By: Sen. Adam Kline
In my first two posts on this blog back in mid-January (Budget Impossible and Budget Impossible, Part 2), I wrote about the depth of our current budget crisis, how we arrived in this horrendous situation, and a few actions the legislature can take to get us through this recession without completely shredding our social safety net and other public programs upon which we all depend.
Since then, the situation has grown much worse. In January, I reported that the projected revenue shortfall was $5.8 billion. A few weeks ago, an updated forecast set the shortfall at $8.3 billion. The latest forecast released on March 19 by our state’s Economic and Revenue Forecast Council paints an even bleaker picture by predicting a nearly $9 billion gap over the next two years. This gap is between the projected revenue for the next two years and the amount we need to continue paying for our current commitments in areas such as education, social services, health care, public safety and environmental protection. And these current commitments don’t accommodate the facts of inflation and population growth. Just continuing existing programs for Washington’s growing population would cost $3 billion more than the last time we wrote a budget.
Our $9 billion revenue deficit translates to roughly a quarter of our state operating budget. Just like the thousands of families in our state struggling to stay atop of their growing daily expenses, our state income is lagging more than 25% behind what is needed to fund essential public services.
This is an unprecedented challenge. The shortfall is the largest in modern state history, both in terms of total dollars and in percentage of the overall budget. We have to make some very difficult decisions. At all times, we must keep in mind that the state budget is not just a financial document – it’s also a moral document that determines how well we will take care of each other.
At this point, it looks like we will be utilizing several strategies to get through this crisis: we’ll use some of our Rainy Day Fund; we’ll make good use of the Federal Stimulus Plan; we’ll do our best to cut waste and inefficiency in government; we’ll raise new revenue; and we’ll be making serious cuts in important state programs. I’ll address each of these in turn.
The Rainy Day Fund
Last biennium, we created this fund to save money for crises just like the one we’re experiencing now. We’ll tap into this fund, but there’s less than a billion dollars currently available. This session, we’re also working on legislation that will increase the percentage of money we save during years when the economy is good so that we’ll have more to draw on during down times.
The Federal Stimulus Plan
President Obama and Congress understand that almost every state is experiencing severe budget crises, and did the right thing by investing in state programs. This investment will be useful, but these federal funds for the states are very narrowly categorized to specific programs, and come with a number of strings attached. For example, we can’t use as much of it as we’d like for our core safety net programs, and we have been directed to use a lot of the funding for “shovel ready” construction projects that are important but wouldn’t necessarily be our top priority. Still, the injection of billions of dollars in federal money into our state’s economy will undoubtedly provide a stimulus, and we’re happy to have it. One important component is federal aid to our Unemployment Insurance program. The federal funds help us address less than 20% of our state’s budget shortfall.
Cut waste and inefficiency in government
We’re suspending and cutting some programs that have proven to be ineffective, and we’re doing our best to decrease state spending as much as possible without causing too much damage. For example, many state agencies have halted new hires, frozen salaries, limited equipment purchases, and have taken extreme actions to cut agency overhead. Each agency is involved in an intensive process to increase efficiency, and this has helped us to already save more than $800 million. But there isn’t that much “government waste” to cut. According to the Pew Center on the States, Washington ranks as the best-managed state in the nation.
What we can do is invest our money more wisely. For example, in the area of criminal law, there’s plenty we can do to increase public safety and spend less money. This press release discusses two such bills of mine that have passed the Senate and are being considered in the House. This blog post discusses, among other things, a bill that I co-sponsored that would have reclassified marijuana crimes. Senator Jeanne Kohl-Welles is the prime sponsor of SB 5615, which would reclassify adult possession of up to 40 grams of marijuana from a misdemeanor carrying mandatory jail time to a civil infraction imposing a $100 penalty that could be paid by mail.
The latest fiscal note produced by the state Office of Financial Management found total savings in city, county, and state court costs; prosecution; public defense; and jail sentences to be over $16 million, plus increased net revenue of $973,600.
SB 5615 passed out of committee, but didn’t make it to the Senate floor before the cut-off date for bills to pass out of their house of origin. It’s possible that it could be resurrected as being “necessary to implement the budget.” There’s very, very little chance that we’ll be able to muster enough support in the Legislature to do that this year, but it’s crucial that we make reforms in our criminal justice system that will both improve public safety and save money.
Last week, National Public Radio produced a great story on ways various states, including Washington, are trying to reform our criminal justice system designed to save money and protect public safety. Here’s a link to the transcript and recording of the broadcast.
Raise New Revenue
Short term Revenue Solutions: The depth of our revenue shortage means that we have no choice but to make severe cuts in most state programs. For reasons I’ll discuss below, I strongly believe that we can’t just cut our way through this crisis. We must raise money to pay for essential programs. It is likely that the Legislature will send a referendum to the voters asking for their approval on a tax that will pay for a portion of specific education or health care programs. We need to find revenue sources that won’t unduly burden Washingtonians, many of whom are already experiencing their own budget crises.
The two easiest options for raising revenue in the short term are raising our sales tax and/or raising our “sin” taxes on items like candy, cigarettes, liquor, and gum. As I’ve said repeatedly, the sales tax is the most regressive of all taxes, and is the main culprit responsible for our skewed tax burden. We already take four times the percentage of income from the bottom fifth of earners that we take from the top fifth. I will support an increase in our sales tax only if we balance it out with the implementation of the Working Families Tax Rebate (WFTR), which we passed last year. The WFTR is a sales tax rebate for low and middle income families that complements the federal Earned Income Tax Credit. I’ve written about the WFTR here.
A resident of our district sums up our need to raise taxes at this difficult time:
“I support a referendum from the legislature to the people for a vote that would raise revenue to preserve public safety programs, public health programs, and baseline safety net programs. An 'all cuts' approach to balancing the budget is 'devastation upon devastation' for low and middle income working families and the many who are unemployed. I support using our state’s rainy day fund, using money from the federal economic stimulus package, and raising revenue - in a fair and equitable way so that the burden falls on those who are more able.”
Raising our sales and/or sin taxes is just a short-term solution to deal with the consequences of the recession and our broken system of taxation. The best case scenario is that we’ll be able to raise $2 billion over the next two years, which doesn’t come close to solving our $9 billion deficit.
Long Term Revenue Reform: Certainly, much of our current revenue crisis was caused by factors beyond the control of our state legislature. But we could have eased the crisis by at least $2 billion if we’d not gone along with Tim Eyman’s proposal to regressively cap property taxes and the Motor Vehicle Excise Tax.
There is growing support for tax reform. Some recent polls show that a slim majority of folks would support an income tax for folks who earn over $250,000 per year. My preference would be institute an income tax for individuals who make over $100,000 per year or for couples (either married or in a domestic partnership arrangement) whose combined income is over $200,000 per year.
By the way, Washington voters overwhelmingly approved an income tax in 1932, during the Great Depression. The state Supreme Courts declared it unconstitutional, a decision that has been criticized by legal scholars familiar with our state constitution. Since then, the tax advisory councils created by nine different governors have found our tax-structure to be “flawed.” Most recommend an income tax. Although several attempts have been made to institute an income tax since the Great Depression, all have failed. I’m well aware that it’s an uphill climb to reform our tax system so that it’s stable, progressive, adequate, and fair, but I’m in this work for the long haul.
Cuts to critical state programs
There’s no way we can avoid making serious cuts in vital programs in all areas of state government, including health care, education, and social services. This will have dire consequences, and will cause suffering and in some cases, death. (I’m not trying to be hysterical here, just realistic. Our planned cutbacks in state-funded healthcare will have that effect for some people, literally.)
The cuts we will have to make will cause short-term and long-term damage and will end up being more expensive in the long run. For example, cuts in the funding of Community Health Centers will harm the people who will no longer have access to healthcare and will harm the healthcare workers who will lose their jobs. Keeping health care funding intact today is essential to avoiding much larger costs in emergency room visits tomorrow. The average cost of a visit to the doctor’s office is between $100 and $150, depending on your age. The average trip to the emergency rooms runs upwards of $800. And even if we’re able to return in a few years to restore funding to Community Health Centers, it will take a long time to rebuild the workforce, institutional knowledge, and the sense of community that we’ll devastate by making cuts in this funding.
The costs of our current economic situation are already huge. In a little over a year, we’ve gone from record low unemployment to record numbers of people applying for unemployment benefits. Each of these people is suffering. Statistics alone can’t tell the full story of the impact of social service programs because they don’t include the personal stories of the people and circumstances behind the numbers. That’s the case when it comes to Washington’s social safety net.
More than two million people – one-third of the population – looked to state government for a lifeline the year before our recession started. Many sought medical and economic assistance to feed their children, pay for prescription drugs or see a doctor. The needs have grown in today’s economy, and we are looking for ways to keep that safety net intact.
If we cut the state’s Basic Health Plan by 40% – as has been proposed – 40,000 individuals in our communities would no longer have a viable option to receiving needed medical care. That’s a crowd large enough to sell out Safeco Field. It’s a mistake to think that the accounting savings realized from cutting this program will translate into actual savings. After all, it’s not as if these 40,000 of our neighbors will suddenly no longer get sick or need medical attention. Many will simply wait until their situation becomes an emergency to get the care they need from hospitals – maximizing the toll taken on their health and the costs to our overall system.
Similarly, cutting mental health funding – as has also been proposed – creates a more costly effect of not providing mental health treatment to those who need it, resulting in greater crime, more victims, more children on welfare, and more adults in our jails and prisons.
On paper, cutting these funds might provide a temporary accounting savings – but they don’t provide a long-term real savings because of much bigger financial costs down the road. And it cannot be forgotten that the state budget is not just a financial document – it’s also a moral document. We must, at all times, take into account the real human costs to these types of cuts.