007-08, employer-provided coverage weakened significantly over that time. Public coverage, that is Medicaid, increased during that time, offsetting the decreases in employer-based insurance.

National data shows that in 2000-01, 13.1 percent of Washingtonians lacked health insurance. This number dropped to 11.8 percent by 2007-08. Over that time, the table below shows that employer-sponsored health insurance fell from 67 percent of the population in 2000-01 to 64.6 percent in 2007-08. At the same time, the share of the population covered by Medicaid jumped from 12.1 percent to 13.6 percent.

Before the Census data was released, the Budget & Policy Center, Washington Kids Count, and others expected there would be a decrease in the share of Washingtonians with health insurance between 2000-01 and 2007-08. The news that the share of the population with health insurance actually went up, highlights the importance of publicly provided health care coverage.

During the last legislative session in Washington, lawmakers decided to cut funding for the state’s Basic Health Plan. This will result in a loss of coverage for Washingtonians who do not receive insurance through their employer. At the same time, the unemployment rate in the state has been rising, which means many people who did have employer-sponsored insurance will no longer have coverage. Because of these trends, we anticipate that a drop in the share of Washingtonians with health insurance will become evident in the near future.

Editor’s note: On September 22, 2009 the Census Bureau will release state-by-state estimates of poverty, median income, and health insurance coverage for 2008 from the American Community Survey (ACS). The ACS has a very large sample size, allowing for single-year estimates at the state and county levels. On the 22nd, the Budget & Policy Center and Washington Kids Count will jointly release an analysis of poverty, median income, and health coverage in Washington using the latest ACS data.

The Children's Alliance along with Washington Kids Count posted an analysis of the latest census data looking specifically health coverage among children in Washington. Consistent with the general population, they find that Washington's S-CHIP program (Apple Health for Kids) has kept number of children without health insurance from climbing in 2007-08.

New Census Health Insurance Data Likely to Show Declines in Health Coverage throughout Washington State

2009-09-09T12:36:00.000-07:00

Tomorrow, the U.S. Census Bureau will release national and state health insurance data for 2007-2008. The data will provide a preliminary glimpse of the impact that the current recession has had on families in Washington and throughout the nation. The data will not however, capture the full impact of the current economic crisis which deepened dramatically in 2009.

The new Census data is expected to show significant increases in the share of the population that is uninsured since the early 2000’s to 2007-2008. The loss of employer-sponsored health insurance is likely to be the dominant driver behind this trend. During the current recession, the economy sunk rapidly in 2009 and many more people lost their jobs and their health insurance. So while tomorrow’s release will signal trouble, next year’s 2008-2009 health coverage data will undoubtedly be far worse.

For example, as the graph below shows here in Washington the unemployment rate jumped from an average of 5.3 percent in 2008 to 9.1 percent by July 2009. Since the start of 2009, over 64,000 jobs have been lost in the state. As a result, next year’s 2008-2009 data will show a large drop in the number of Washingtonians enrolled in employer-sponsored health coverage.

Stay tuned to schmudget tomorrow when the Budget & Policy Center in conjunction with Washington Kids Count will post an analysis of health coverage trends in Washington using the new Census data. Our analysis will highlight changes in the share of the population without health insurance over time and will detail changes in employer-sponsored coverage and public coverage in Washington State.

Editor’s note: Tomorrow’s release will also include updated data on poverty and median income. To obtain state-level estimates of these measures, however, the Census Bureau recommends using data from a different survey, the American Community Survey (ACS). The latest ACS data for 2008 will be released on September 22, 2009. That morning, the Budget & Policy Center and Washington Kids Count will post analysis of the ACS data on poverty, median income, and health coverage in Washington State.

Toxic Twins Part 4: TABOR Did Nothing for Colorado's Economy

2009-09-03T16:04:00.001-07:00

Supporters of initiatives like I-1033 argue that rigid public spending limits can be a boon for state economies. In Colorado, however, TABOR had no positive impact on the state’s economy. In fact, after enacting TABOR, employment growth in Colorado slowed relative to other states in the region. Worse, following the last recession employment recovered much more slowly in Colorado compared to neighboring states.

The table below shows that employment in Colorado grew at an annual rate of only 0.2 percent between 2001 and 2006. At the same time, the median annual growth rate among the remaining seven states in the mountain region was 9.3 percent.

For more information on how TABOR adversely impacted core public services in Colorado, see our recent report, Toxic Twins: I-1033 Mirrors Colorado’s Corrosive TABOR, coauthored with the Colorado Fiscal Policy Institute.

Editor's note: This is the final post in series about TABOR's adverse effects on essential public services in Colorado. Previous posts in the series detail the sharp declines in education funding, health care services, and transportation infrastructure that ocurred in Colorado under TABOR.

Toxic Twins Part 3: Colorado’s Transportation Infrastructure Deteriorated Under TABOR

2009-09-03T14:11:00.000-07:00

I-1033 will lead to severe deterioration in public structures that are vital to Washington’s future prosperity, much like what happened with Colorado’s TABOR amendment. Our latest report, coauthored with the Colorado Fiscal Policy Institute, details TABOR’s disastrous impact on education, health care, communities, and transportation. This post highlights some of our findings on the serious erosion in Colorado’s transportation infrastructure as a result of budget shortfalls created by TABOR.

Under TABOR, Colorado was unable to make adequate investments in roads, bridges, and other forms of transportation infrastructure. In 2007, the state ranked 48th among all 50 states in spending as a share of personal income on highways. The result:

About 40 percent of the state’s roads were rated poor in 2006.

Over 100 bridges in Colorado have been found to be structurally deficient.

Congestion on Interstate 70 has been estimated to cost Colorado’s economy about $839 million each year.

To learn about TABOR’s adverse effects on other core public services – such as health care and education -- click here to view the entire report.

Editor’s note: This is the third post in a series about the sharp declines in core public services that occurred in Colorado as a result of the TABOR amendment. The next and final post in this series will discuss economic growth in Colorado during the period in which TABOR was active (1992-2005).

State Policy Fellowship Program Seeks Applicants

2009-09-03T11:30:00.000-07:00

The Center on Budget and Policy Priorities is sponsoring in coordination with the State Fiscal Analysis Initiative (SFAI), the State Policy Fellowship Program which is currently seeking highly-qualified candidates to serve two years as entry-level analysts. The position would entail working within a state policy organization belonging to the SFAI network, such as the Washington State Budget & Policy Center, or at the Center’s state fiscal division in Washington D.C.

Fellows will gain hands-on education and experience while working alongside experts in the field of state policy to analyze the impact of state budget and tax policy choices on low-income residents and promote positive reforms. The program offers a competitive salary with health benefits and features professional development opportunities.

For more information, click here.

Toxic Twins Part 2: TABOR Caused Sharp Declines in Health Care Funding

2009-08-27T14:26:00.000-07:00

Our latest report, co-authored with the Colorado Fiscal Policy Institute, details TABOR’s impact on education, communities, health, and transportation infrastructure. This post highlights some of our findings regarding TABOR’s disastrous effects on public health programs in Colorado.

In Colorado, TABOR greatly compromised a critical part of the public safety net – health care services. From 1992 to 2005, TABOR-induced shortfalls forced deep cuts in health care services throughout Colorado. The result:

Between 1992 and 2004, the share of lower income children with no health insurance doubled from 16 to 32 percent, making Colorado the worst in the nation by this measure.

In 2002, the state could no longer afford basic vaccines and had to suspend the requirement that all students be vaccinated against common diseases such as tetanus, diphtheria, and whooping cough.

In 2003, budget restrictions forced the state to temporarily stop the enrollment of children in the children’s health program and suspend the prenatal program.

TABOR had numerous adverse effects on health care and other public services in Colorado. For more detail, please click here to view the entire report.

Editor’s note: This post is the second in a series about the sharp declines in Colorado’s core public services that occurred as a result of the TABOR amendment. There will be two future posts: The next post will cover TABOR’s effects on transportation infrastructure; the final post will discuss economic growth in Colorado during the period in which TABOR was active.

Toxic Twins: I-1033 Mirrors Colorado's Corrosive TABOR

2009-08-26T11:38:00.000-07:00

To understand how Tim Eyman’s I-1033 would undermine public investments and our economic recovery in Washington, look no further than Colorado. Our new report, co-authored with the Colorado Fiscal Policy Institute finds that Colorado's TABOR amendment greatly undermined that state's capacity to maintain core public services such as education and health care. Initiative 1033, which will appear on the ballot in Washington State this November, possesses the same fundamental characteristics as TABOR and would have a similar impact on Washington.

Editor's note: This post is the first in a series about TABOR's impact on services and public priorities in Colorado. Future posts in this series will detail TABOR's impact on other crucial services -- including health care and transportation infrastructure. The final post in this series will discuss economic growth in Colorado while TABOR was in effect.

To view the full report click here.

TABOR's Impact on Education and Opportunity

Under TABOR, funding on K-12 and higher education declined substantially, leading to harmful budget cuts throughout the education system. As a result:

The state fell from 35th to 49th in the nation in spending on K-12 education as a share of personal income.

Average teacher’s salaries fell from 30th to 50th in the nation compared to pay in other occupations.

Higher education spending per resident student declined by 31 percent after adjusting for inflation, from $5,188 to $3,564.

The shortfalls created by TABOR adversely impacted Colorado’s education system in numerous other ways. For more information on how TABOR led to steep declines in education funding throughout Colorado, view the entire report by clicking here.

Budget & Policy Center Launches Facebook Page

2009-08-19T13:28:00.000-07:00

The Washington State Budget & Policy Center is pleased to announce the launch of our new Facebook page. Please become a fan and stay apprised of our latest media work, public appearances, policy briefs, and blog posts. We hope you will join us and share our work with your colleagues and friends!

Senate Climate Bill Should Redirect Resources from Business to Consumers

2009-08-18T14:00:00.000-07:00

The federal government is working to pass climate legislation that would combat global warming by reducing the nation’s emissions of greenhouse gases. One impact of the proposals to cap emissions would be an increase in the cost of fossil fuel energy and energy-related goods. Low and moderate income consumers would be hit harder by these increased costs because they spend a bigger share of their income on necessities like energy than wealthier households do.

The House bill, which passed in June, sets aside 15 percent of the value of emissions allowances (the permits that allow companies to pollute) to provide financial relief to low-income consumers through an energy refund. Here in Washington State, there are 1.2 million people living below 150 percent of poverty* who could potentially benefit from the energy refund.

However, CBO has found that over 60 percent of the relief the bill would distribute through utilities would go to businesses, rather than individual households. Businesses would likely retain this relief as added profit benefiting high income owners and shareholders rather than pass it on to consumers in the form of lower prices for their products. Thus the graph below shows that the House bill would benefit higher income households, as a percentage of income, more than those in the middle.

According to this paper by the DC-based Center on Budget and Policy Priorities, the Senate bill which has yet to be voted on, should build on the House approach by adopting the consumer provisions and redirecting resources provided through utility companies for their business and industrial customers instead to moderate income households.

*Calculated from American Fact Finder ACS 2007 table B17002

Budget & Policy Center Urges Cantwell To Offset Consumer Costs in Climate Bill

2009-08-13T13:28:00.000-07:00

Yesterday, the Budget & Policy Center’s Communication and External Relations Director Aiko Schaefer joined members of the environmental, business, labor and faith communities in a meeting with Senator Maria Cantwell to convey the urgency of passing climate change legislation this year.

The Budget & Policy Center has been working with a broad group of stakeholders to ensure that climate legislation serves to control greenhouse gas emissions and develop renewable energy technologies while also offsetting any increased energy costs to consumers.

In addition to discussing the concerns of consumers in climate change policy with the senator, Aiko also delivered this letter, signed by many of our partners, highlighting the importance of mitigating the impact of any legislation on low and moderate income households.

Stay tuned for more updates and analysis as the climate change debate in DC continues.

UPDATE: Official State Analysis Shows High Cost of I-1033

2009-08-11T12:06:00.000-07:00

Initiative 1033 would negatively impact the ability of the state, counties, and cities to fund public priorities such as education, economic security, health care, and community development. This would come at a time when Washington is struggling to recover from a severe recession.

A new analysis by the Office of Financial Management estimates the fiscal impact of the initiative on the state, counties, and cities for calendar years 2010 through 2015 (shown in the graphs below). The results emphasize the fact that the impacts of I-1033 will compound from year to year.

At the state level, the cumulative impact is expected to be nearly $6 billion over the six years:

Counties stand to lose a total of $694 million in capacity to support essential public services by 2015:

Cities stand to lose $2.1 billion cumulatively:

BPC Report Shows I-1033 Undermines Public Priorities

2009-08-05T13:20:00.000-07:00

A new paper by the Budget & Policy Center finds Initiative 1033 would impose strict spending limits on state and local governments resulting in sharp reductions in public investments in education, community development, health care, and economic security. By restricting resources, I-1033 would dramatically weaken the state's ability to fund important public priorities and would diminish the quality of life for all Washingtonians.

I-1033 would:

Sharply limit public investments over time

Lock in the current budget cuts and increase the deficit

Exacerbate the effects of economic downturns

Be fiscally irresponsible

To read the entire paper, click here.

KIDS COUNT Data Center: Higher Education and Future Prosperity

2009-08-03T14:00:00.000-07:00

Editor’s Note: This post is the final in a series on the launch of the new KIDS COUNT Data Center in Washington State. The series is written by our colleagues at Washington KIDS COUNT at the University of Washington. The work of KIDS COUNT intersects well with efforts of the Budget & Policy Center to highlight the importance of state investments.

Higher education reaps numerous benefits for individuals and society including higher lifetime earnings, better health, and more civic participation. In Washington, less than 30 percent of adults over 25 have obtained a post-secondary degree.

Within the state, there are regional disparities in educational attainment. As the map below shows, in some urban counties like King and Whitman, close to half of adults (44 and 48 percent, respectively) have earned a bachelor’s degree. In contrast, in 13 of the state’s rural counties, less than one in five adults have completed a BA.

Find hundreds of indicators of child and family well-being for your county at the new KIDS COUNT Data Center.

KIDS COUNT Data Center: High School Graduation Rates Influences Economic Security

2009-07-30T12:00:00.000-07:00

Editor’s Note: This post is Part Four of a series on the launch of the new KIDS COUNT Data Center in Washington State. The series is written by our colleagues at Washington KIDS COUNT at the University of Washington. The work of KIDS COUNT intersects well with efforts of the Budget & Policy Center to highlight the importance of state investments.

Post-secondary education and training are the primary pathways by which young adults gain the knowledge and skills to be successful in the labor force and achieve economic security. Earning a high school diploma is critical to embark on these pathways, yet a sizable proportion of youth in Washington are at risk of not graduating.

Overall, 28 percent of Washington’s ninth graders in 2007 did not graduate within four years. On-time graduation rates among students of color are particularly alarming. As the graph below indicates, 50 percent of American Indian students and 40 percent of Hispanic and Black students did not graduate on-time in 2007. Not graduating on-time puts students at risk for not graduating at all – the extended graduation rate for ninth graders in 2007 was just 78 percent, only slightly higher than the on-time graduate rate (72 percent).

Students who do not receive post-secondary education or training are more likely to have lower incomes or become unemployed as adults. In Washington, 89 percent of children with parents who did not graduate from high school live in lower income households.

Find graduation data and other indicators of child and family well-being for your county at the new KIDS COUNT Data Center.

KIDS COUNT Data Center: Child Poverty and Unemployment

2009-07-29T11:30:00.000-07:00

Editor’s Note: This post is Part Three of a series on the launch of the new KIDS COUNT Data Center in Washington State. The series is written by our colleagues at Washington KIDS COUNT at the University of Washington. The work of KIDS COUNT intersects well with efforts of the Budget & Policy Center to highlight the importance of state investments.

In yesterday’s post, we presented regional data on children living in poverty in Washington State. However, this data does not include the impact of the current economic recession. Typically, unemployment rises when the economy shrinks. Previous economic downturns show that poverty closely tracks unemployment. By analyzing the relationship between unemployment and poverty in the past three recessions, we can estimate where child poverty is headed in Washington State.

The line graph below shows the relationship between unemployment, poverty for all ages, and child poverty over time. Data for total poverty and child poverty are only available for the years shown and the shaded areas indicate periods of recession. During each recession as unemployment has gone up, child poverty has also increased. For example, in the recession starting in 2001 when unemployment surpassed seven percent, child poverty jumped from 11 to 13 percent and an additional 33,000 children entered poverty by 2003.

In our recent State of Washington’s Children report, Poverty and the Future of Children and Families in Washington State, Washington KIDS COUNT used data from the last three recessions to estimate that an additional 37,000 children would enter poverty this year as unemployment reached 9 percent. Since the release of that report, unemployment has continued to climb. We have updated our estimate to predict a total of 60,000 children entering poverty by 2010.

Tomorrow on schmudget we will discuss the importance of education for a child’s future economic security.

Make your own customized line graphs and charts with hundreds of indicators of child and family well-being at the new KIDS COUNT Data Center.

KIDS COUNT Data Center: Child Poverty Across the State

2009-07-28T09:42:00.000-07:00

Editor’s Note: This post is Part Two of a series on the launch of the new KIDS COUNT Data Center in Washington State. The series is written by our colleagues at Washington KIDS COUNT at the University of Washington. The work of Kids Count intersects well with efforts of the Budget & Policy Center to highlight the importance of state investments.

Economic security is vital for healthy growth and development of children. Compared to children living in poverty, those with economic security are more likely to perform well in school, have good health, attend higher education, compete successfully in the labor market, and become engaged citizens. When children are able to realize their full potential, everyone benefits – families, communities, and the state as whole.

Unfortunately, there are many children in Washington State who live in families where a lack of economic security limits their potential. Prior to the recession, 15 percent of children (226,000) in Washington lived in families with incomes below the official poverty line, which is $22,050 for a family of four. Rising unemployment due to the current economic recession will likely send many more children in the state into poverty. That data is not yet available.

The highest rates of poverty in Washington occur for children who are less than five years old, live with a single parent, or are children of color. The map below also shows significant disparities in child poverty by county, with rural counties having the highest poverty rates in the state.

Tomorrow we will share data from the KIDS COUNT Data Center on the relationship between unemployment and the loss of economic security in families with children.

Strength in Numbers: The New KIDS COUNT Data Center

2009-07-27T14:24:00.000-07:00

Editor’s Note: This post is Part One of a series on the launch of the new KIDS COUNT Data Center in Washington State. The series is written by our colleagues at Washington KIDS COUNT at the University of Washington. The work of KIDS COUNT intersects well with efforts of the Budget & Policy Center to highlight the importance of state investments.

Washington KIDS COUNT is pleased to announce the new KIDS COUNT Data Center. The KIDS COUNT Data Center is a new, on-line resource that contains hundreds of measures of child well-being covering national, state, and county information. The KIDS COUNT Data Center is updated throughout the year and is a powerful resource for policy makers, practitioners, and the media. The Data Center allows you to:

Rank states, cities, and other geographic areas on key indicators of child well-being;

Generate customized maps and trend lines that show how children are faring and use them in presentations and publications;

Feature automatically updated maps and graphs on your own website or blog.

This week on schmudget, Washington KIDS COUNT will be highlighting indicators of child and family well-being from the Data Center to accompany the release of the 2009 KIDS COUNT Data Book: Counting What Counts.

Check out the new KIDS COUNT Data Center at http://datacenter.kidscount.org/wa

UPDATE: Basic Health Waiting List Continues to Grow

2009-07-20T14:45:00.000-07:00

Last month we posted on the increasing numbers of people on the waiting list for the state Basic Health Plan. As the revised graph below shows, this trend continues. In June there were 31,275 people on the list. Today, there are 38,662.

Revenue Implications of Federal Estate Tax Reform

2009-07-13T16:41:00.000-07:00

The federal estate tax provides a substantial revenue stream to the government that could be a key source of funding for health care reform, education and drawing down our federal deficit. Paid by only one quarter of one percent of all estates, it is the most progressive of all federal taxes.

Since 2001, revenue from the estate tax has shrunk continuously due to tax cuts instituted by the Bush Administration. According to current law, the federal estate tax is set to expire entirely in 2010 and then resume at 2001 levels the following year. Prior to this happening, it is expected that Congress will pass new legislation that sets a standard exemption level going forward.

In anticipation of the debate, the President has proposed keeping the estate tax within the 2009 parameters. This allows for an individual exemption of $3.5 million and taxes eligible estates at 45 percent. The White House has also proposed indexing the exemption levels for inflation, which would allow the real value of the exemption to be maintained over time.

Not everyone agrees. Others have called for raising the individual exemption to $5 million and lowering the tax rate to 35 percent. But a new paper released by the Center on Budget and Policy Priorities estimates that instituting these parameters would cost the federal government $118 billion* between 2012-2021, when compared to the White House proposal.

Now is not the time to reduce government revenue. Because of the severity of the current recession, the federal government must make major investments to help spur recovery. Any estate tax revenue lost over the next ten years will likely result in other tax increases or significant reductions in key investments. And attempts to offset reductions in the estate tax with other tax increases would represent a tax shift away from the wealthiest families in the country to families with more moderate means.

*This figure includes $91 billion in lost revenue and $27 billion in increased interest payments on the debt.

Initiative 1033: Experience in Colorado Shows Harmful Effects

2009-07-09T09:00:00.000-07:00

In 1992, Colorado passed a state constitutional amendment similar to 1033. Known as TABOR, the Colorado initiative restricts spending in state, county, and city governments to the previous year’s level plus population growth and inflation. This formula has proven to be insufficient to fund the ongoing cost of government and has created a permanent revenue shortage.

A growing body of evidence shows that TABOR has contributed to a significant decline in Colorado's public services. This includes:

Colorado declined from 35th to 49th in the nation in K-12 spending
Higher education funding dropped by 31 percent
Colorado fell to near the bottom of national rankings in providing children with full, on-time vaccinations
The share of low-income children in the state who lacked health insurance doubled, making Colorado the worst in the nation by this measure

The effect of 1033 may be worse for Washington than it was in Colorado because it would go into place during a fiscal crisis. Again, Colorado provides an apt example: the state's economy was slow to recover following the 2001 recession with a job growth rate at a meager .2 percent. Other surrounding states had job growth rates that were much higher.

Below is a video that describes the experience of TABOR for Colorado voters and lawmakers.

Initiative 1033: Harmful Effects Worsen Over Time

2009-07-08T09:00:00.000-07:00

As we’ve discussed in previous posts, Initiative 1033 would have a harmful effect on the ability of state and local governments to fund investments in education, health, public safety, and economic security. Importantly, this restricting effect will grow bigger over time making it increasingly difficult to fund these and other public priorities.

Take for example, the effect on the state budget if 1033 had been put into place in 1995. Economists measure the size of state budgets as a share of total personal income. This provides insight on the share of total resources that are used for public investments.

Even without 1033, the share of personal income in the state general fund has declined between 1995 and 2011, from seven percent to 5.5 percent. If 1033 had been in effect in 1995, there would have been a much more dramatic drop in the state general fund, from seven percent down to just over four percent. As the graph below shows, this means we would have had $6 billion less to spend in the current biennium than we actually had.

This $6 billion amounts to the entire two-year state budget for higher education, natural resources, public health, early learning, corrections, and the Basic Health Plan.

Initiative 1033: Harms Our Ability to Recover from Economic Downturns

2009-07-07T08:00:00.000-07:00

Initiative 1033 would dramatically limit state and local spending starting in 2010. It is particularly troubling that this initiative comes during a time of economic recession when revenue is especially low. The spending cap imposed by 1033 would be based on the previous year’s revenue with a flawed formula for annual increases using population growth plus inflation.

It would also be tough to recover from future economic downturns. According to the 1033 proposal, if revenue drops below the spending limit in a given year, the following year’s limit is based on the lower number. The state, county, or city permanently loses that spending capacity.

To illustrate this point, imagine a scenario in which the spending limit grows according to the 1033 formula over a period of three years. In the fourth year, the economy falters and revenue falls below the limit at the beginning of the three year period. Then it starts to grow again, but starting at the lower rate. As the graph below shows, the limit is permanently lower. Short of a voter-approved tax increase, revenue cannot catch up to previous levels.

In our current economic climate, the state anticipates raising $1.04 billion more revenue in 2011 than it did in the previous year. If 1033 is passed by voters this November, we would only be able to use $471 million. The other $571 million would be required to go to a property tax cut in 2011-13.

To view a comprehensive slideshow about 1033, please click here.

Budget & Policy Center's Remy Trupin Discusses Flaws in 1033 on KUOW

2009-07-06T13:44:00.000-07:00

Today our Executive Director Remy Trupin was invited to speak on the harmful effects of Initiative 1033 on KUOW's The Conversation. During the program, Remy said that 1033 would be:

1. Fiscally irresponsible because it would make it very hard for state, county, and city governments to set aside money for a rainy day.

2. He also noted that the timing of the initiative would be especially damaging, as it comes during an economic recession when revenue is down.

3. Finally, Remy pointed out that the state of Colorado had a terrible experience with a similar initiative that led to dramatically diminished public services and programs.

To listen to the program, please click here.

I-1033 Would Limit Government's Ability to Save for a Rainy Day

2009-07-02T11:53:00.000-07:00

One of the lessons of the last year is that we should have been building more robust rainy day funds before the economy went sour. Hopefully, it is a lesson we will remember when the economy starts to rebound.

I-1033 will make that difficult. It sets a strict limit on the amount of state, county and city revenue that can be spent. Any money above that limit must be used for property tax cuts; it cannot be used to build savings for the next downturn.

At the state level, I-1033 would exempt constitutionally-mandated deposits into the rainy day fund from the calculation of the limit. However, deposits above the minimum would not be exempt.

At the city and county level, there does not appear to be any exception made for rainy day funds.

To view our slideshow that provides more details on I-1033, click here.

Initiative 1033: Severely Constricts State and Local Spending

2009-07-02T11:43:00.000-07:00

Today, Tim Eyman filed Initiative 1033, a measure that would severely limit the amount of state, county, and city revenue that could be spent starting in 2010. Any revenue raised above the limit would be required to go to reducing property taxes in the following year.

According to the initiative, the spending limit would grow annually by a formula adjusting for inflation and population growth. This formula is flawed in a number of ways. First, it adjusts for inflation using a measure of the change in costs of goods and services consumers buy, not those purchased by government. Secondly, the change in population growth only looks at changes in the general population and does not account for special populations, such as the rising numbers of retiring baby boomers.

Importantly, I-1033 leaves no room for unanticipated costs, such as those that come with natural disasters, unfunded mandates, or emerging public priorities.

But even with regard to maintaining current commitments, I-1033 will fail to keep up with spending needs. The graph below illustrates the discrepancy between state estimates for rising costs of maintaining current investments and the spending limit that would be imposed by I-1033.

In upcoming blog posts, we will look at why it would be especially damaging to enact this initiative during an economic recession, the effect on the state budget over the long term, and the negative impact a similar measure has had in the state of Colorado.

To view our slideshow that provides more details on I-1033, click here.

I-1033: What's At Stake for Washington State

2009-07-01T17:00:00.000-07:00

I-1033 is a ballot initiative expected to qualify for the November 2009 ballot. Our analysis finds that it would:

Constrict the ability of state, county, and city governments to make essential public investments.
Exacerbate the effects of economic and fiscal downturns.
Increase the current deficit by half a billion dollars.

Watch the slideshow below for more details:

Stay tuned to schmudget for continued analysis.

(You can access individual images from the slide show by clicking in the lower left corner.)

Increases in Caseload Forecast Will Cost $250 Million

2009-07-01T15:22:00.000-07:00

Today, the Washington State Caseload Forecast Council (CFC) released its revised caseload projections for the 2009-2011 biennial budget. The Office of Financial Management (OFM is the Governor's budget office) predicts that CFC's current caseload forecast will increase the cost of maintaining current budget commitments by $250 million in the current biennium. Combined with the recent revenue forecast, the State is hundreds of millions short of the revenue needed to maintain public structures.

The rise in the caseload forecasts reflect the growing need for public services during the current economic recession. The projections below are based on OFM data:

Health care: State-funded health care for children and families will require an additional $183 million. To maintain mental health services, costs are projected to increase by $29 million and costs of serving more residents in nursing homes and in home community-based services are projected to jump by almost $9 million.

Economic security: Increases in the General Assistance caseload will require an additional $12 million.

Education: Changes to the K-12 caseload amount to approximately $10 million. Most of this increase is due to an additional 916 students from the time of the budget's adoption. The state expects less private school enrollment and a larger birth cohort which will increase the number of students entering school.

With the fiscal year starting today, the deep cuts in the state budget from the last legislative session will begin to be felt in these and other state investments.

Increasing Access to Healthy Food in Washington State

2009-06-29T14:07:00.000-07:00

A report issued today by the Washington State Budget & Policy Center finds that residents in lower income, rural parts of the state face geographic barriers that make it harder to shop at grocery stores. As a result they often turn to corner markets or gas station mini marts for food where there are fewer healthy options. Access to affordable, healthy food is essential for the health and well-being of Washington families.

The report finds that residents who live in rural communities must travel 15 miles or more to reach a full-service grocery store. In contrast, metropolitan area residents frequently live within one mile of a full-service grocery store. In rural parts of the state, more families also live in poverty and struggle to have enough money to buy food. The cost of gas to make a longer trip to a grocery store, as well as the time and reliable transportation it takes to get there, make it harder to support a healthy diet.

In addition to state and federal programs that are designed to help lower income households maintain a healthy diet, marketplace initiatives such as the Healthy Corner Store Network can help increase access to healthy food for Washington families in all areas of the state.

Increased TANF Caseloads Across the Country Linked to Rising Unemployment

2009-06-24T16:18:00.000-07:00

Welfare caseloads are on the rise across the country, as they have been here in Washington State. According to a new survey conducted by the Wall Street Journal and the National Conference of State Legislatures, 23 of the 30 largest states in the nation saw caseloads increase over the past year for Temporary Assistance to Needy Families (TANF).

One explanation for the increase in TANF caseloads is the rising unemployment rate. As people’s unemployment benefits run out and the labor market remains constricted, some are turning to welfare as a stopgap until the economy improves.

As the WSJ map below shows, the biggest increases in TANF caseloads are in states with some of the worst joblessness. For example, Oregon’s caseloads were up by 27 percent in May from the previous year. At the same time, the state’s unemployment rate had risen to 12.4 percent. Here in Washington State, TANF caseloads jumped by more than 18 percent between May 2008 and 2009. Unemployment steadily climbed during that time period to 9.4 percent.

Will Basic Health Become Unaffordable?

2009-06-19T06:13:00.000-07:00

The budget signed by the Governor last month included a 43 percent cut in Basic Health, a program that provides health insurance to lower income Washingtonians. The Health Care Authority (HCA) was given the unenviable task of figuring out how to make the cuts happen.

The HCA considered a number of approaches that would have directly and dramatically reduced the number of people enrolled in the plan. Finally, they settled on sharp increases in premiums and deductibles.*

This option may have some advantages over the alternatives, but it does not mean that people won't end up uninsured. The cost increases are likely to make enrollment unaffordable for many.

The table below compares the current and proposed premiums for a single enrollee aged 40-55 (premiums are on a sliding scale based on income and age). The highest increases are for those earning between $20,036 and $21,660. Their premium would raise by $780, requiring them to spend 11 percent of their annual income on premiums.* Premiums for individuals under $13,538 would double. In addition to the increases shown in the table, the annual deductible will rise by $100.

If Basic Health is made unaffordable, it will no longer serve its purpose as a source of health insurance for people who lack other options, including the 30,000 people currently on the waiting list. That purpose cannot be maintained under a 43 percent budget cut; it will require bold action by state policymakers.

*The Health Care Authority has also identified 5,000 people on the progam who also receive benefits through Medicaid and another 3,000 who the agency believes may qualify for the federal program. They will be transitioned off Basic Health and onto Medicaid.

New Revenue Forecast Emphasizes Need for Real Solutions

2009-06-18T11:56:00.000-07:00

Today, the Economic and Revenue Forecast Council announced that the state general fund will have a $195 million deficit at the end of the 2009-11 biennium. This means that state revenue projections have fallen even further since the Governor signed the budget in May, thanks to the continuing sluggish economy.

The Governor’s budget office has suggested that the executive branch may take quick action to cut the budget in order to cover the gap. This would be consistent with the path the state has taken so far—relying almost completely on cuts to balance the budget.

The state needs a more balanced approach to the problem of inadequate revenue.

In the short term, there is enough money in the rainy day fund to cover the gap. There is no reason not to seek access to this money. This is exactly what the rainy day fund is for.

In addition, we must get serious about expanding revenue. There will be two more revenue projection updates between now and when the next legislative session meets in January. The state of the economy could very well get worse than it is now. It is worth noting that we are also likely looking at a 2011-13 biennium with insufficient revenue and no federal recovery funds to save the day.

In the meantime, the effects of the unprecedented budget cuts already enacted are starting to be felt. These cuts to state investments will do lasting damage to the progress we have made in previous years in creating a just and prosperous state for all.

Near the end of this year’s legislative session, a public conversation began about revenue reform. There was a proposal for a temporary sales tax that would have protected essential health care programs. It would have been paired with a Working Families Tax Rebate to provide a tax cut for lower income families. There was also a proposal for an income tax that would have ensured long-term improvements to our revenue system.

When the session ended, so did the conversation. It’s time to pick it back up because we are not out of the woods yet.

Structural Deficit: The Shift in Consumption from Goods to Services

2009-06-16T14:30:00.000-07:00

As mentioned in our previous post on the structural deficit, Washington relies heavily on the retail sales tax to raise revenue for important public investments. The retail sales tax applies primarily to the sale of goods, taxing few services.

The failure to tax services is one of the reasons that our revenue structure cannot keep pace with the natural growth in the economy. As the graph below shows, Americans have shifted their consumption patterns from spending 49% of their total expenditures on goods in 1983 to only 40% in 2008.

In light of this shift to a service economy, Washington should consider expanding the sales tax base to include a broader selection of services. Not only would taxing services yield much-needed income for the state, it could help to reduce the year-to-year volatility of sales tax collections and make the state sales tax system more fair.

Unemployment Rate Understates Problem

2009-06-09T16:35:00.000-07:00

The statistic most often used to illustrate weakness in Washington State’s labor market is the unemployment rate, or the share of the labor force that is unsuccessfully looking for work. At the national level, the Bureau of Labor Statistics publishes a more comprehensive measure often called the “underemployment rate.” That measure includes people who have stopped looking for work because they have become discouraged. It also includes people who are working part-time because they can’t find fulltime work. During a recession, the gap between the two rates widens because of the increased difficulty of finding employment.

The Bureau of Labor Statistics doesn’t publish state-level underemployment rates, but a recent post by Joe Turner got me wondering what was happening with underemployment in Washington State. So I dug into the microdata and the results are shown below. (April is the most recent month available.)

Structural Deficit: E-Commerce Sales Tax Revenue Losses Are Growing

2009-06-08T08:53:00.000-07:00

Washington relies heavily on the sales tax to raise revenue for important public priorities. The growth of untaxed electronic commerce transactions, known as e-commerce, result in increasing revenue losses for the state.

When a customer purchases a taxable item in a store, sales tax is paid to the retailer who in turn, sends its tax collections to the state or local government. If the purchase is made online through a store that has a physical presence in the state, an equivalent "use tax" is also collected and remitted.

However, if the purchase is made through a vendor that is not located physically in Washington, the customer still owes the use tax, but the vendor is not required to collect the tax. Instead, it is the customer’s responsibility to pay the tax directly to the state or local government. It is estimated that 25 percent of taxes due on e-commerce transactions go uncollected.

As a result, not only does the state lose revenue, but local merchants start out with a pricing disadvantage because they must charge local sales tax while many interstate merchants don't have to. And the sales tax becomes even more unfair to lower income families that pay sales taxes when they shop in stores that more affluent households avoid when they shop online.

In an April report, Donald Bruce and William Fox of the University of Tennessee predict the inability to collect taxes on internet purchases will cost Washington State about $1.3 billion in lost revenue between 2007 and 2012. (See graph) These losses are equal to the estimated value of the taxes due, in this case $5.4 billion, minus the estimated value of those that are collected, $4.1 billion.

This problem is not unique to Washington State – the report forecasts nationwide states will experience up to $13 billion in e-commerce revenue losses annually by 2012.

Washington has joined a national interstate tax compact, called the Streamlined Sales and Use Tax Agreement, to simplify and standardize the way states tax goods. The goal of the Agreement is to demonstrate to Congress that the burden for interstate sellers has been reduced sufficiently so that states ought to be authorized to require all large merchants to collect every state's sales and use taxes. Legislation to provide this authorization is expected to be reintroduced in this session of Congress within the next one to two months.

Basic Health Waiting List Growing by 386 People Per Day

2009-06-04T10:40:00.001-07:00

The recently enacted state budget made deep cuts to the Basic Health Plan (BHP), which is the state program that provides affordable managed care health insurance to lower income Washingtonians who do not qualify for Medicaid. Because of the cuts, the number of people receiving health insurance through the plan will be reduced by 36,000.

But disenrolling participants is only one part of the picture. The budget cuts are coming at a time when the need for the BHP is growing dramatically. As shown below, between the end of the legislative session and yesterday, the number of people on the waiting list for BHP has grown by over 14,000 people. That’s an average of 386 per day.

This year the state will take an enormous step backwards in our commitment to ensuring quality and affordable health insurance for all. It is a step that could have been ameliorated by a modest sales tax increase.

The Final Budget Cuts, Part Four: Economic Security

2009-06-03T09:43:00.000-07:00

State investments in economic security ensure that people can survive difficult financial times and take steps to improve their quality of life. Families succeed when parents are secure in their ability to provide basic necessities for their children. Workers prosper when workplaces are safe and financial protections exist in cases of injury or job loss. And everyone in state benefits when people can meet their basic needs and find meaningful employment.

Even in times of prosperity, we all face the risk of job loss, disability, or family crisis. When the economy is strained, public investments in economic security matter even more.

WorkFirst: Federal funding is expected to pay for the growing need for WorkFirst, which provides temporary assistance for lower income families. There will be a reduction in state funding of $69 million through administrative reductions and "caseload management."

General Assistance-Unemployable: GA-U is a program that helps adults who are temporarily unable to work due to disability. The Governor's budget proposed eliminating GA-U altogether, but the enacted budget makes only a $25 million cut that will be achieved by aggressively facilitating transfers to federal programs and a change in how earned income is calculated.

Policy Analyst Job Opening

2009-06-02T11:18:00.000-07:00

The Budget & Policy Center has an opening for a Policy Analyst/Senior Policy Analyst. This fulltime position is temporary through the end of 2009 with the possibility of becoming a permanent position contingent on funding.

Responsibilities
Responsibilities include but are not limited to the following:

Monitor and analyze state policy developments and economic trends.
Contribute to research, writing, and project management of the Progress Index, a long-term project to measure the state’s progress toward broadly-shared goals.
Write policy briefs, blog posts, and longer research reports that include original quantitative analysis.
Work in a team to formulate progressive policy alternatives and solutions.
Build and maintain databases of fiscal and economic data.
Represent the Budget & Policy Center in speaking engagements, stakeholder meetings, and in the media.
Assist in coordination and planning of meetings and events.

Requirements

Expertise in an area such as health care, tax policy, housing, or education; ability and willingness to develop broad expertise in other areas.
Advanced degree in public policy, economics, or other relevant field.
3+ years of academic or professional experience involving quantitative analysis. Proficiency with Microsoft Excel required, experience with statistical software such as Stata or SPSS preferred.
A commitment to accuracy and attention to detail; ability to work independently and as part of a team.
Excellent written and oral communications skills, including the ability to communicate technical information clearly to non-policy oriented audiences both in writing and through oral presentations.
Dedication to the mission of the Budget & Policy Center.

Compensation
WSBPC offers a competitive salary commensurate with experience and a benefits package that includes employee and dependent health and dental coverage, a 403(b) retirement plan, and personal, vacation, sick, and parental leave.

Apply
Send a cover letter, resume, relevant writing sample, and three references to analysis@budgetandpolicy.org. Writing samples should demonstrate an ability to write concisely and clearly and should be appropriate for publication. Please refer to our website for examples. The position is open until filled. Candidates are encouraged to apply as soon as possible. Applications will be accepted until June 17, 2009.

The Washington State Budget & Policy Center is an equal opportunity employer.

The Final Budget Cuts, Part Three: Thriving Communities

2009-06-01T13:01:00.001-07:00

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.

This year's budget process resulted in significant budget cuts in areas that contribute to thriving communities, particularly natural resources and public safety. (Click on the table below to see a larger version).

The Final Budget Cuts, Part Two: Education and Opportunity

2009-05-29T11:09:00.000-07:00

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.

This year's budget process resulted in significant budget cuts in education, as shown in the table below (click on it to see a larger version).

In K-12 education, the largest cuts were to two voter-approved initiatives (I-728 and I-732). I-728 called for funding to school districts for specific quality improvements such as class size reduction, extended learning, early learning, or professional development. I-732 called for a cost of living adjustment for education professionals. This cut will diminish the state's ability to attract and retain high quality teachers, a proven factor in improving student performance in school. A number of other education reform efforts were also suspended, eliminated, or reduced.

Higher education will also suffer under the new budget. Despite federal stimulus efforts, community and technical colleges will have $226 million less in state support during a time when the need for workforce training is growing dramatically. In addition, the university system will receive $384 million less in state support. Tuition will rise and services will be cut as a result.

These cuts will harm the long-term economic competitiveness of our state as well as the availability of quality education for all of Washington's students.

* Note: Federal stimulus funds not directly affecting the near-general fund balance are not included.

When Will the Recession Be Over?

2009-05-28T14:04:00.000-07:00

According to the Economic and Revenue Forecast Council, the end of the recession is in sight--as early as later this year. That's good news.

However, the end of the recession only means the economy as a whole will be growing again. It will take some time before the labor market rebounds. According to the Forecast Council, the unemployment rate in Washington will rise through the third quarter of 2010 and then only drop slightly.

The green line below shows one measure of the size of the state economy--personal income (an estimate of the total income received by all Washingtonians from all sources), adjusted for inflation. The purple line shows the projected unemployment rate.

The Final Budget Cuts: Part One

2009-05-28T09:52:00.000-07:00

Last week on schmudget we posted on how we got to an $8 billion state budget deficit, what lawmakers did to address it, and the role of federal stimulus money in shoring up the state economy.

In the next few days we will take a close look at the $6.7 billion in state budget cuts that lawmakers enacted. We will explore the state budget in each of four core value areas: Education and Opportunity, Healthy People and Environment, Thriving Communities, and Economic Security. These values make up the framework for our Progress Index report and represent a shared vision for the state.

The table below sums up the total budget cuts signed into law by the Governor last week in both the current and upcoming biennia. It also shows the federal stimulus funding used to offset the budget cuts.

Stay tuned to schmudget for more detail. First up: Education and Opportunity.

The State Budget and Federal Recovery Funds

2009-05-22T12:07:00.000-07:00

This post contains corrected numbers.

Deep cuts in state budgets during a recession can have a significant harmful impact on the economy. In recognition of this fact, the federal government passed the American Recovery and Reinvestment Act of 2009 (ARRA), which includes significant fiscal aid to Washington State.

The recently enacted state budget relies heavily on ARRA funding to partially offset the effects of cuts in health care, education, public safety, and economic security.*

Health care**
The largest component of federal stimulus funding is an increase in federal funding for Medicaid, the primary source of public health insurance for lower income families. The increased federal contribution allows lawmakers to cut state spending on health care without reducing total funding for the program. Washington State is expected to receive $1.8 billion in Medicaid funding from ARRA.

However, the state budget does not take full advantage of ARRA funding for Medicaid because it cuts too deeply. Examples of cuts that cause a loss of federal money include:

A $33 million cut in reimbursements for providers of Medicaid and SCHIP managed care services will result in a loss of $44 million in federal money, more than doubling the total size of the cut.
A $38 million cut in nursing home rates results in a loss of $56 million in federal funds.
An $18 million cut in reimbursements for pediatric services results in a $25 million loss in federal funds.

Education
Another component of ARRA is the State Fiscal Stabilization Fund, which provides flexible funding for education and other programs. In education, this fund is being used to partially offset devastating cuts in three areas:

$176 million for levy equalization, which assists property-poor school districts that have difficulty raising sufficient property taxes to fund local schools.
$562 million for a voter-approved (I-728) initiative that provides funding to school districts for quality improvements such as class size reduction, extended learning, early learning, or professional development.
$81 million for higher education institutions.

Public Safety
The remainder of the State Fiscal Stabilization Fund ($182 million) is appropriated to the Department of Corrections to offset cuts in public safety and rehabilitation programs.

Economic Security
ARRA also expands federal support for the state’s WorkFirst program, which provides temporary assistance to families with very low incomes. During the recession, the need for WorkFirst has grown significantly. TANF contingency funds ($193 million) is intended to help pay for the increased need. Another $12 million is made available to assist in the state’s child support collection program.

* ARRA also included significant fiscal relief that does not directly impact the near-general fund budget.
** Separately from ARRA, Washington State will benefit from the reauthorization of the State Children’s Health Insurance Program, which enhances federal support of state efforts to insure lower income children.

Update: How to Lower Costs of Climate Change Policies for Consumers

2009-05-19T15:38:00.000-07:00

The Budget & Policy Center is releasing a new policy brief today on a federal climate rebate proposal. With cap-and-trade legislation currently being drafted in the U.S. House Energy and Commerce Committee, it is critical that lawmakers adequately address the regressive financial impact that any carbon-pricing policy will have on lower and moderate income households. The paper provides a framework for how a climate rebate assisting lower and moderate income households can be integrated into federal climate policy.

A climate rebate represents an effective and efficient strategy for mitigating the household budget impact of a cap-and-trade system. It would utilize existing benefit and tax structures to deliver a cash rebate to lower and moderate income families, would be fully funded from cap-and-trade emission permit revenue, and would reach virtually all eligible families.

An important strength of a climate rebate is that it would address the shortcomings of other consumer assistance proposals, such as a utilities approach. For more information on how a climate rebate would work, please refer to our paper.

Update: Yesterday, the U.S. House Energy and Commerce Committee concluded the markup of the American Clean Energy and Security Act of 2009 (H.R. 2454) by voting to move it out of committee. Introduced by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), the bill (commonly referred to as Waxman-Markey) would cap the emissions of greenhouse gases in order to curb climate change.

Importantly, the Waxman-Markey bill includes provisions to protect lower income consumers from the financial impact of climate policy, similar to the recommendations outlined in our recent policy brief (based on analysis by the CBPP). In particular, the bill would allocate 15 percent of emission permit revenue to fully offset the average loss in purchasing power for lower income consumers. For more information on the bill, refer to the Center on Budget and Policy Priorities’ recent report.

Closing the Deficit: An Unbalanced Approach

2009-05-19T13:53:00.000-07:00

This afternoon, the Governor will take action on an operating budget that must close an $8 billion deficit, likely the largest in state history. Rather than take an approach that balances raising revenue and reducing spending, the budget passed by the Legislature relies heavily on deep budget cuts in education, health care, economic security, public safety, and the environment.

The graph below shows how the Legislature’s budget closes the three-year deficit. (The numbers may differ slightly once the Governor exercises her veto power.)

Budget cuts: The budget makes a total of $6.7 billion in near-general fund cuts. We'll be providing more detail on these budgets cuts later in the week. Federal stimulus funds offset $3 billion of these cuts, however this number is somewhat misleading because other spending cuts reduce the federal funds the state is entitled to receive.

Revenue: Actions on revenue are expected to raise a net $242 million. These include restructuring the resale certificate program, opening nine liquor stores on Sunday, and opening liquor stores in malls during the holiday season.

Rainy Day Fund: $445 million is transferred from the Rainy Day Fund, leaving a balance in that account of $250 million.

Capital budget resources: The budget uses $777 million of funds that are typically appropriated in the capital budget.

Other transfers and changes: An additional $389 million in funds is accessed by transferring money from other accounts and making other marginal changes.

Ending balance: These actions leave an estimated $573 million in an unrestricted balance, although recent revenue collections suggest the ending balance could actually be lower.

$8 Billion Deficit: What a Difference a Year Made

2009-05-18T09:44:00.000-07:00

Tomorrow, the Governor is expected to sign a budget that has the unenviable task of closing an $8 billion near-general fund deficit, likely the largest shortfall in state history.*

How did we get to $8 billion? The graph below divides the deficit by 1) the shortfall that was anticipated in June 2008, 2) the increase in cost estimates since June 2008, and 3) the decrease in revenue expectations since June 2008.

About one quarter of the $8 billion deficit was already anticipated in June 2008, after the Governor signed the supplemental budget. In 2007 and 2008, the Legislature maintained long-term investments in key public priorities, but failed to enact revenue solutions that would ensure funding beyond that biennium. As a result, after passing the 2008 supplemental budget, state forecasters estimated there would be a nearly $2 billion deficit by the end of fiscal year 2011.

While the forecasters expected a weak economy, they were not prepared for the economic crises that hit last fall. As the economy plummeted, the state’s deficit forecasts quadrupled.

Here’s why: a suffering economy takes a toll on the state budget both in terms of costs and revenue. On the cost side, the recession increased the need for public supports that provide economic and health security. In total, between June 2008 and March 2009 the estimated price tag of continuing current commitments rose by roughly $600 million.**

But the biggest problem for the state budget comes from the loss of revenue. Between June 2008 and March 2009, the official state revenue projection fell by $5.5 billion, an eight percent reduction. The largest component was a $2.9 billion decrease in expected sales tax revenue because of a sharp decline in retail sales. In addition, the housing crisis took its toll; revenue from the real estate excise tax fell by 25 percent from what was expected in June.

So that’s how we got to $8 billion. Tomorrow we’ll discuss what this year’s budget writers did (and didn’t do) to close the gap.

* Often, projections of budget deficits use estimates of additional policy costs that are not generally included in the maintenance budget. For this analysis, we are only including the stricter definition of the maintenance budget, which results in a more conservative estimate of the deficit.
** $600 million is a rough estimate based on unofficial Senate Ways and Means projections from Summer 2008.

Series on the State Budget Crisis: Part Three, States Raise Taxes

2009-05-15T10:50:00.000-07:00

States are struggling to balance their budgets during the current economic recession. As we discussed in yesterday's post, many have opted to cut spending as a result. But given the sheer size of state budget shortfalls, cuts alone will not be enough to solve the problem without long term harm to essential public services.

According to a new report from the Center on Budget and Policy Priorities, instead of a cuts-only approach, states are increasingly employing a combination of budget solutions that involves drawing down reserve funds, maximizing the use of federal dollars, and raising taxes.

As the map below shows, so far in 2009 sixteen states have raised new revenue through tax measures. Another 17 are giving serious consideration to doing so. These initiatives are in addition to revenue actions taken in states in late 2007 and 2008 as the recession’s effects began to be felt.

In addition, the report finds that states that raised taxes during the 2001 recession were just as fast to rebound from the recession as states that did not, even though they were typically climbing out of a deeper hole.

Series on the State Budget Crisis: Part Two, Cuts to Vital Programs

2009-05-14T23:10:00.000-07:00

As we mentioned in yesterday's post, almost every state in the nation is facing budget deficits because of the weakened economy. The federal American Recovery and Reinvestment Act includes roughly $140 billion in fiscal relief for state governments. But the recovery act funding will only be enough to fill about 40 percent of the $350 billion to $370 billion shortfall that states will face in the next two-and-a-half years.

According to a new report from the Center on Budget and Policy Priorities, at least 36 states have addressed their shortfalls by cutting spending. As the report notes, cuts in state budgets worsen the recession by reducing overall economic activity. Reductions in state spending translate into fewer state jobs, canceled contracts with vendors, lower payments to businesses and nonprofits that provide services, and cuts in benefit payments to individuals.

Importantly, cuts in state spending also particularly hurt the most vulnerable residents in the state. The report outlines five areas in which states have made cuts. Washington State has made cuts in all of these areas.

Public health programs: At least 19 states have implemented cuts that will affect low-income children’s or families’ eligibility for health insurance or reduce their access to health care services.

Programs for the elderly and disabled: At least 21 states plus the District of Columbia are cutting medical, rehabilitative, home care, or other services needed by low-income people who are elderly or have disabilities, or significantly increasing the cost of these services.

K-12 education: At least 22 states are cutting K-12 and early education.

Colleges and universities: At least 30 states have implemented cuts to public colleges and universities, resulting in cuts in faculty and staff and tuition increases of 4 percent to 15 percent.

State workforces: At least 39 states and the District of Columbia have made cuts affecting their state workforces. At least 27 states and the District of Columbia have instituted hiring freezes, 10 have announced lay-offs, 15 have reduced state worker wages, and several have delayed scheduled pay increases (including cost of living adjustments).

Click on the chart to see a state-by-state view of cuts in these budget areas.

Tomorrow we will post on states that have raised taxes to help close budget deficits during the current recession.

Series on the State Budget Crisis: Part One, The Big Picture

2009-05-13T11:53:00.000-07:00

Most states, including Washington State, are facing deep fiscal troubles. A new series of reports from the Center on Budget and Policy Priorities analyzes the effects of the state fiscal crisis and how states are responding. Today’s schmudget post looks at the overall state deficit picture, tomorrow’s will look at budget cuts states are undertaking, and Friday’s will look at states that are considering tax increases.

Washington is not alone among states that are in deep fiscal trouble. According to a new report from the Center on Budget and Policy Priorities, at least 47 states are dealing with significant budget shortfalls. Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion, the report says.

As the graph below shows, in fiscal year 2009, total state budget shortfalls amount to $106 billion. The estimated budget deficits going forward show the problem is expected to get worse. The CBPP estimates that FY 2010 deficits will amount to $145 billion and FY 2011 deficits will be $180 billion.

According to this article in the TNT, Washington State Governor Gregoire told the paper's editorial board that she anticipates state revenue forecasts will be down in June and September as revenue collections continue to fall.

Here in Washington, as in many other states, the problem of inadequate revenue to meet the needs of normal growth in state spending is not going away. An honest conversation about how to move forward and preserve important progress that has been made through state investments in health care, education, communities, and economic security must continue.

Tomorrow we will look at the deep cuts in state investments that have occurred throughout the country.

High Cost of Subprime Lending Featured on KUOW

2009-05-12T11:19:00.000-07:00

I was interviewed on KUOW this morning about our report "The High Cost of Subprime Lending in Washington State." The full transcript and audio are available here and the audio is also embedded below.

Among other findings, our report points out that over 40 percent of the mortgages lent to African Americans and Hispanics in 2006 were high-cost, compared to around 22 percent for non-Hispanic whites and Asians (see graph below). Even among borrowers whose incomes were twice the area median, 39 percent of African-Americans and 37 percent of Hispanics had high-cost loans.

Uninsurance High Among Unemployed

2009-05-11T13:00:00.000-07:00

A new study by the State Office of Financial Management contains detailed analysis of health insurance by employment status. The report is rich with information, but unfortunately the latest data were collected in Spring 2008--before the bottom fell out of the state labor market. The state unemployment rate has risen dramatically since then, making it likely that the health insurance picture has also worsened.

The report illustrates the difficulty of obtaining and maintaining insurance for unemployed workers: 44 percent of unemployed adults ages 19-64 were uninsured, compared to 14 percent of employed adults.

As employment-based health insurance becomes less available, the need for public programs grows. Despite this growing need, the Governor is expected to sign a budget that will eliminate around 40,000 Basic Health Plan slots.

Washington TANF Caseload Increases Match State Forecasts

2009-05-07T13:00:00.000-07:00

Temporary Assistance to Needy Families (TANF) caseloads have risen sharply in Washington over the last year. Since April 2008, total TANF caseloads in the state went up by 9,000. The increase to over 60,000 cases in April this year can be attributed both to rising numbers of people entering the program and decreasing numbers of people exiting.

Back in November, the Caseload Forecast Council predicted that TANF caseloads would remain under 60,000 through 2011. In March, the Council recalibrated its forecasting to include more recent economic trends and projections such as rising unemployment.

As the graph below depicts, the new forecasting seems to be working. In March, the Council predicted TANF caseloads would be 61,550 in April and the total caseloads were actually 60,809. Currently, the state predicts that TANF caseloads will rise by 13 percent this year and 11 percent in 2010. Caseloads are projected to decrease by less than one percent in 2011.

Washington is applying for the maximum allotment from TANF contingency funds, including funds from the federal stimulus bill to support increasing caseloads and other TANF efforts at the state level. The total amount for fiscal years 2009 and 2010 will be $190 million. All the funds received will be used to backfill rising caseload costs and help preserve basic services.

Note: TANF caseloads are affected by seasonal employment patterns. They tend to rise during the fall and winter and fall during spring and summer.

UPDATE: High Unemployment Across the State

2009-05-06T15:53:00.000-07:00

Between March 2008 and March 2009, the state unemployment rate rose from 5.1% to 9.7%. Unemployment rates grew in every metropolitan area of the state as well, as shown by the table below:

UPDATE: I neglected to include the unemployment rate for the Washington side of the Portland-Vancouver-Beaverton metropolitan area. It went from 6.3 percent in March 2008 to 13.8 percent in March 2009.

March Mass Layoffs Are Worst on Record

2009-05-05T13:10:00.000-07:00

In March, there were 2,933 mass layoffs across the country, resulting in close to 300,000 new unemployment insurance (UI) claims. A mass layoff, as defined by the Bureau of Labor Statistics, is when a single employer lays off 50 or more employees.

The number of mass layoffs and new UI claims were the largest on record; the data go back to 1995. The graph below shows the number of new UI claims due to mass layoffs over the last nine years. The previous peaks were associated with the 2001 recession and terrorist attacks and Hurricane Katrina in 2005.

Microsoft announced today that it will layoff about 1,200 workers in Washington State as part of its plan to eliminate 5,000 jobs this year. To follow that news, click here.

*The data in the graph have been seasonally adjusted, which means that the BLS has accounted for seasonal variations in employment.

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

2009-04-30T10:43:00.000-07:00

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

2009-04-28T15:27:00.000-07:00

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?

2009-04-28T14:43:00.001-07:00

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

2009-04-27T11:15:00.001-07:00

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

2009-04-24T11:00:00.000-07:00

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

2009-04-24T10:26:00.000-07:00

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

2009-04-23T10:30:00.000-07:00

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.