New Census Poverty Data Reveal Deep Disparities throughout Washington

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.

Washington Families Risk Losing Housing Assistance

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.

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

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).

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

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.

BPC Report Shows I-1033 Undermines Public Priorities

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.

The Final Budget Cuts, Part Three: Thriving Communities

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 State Budget and Federal Recovery Funds

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.

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

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

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

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.

Spokesman-Review Editorial Debunks Myths on Taxes and Spending

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

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

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

UPDATE: "The High Cost of Subprime Lending"

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


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

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

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

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


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

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


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

"The High Cost of Subprime Lending" Part 3: Future of Housing Crisis in Washington

On Monday, the Budget & Policy Center released a paper entitled, “The High Cost of Subprime Lending in Washington State.” Over the week we have posted here about the disproportionate effects of high cost lending on certain lower income neighborhoods and people of color. Today we will take a look at the future of the housing crisis in Washington State.

Washington has been relatively fortunate to avoid some of the deepest mortgage problems seen in other states as a result of the subprime lending crisis. Nationwide in the third quarter of 2008, over five percent of mortgages were seriously delinquent or in foreclosure, whereas in Washington, foreclosure rates were below 2.5 percent. (Only seven states in the country had such low foreclosure rates during this time.)

But the housing situation in Washington may take a turn for the worse in the near future. Nationwide, 77 percent of subprime loans with adjustable rates have already experienced a reset of the initial interest rate. In Washington State however, only 67 percent of loans have reset (see graph) The remainder are still at the original interest rate.


In the next 12 months, it is expected that interest rates will reset on 23 percent of subprime adjustable rate mortgages in the state, a higher share during that period than nearly every other state in the nation.

Problems for strapped homeowners can be exacerbated by prepayment penalties and large loan balances. Thirty-two percent of subprime mortgages in Washington State have prepayment penalties currently in force, a higher percentage than nearly every other state. And only 10 states have larger average subprime loan balances.

This is worrisome because the subprime mortgages that are most likely to go into delinquency or foreclosure are those with adjustable interest rates. Homeowners with these loans see sudden and significant increases in their mortgage bill from one month to the next and the additional cost can lead to late payments and eventually, foreclosure.

"The High Cost of Subprime Lending" Part Two: Loans by Neighborhood & Region

On Monday, the Budget & Policy Center released a new report on the "High Cost of Subprime Lending in Washington State." We will be blogging on the topic throughout the week. Check out the entire paper and part one of the blog series.

Statewide, mortgages in lower-income neighborhoods were almost twice as likely to be high-cost than those in higher-income neighborhoods.* (See graph.)


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

In most areas of the state, lower income neighborhoods had higher rates of high cost loans than wealthier neighborhoods (click on table below to see larger version). In Cowlitz County, for example, 45.5 percent of mortgages in the lowest income neighborhoods were high-cost, compared to 20.8 percent in the higher-income neighborhoods. Whatcom County was the only area where wealthier neighborhoods did not have significantly lower rates of high-cost mortgages than poorer neighborhoods.


The pockets of high-cost mortgages across the state raise the question of whether borrowers in lower income regions and neighborhoods have adequate access to financial education and whether they have a variety of lending options. This has an impact on all homeowners: when foreclosures concentrate within neighborhoods, it is not just the delinquent homeowner that suffers. Other owners are likely to see impacts such as property value decline and increased crime.


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

Discussing the Budget on TVW

I went on the TVW show "The Impact" yesterday to discuss the state budget. My dance partner on the show was Jason Mercier from the Washington Policy Center. This is the type of reasonable discussion we should be having about the state budget.

Enjoy.

"A Shared Vision" Part Two: Thriving Communities

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

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

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

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

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


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

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

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

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

A Shared Vision for Washington State: Four-Part Series

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

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


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

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