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McKenna, Inslee: deep in budget denial

Both candidates are eager to be seen as anti-new taxes. But their statements leave listeners wondering how they will pay for what they want to do.
Jay Inslee, left, and Rob McKenna at a debate.

Jay Inslee, left, and Rob McKenna at a debate. State of Reform

These are challenging days for citizens who would like fact separated from fiction to further their understanding of how the candidates for governor would find the cash to fund education and other essential programs, which is perhaps the most critical issue of this election. The task is made more difficult as a torrent of competing TV ads by the candidates’ campaigns and supporters continues even after fact-checkers declare some of them to be less than truthful. Truthiness prevails.

So it was perhaps predictable that the last two debates (here and here) organized by the state’s major TV channels and The Seattle Times would see both candidates indulge in problematic numbers and less than clear answers to some pertinent questions from reporters on revenues and expenditures.

It’s hard not to conclude that Rob McKenna’s and Jay Inslee’s positions on fiscal issues have become muddled, as each tries to out-compete the other to be perceived as the one least interested in new taxes. Both are betting on government efficiencies and a recovering economy to deliver more revenues. But economic projections indicate the first comprises a relatively small factor and the likelihood of the second is slim, at least in the short-term.

The candidates were asked how they would deal with a lingering recession — with cuts or new revenues? McKenna prefaced his answer — that we need to live within our means and not ask voters for new revenue — by reciting what is now a common campaign theme: that Democratic control of the governor’s office has lead to a dramatic growth of state budgets. McKenna said the (general fund) budget has about doubled from $16 billion to $31 billion in the last 20 years. And future revenues that are projected to increase by over $11 billion over the next 8 years should be prioritized for education first.

McKenna’s historical numbers are correct but they ignore the reality that budgets grow in proportion to the needs of an increasing population, and that inflation pushes up costs. Washington has been in the top 10 of all states in population growth over the past two decades, growing 30 percent since 1993. Although inflation hasn’t been high on an annual basis, consumer costs increased 74 percent over the same period.

When the nominal budget numbers are adjusted for 20 years of population growth and inflation (using the Seattle Consumer Price Index), real growth over 10 budget cycles has been just 11 percent.

Budget growth is a composite of increases in entitlements and other necessary expenditures, plus discretionary spending decisions that can involve cuts as well as increases. A detailed analysis would reveal the exact reasons for the growth. An individual program’s share of the budget can change from one budget cycle to the next.

Much of the growth appears to be the result of the state’s partnership with the federal government for a range of safety net programs, including medical assistance and long-term care Twenty years ago federal funds accounted for 36% of the state general fund budget. The federal share of the current (2011-13) budget is 47 percent.

The most notable cuts in recent budgets have been in support of higher education. For the University of Washington and the other four-year schools, this has meant their share of the state budget has fallen from a high of about 8 percent to 3 percent, with tuition making up the difference.

And accurate future revenue projections are difficult. The state’s official forecasting agency, the Economic and Revenue Forecast Council, projects general fund revenues out four years, not eight. And they suggest that there is great uncertainty in even those numbers. In its September forecast (chapter 3, page 80), ERFC projects an increase of 7.2 percent to $33 billion in 2013-15 and another 8.7 percent to $36 billion in 2015-17. It provides no data for 2017-19 and beyond.


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Comments:

Posted Wed, Oct 17, 10:26 p.m. Inappropriate

It's certainly safe for both of them to say "no new taxes" because currently 1053 requires a 2/3rds majority of the Legislature. The court decision on that won't come before the election, so actually neither of them can reasonably say anything about new taxes (and revenue from increased taxes would be "new", under 1053). Unfortunately, Inslee cares more about being elected than being brave, and I can't say I blame him at this point, since if he were brave, he definitely wouldn't be elected. And perhaps his lack of courage isn't unfortunate, since McKenna would make a very dangerous governor. He's already been a dangerous attorney general.

sarah90

Posted Thu, Oct 18, 7:20 a.m. Inappropriate

Interesting that the Democrat author wants the candidates to refer to the study that suggests Washington State move to a progressive State Income Tax. Dick and Jay, Two Democrats with a common vision.

Cameron

Posted Thu, Oct 18, 2:56 p.m. Inappropriate

"McKenna suggested that it might be a good idea to tax internet sales that compete with brick-and-mortar businesses" Doesn't this item require some explanation? Washington state presently applies sales tax to online purchases. What is McKenna suggesting, an additional sales tax on web purchases? sounds nutty in a state that is home to Amazon.com.

So Mr. Inslee would presumably veto an income tax! That seems to suggest Mr. Nelson, tireless proselytizer for a state income tax, will not vote for him. Just kidding.

kieth

Posted Thu, Oct 18, 3:46 p.m. Inappropriate

Washington taxes online sales by firms that have a physical presence (nexus) in the state. So Amazon pays to the state sales tax revenue that it collects from in-state customers. But almost all other online and mail-order purchases by Washingtonians from out-of-state firms such as Overstock.com and LLBean)are not taxed. Unless of course, the purchaser pays the equivalant use tax which is a rare event.

Amazon has been fighting the sales tax issue in numerous states even where they have a physical presence. But that seems to be changing. For a recent update see:

http://seattletimes.com/html/businesstechnology/2019048905_amazontax02.html

Posted Thu, Oct 18, 6:19 p.m. Inappropriate

Thanks for correcting my comment. As you note in the article, this is not a State issue. So it remains a puzzle what McKenna has in mind... he's smart enough to know the legal difficulties so why bring up a strategy like that? assure westside voters that he is amenable to some alluring but unattainable tax increases?

kieth

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