Rational budgeting: Inslee should return state to recent, Democratic model

Guest Opinion: Gary Locke created reforms that made state leaders look at the real needs and prioritize. The approach would make for smarter choices, whether or not lawmakers decide taxes should be increased.
Former Gov. Gary Locke, center left, is now the U.S. Ambassador to China (2011 photo)

Former Gov. Gary Locke, center left, is now the U.S. Ambassador to China (2011 photo) Brazilian Ministry of Culture

Gov. Jay Inslee

Gov. Jay Inslee John Stang

The fiscal cards have all been dealt and it is time for budget writers in Olympia to unveil their plans for the state’s 2013-15 budget.

The last card was the state’s March 20 Revenue Forecast. We now know budget writers will have $2 billion more in revenue for the 2013-15 budget compared to the current 2011-13 budget.  Here’s the projected trend in revenue increases:

  • 2011-13: $30.8 billion
  • 2013-15: $32.6 billion
  • 2015-17: $35.5 billion

Judging from public comments, however, the way Gov. Jay Inslee and House Democrats view the expected $2 billion increase in revenue is vastly different than the Majority Coalition Caucus in the Senate.

The Senate Majority Caucus sees $2 billion more to increase spending over 2011-13 levels. Gov. Inslee and House Democrats say that’s not enough, and that additional taxes are needed to close a projected $1.3 billion shortfall assuming baseline budgeting and policy add-ons.

If this budget conflict sounds familiar it is because we had a similar debate 10 years ago when then Gov. Gary Locke, a Democrat, decided it was time to change the way Olympia thinks about budgeting.

Here is what Gov. Locke said a decade ago when announcing his Priorities of Government initiative:

We face a dilemma with our budget. We don’t want government to be any more expensive. That means an increased drag on our struggling economy. But we don’t want to compromise the quality of the vital services we provide to citizens either. State services and programs support the health of communities and the economy. One way or another, something has to give.

Past deficits have been addressed mainly by looking at the existing budget. Taxes can be raised to just keep doing what we’re doing. We know that isn’t a preferred option. Or costs are shaved until the spending plan fits the available revenue. Usually, an across-the-board reduction in costs is used to reach the goal . . .

We are convinced there is a better way. This year, we decided not to start with current spending to try to meet the forecasted revenue. Instead, we decided to look at how we should be spending our state’s money in the first place. We decided to look at our Priorities of Government.

We are looking at what matters most to Washington citizens. We are focusing on results that people want and need, prioritizing those results, and funding those results with the money we have.

Using the Priorities of Government — POG — requires agencies and budget writers to answer the following questions:

1.     How much money will the state have?

2.     What results do our citizens want most from state government?

3.     How much money can we allocate to each result?

4.     How best can we spend allocated funds to achieve the results?

One of the reasons POG isn’t used more by lawmakers is it is much harder to do than relying on automatic baseline budgeting (taking the current budget and automatically carrying the spending forward while adding increases for inflation and any growth in caseloads). That said, the Legislature has required the governor to use POG (RCW 43.88.030) when building his budget but has not placed the same requirement on its own budget building process.

To help legislative budget writers have access to the information they need to do full-fledged Priorities of Government, state agencies should be required each fiscal year to rank their activities as high, medium or low priority, with no more than one third of their total costs allocated to each ranking. Lawmakers should then direct agencies to identify at least one measurable performance outcome for each activity it wants to fund. Once lawmakers have access to this information, they can make informed decisions how to deliver the best results for taxpayers and those who rely on essential public services.


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Comments:

Posted Wed, Mar 27, 7:28 a.m. Inappropriate

"a non-partisan independent policy research organization"

If you're not going to give a sense of their leanings--decidedly to the right--then you're not giving the full story.

Ryan

Posted Wed, Mar 27, 7:47 a.m. Inappropriate

It's not a bad approach, and I say that as someone who does not agree with Tim Eyman's 2/3 rule. Just as tax breaks should be periodically reviewed to insure that they are still useful (or ever were), so should spending. In fact, I wish more institutions would take such an approach; universities, for example, could look harder at why their costs escalate so rapidly before they reach for tuition increases.

Posted Wed, Mar 27, 11:02 a.m. Inappropriate

"The fiscal cards have all been dealt and it is time for budget writers in Olympia to unveil their plans for the state’s 2013-15 budget.

The last card was the state’s March 20 Revenue Forecast."

Conveniently left out of the article are some of the other "cards" that state budget writers are regularly dealt - cards like increased 'caseload' demands on public services.

This isn't 'draw poker' where you can throw back cards you don't like and hope to replace them with something better. The Legislature has to play the cards they're dealt - including things like more kids knocking on the doors of our public schools.

Priorities of Government, as laid out in the article, begins with the false premise that the states revenues are fixed and that spending must be constrained to that fixed amount.

Just because that's the priority of right wing groups like the Washington Policy Center doesn't mean it should be the priority of Washington state.

Posted Wed, Mar 27, 11:50 a.m. Inappropriate

Geez, Ryan, the guy is speaking techno-budget and you go all partisan on him. What's wrong with Government writing a budget based on priorities from a "liberal" perspective? A modified-zero base approach to budget writing doesn't necessarily take revenue off the table.

Yes, our friend subtly works in the perspective that inflationary growth in state budget is somehow "growth" in the size of the government relative to the economy. This is baloney, of course. Every working woman and man knows a cost-of-living increase isn't a raise. It's rotten, stinking baloney following a once-in-a-generation economic downturn. The truth is it will take a decade or more to get back to the pre-recession baseline. And many of the "low priority" activities have long since hit the budget cutting room floor with a resounding splat.

I would ask the Washington Policy Center why new revenue is ALWAYS anathema. Aren't there investments the state makes that benefit business development and growth? Roads, schools, early learning....? Come on, guys, you expect us to buy the hard line?

Sounder

Posted Wed, Mar 27, 12:44 p.m. Inappropriate

There's nothing wrong with new revenue. A prospering economy will generate new revenue. The problem is raising taxes during an economic downturn. You can't bludgeon the economy into recovery.

dbreneman

Posted Wed, Mar 27, 2:39 p.m. Inappropriate

You also cannot cut your way to prosperity - but that hasn't stopped the Legislature from slashing state spending by billions of dollars during the Great Recession.

We've tried several rounds of 'austerity' and it clearly hasn't worked - time to try the alternative approach of raising revenue, particularly on those who have long enjoyed tax breaks claiming to be 'job creators' who haven't delivered.

Posted Wed, Mar 27, 3:06 p.m. Inappropriate

Wow. The 2013-2015 budget will see an increase of 5.8% and the 2015-2017 budget might see an increase of 8.9%?

Wish my budget would do that

Speaking of Priorities of Government... did you see that illegal immigrants cost Washington taxpayers $2.7 Billion/year? That's $970 per average (legal) household.

http://www.fairus.org/publications/the-fiscal-burden-of-illegal-aliens-on-washingtonians

BlueLight

Posted Wed, Mar 27, 8:52 p.m. Inappropriate

Do you buy food, Blueline? Someone must, because I assume you eat.

Do you also pay for utilities where you live? Probably so.

How about gas to drive your car(s)?

All of those things are more expensive now than they were a year ago, let alone several years ago.

If your salary didn't increase, you need some other new revenue to keep up with those increases in the cost of living.

As far as your link, a look at the Board members of Fairus shows what kind of organization it is. Fair and balanced it ain't.

sarah90

Posted Wed, Mar 27, 11:58 p.m. Inappropriate

@pepper2000: The average per student cost at state colleges/universities education is largely unchanged over the past 20+ years - what has changed is that the legislature has cut public funding drastically, thus forcing tuition up to make the difference. Take a look for yourself: http://www.stateofworkingwa.org/2012/pay-it-forward/index.htm.

ba

Posted Thu, Mar 28, 12:25 a.m. Inappropriate

So WA Policy Center would force all public budget priorities into high, medium, and low priority "buckets" - with no more than one-third in each of course. How convenient it would be for them to always have some "low-priority" spending to rail against. And I suppose by their math, agencies and legislators would just keep cutting the lowest priorities until there's nothing left.

It's ironic that the WA Policy Center's own "Piglet Book" (their name, not mine) only identified 1/2 of 1% of the state's budget as wasteful: http://www.washingtonpolicy.org/publications/brief/washington-state-piglet-book-connecting-dots-how-government-wastes-your-money. Maybe they'd rather have someone else do the heavy lifting on that.

Of course you'll never see WA Policy Center advocate the same treatment for any of the 600+ tax breaks on Washington's books, collectively worth billions in lost revenue for schools, roads, health care, you name it. Taking a microscope to those would likely offend those who bankroll WA Policy Center: http://www.sourcewatch.org/index.php?title=Washington_Policy_Center

ba

Posted Thu, Mar 28, 7:21 a.m. Inappropriate

Ba,

You may want to tune in to the Senate Trade and Econ committee this morning at 8 where I'll be presenting on our proposal to repeal ALL tax preferences on a revenue neutral basis: http://www.washingtonpolicy.org/sites/default/files/B&OPB.pdf;

As for the current tax preferences review process, here are our thoughts to improve it so JLARC has the information needed to evaluate the preferences: https://www.washingtonpolicy.org/blog/post/improving-performance-tax-preferences

jmercier

Posted Thu, Mar 28, 8:18 a.m. Inappropriate

Why should the repeal of tax preferences be "revenue neutral?" Was there a similar emphasis when those tax preferences were created?

Posted Thu, Mar 28, 11:58 a.m. Inappropriate

I see via your first link that the WA Policy Center proposes to repeal all business tax preferences and replace current B&O; taxes with a system you say would be more neutral, equitable/fair, etc. That's good as far as those values go, but why only look at business taxes through that lens?

The poorest residents of Washington state pay nearly 13% of their income in sales/excise taxes, the middle pays 8%, and the wealthiest pay less than 2% (see: http://www.itep.org/pdf/wa.pdf). That's anything but neutral, fair or equitable. Any serious tax reform proposal has to address that fact, especially given that those revenues make up half of the state's operating budget.

The only realistic way to make the state's taxes more neutral, equitable/fair, etc. for people (not only businesses) is with a progressive state income tax - which the WPC opposes: https://www.google.com/search?q=washington+policy+center+income+tax

As for tax preferences, since both tax expenditures (breaks, loopholes, etc.) and revenue expenditures (direct spending) cost public dollars, why not just require all of it to part of the regular budget-writing process? That way, spending on tax breaks gets evaluated and voted on just the same as spending on health care, K-12 education, etc. That would be much more transparent process, subject to much more public oversight and review.

ba

Posted Thu, Mar 28, 4:17 p.m. Inappropriate

I've read over and over the same thing - that our sales tax is unfair to the low income people. I asked ITEP to send me a breakdown of their calculations, but they never did. Do you have any further info on how the 13% is calculated?

It just seems impossible to be that high. If someone making $20K a year pays, say, $500/mo rent, $200/mo food, that's nearly $10K per year untaxed. If the entire balance, $10K, was subject to sales tax at roughly 10% the tax would be only $1000. That's 5%, *not* 13%. In all likely hood, it would be lower.

Please explain where I went wrong.

pragmatic

Posted Thu, Mar 28, 9:32 p.m. Inappropriate

Just did some Googling on that - looks like you can read all about ITEP's methodology on their website.

A simplified version is here: http://www.itepnet.org/about/itep_tax_model_simple.php

A complete description is here: http://www.itep.org/about/itep_tax_model_full.php.

And they published an overview in their latest "Who Pays?" report:
http://www.itep.org/pdf/whopaysreport.pdf#page=133

ba

Posted Thu, Mar 28, 9:44 p.m. Inappropriate

Fair and equitable aren't in the constitution, so why use them as a measuring stick for anything? Those are value judgements and differ from person to person and from group to group. Not a sound basis for taxing anything.

The poor have never paid 13% of their income in taxes, unless of course you're talking about alcohol and tobacco taxes, and that's a choice they make. I suppose if you wanted to help them out you'd drop those taxes to zero. Exclude those two items and the poor don't have the money to spend that generates a tax burden of 13%. Your link has pretty bars and graphs but no substance or methodology about how the poor in Washington State really spend their money. It's entire purpose is to paint a dire picture and promote an income tax. It's bullshift.

Djinn

Posted Sat, Mar 30, 5:04 p.m. Inappropriate

Your realize there's a difference between modeling and reality? I've read your links, thanks for posting them, however I don't think this organization has it's oars on different sides of the boat. I gather they really really really like progressive personal income taxes, think California and Oregon, and we should adopt it.

Last I heard California wasn't exactly thriving, what with several large cities declaring bankruptcy and major unfunded pension problems at all levels within the state. Then there's Oregon, which exposes the truth of this taxing model. Read it here.
http://www.oregonlive.com/opinion/index.ssf/2013/03/oregon_depends_on_income_tax_b.html

Djinn

Posted Thu, Mar 28, 11:52 a.m. Inappropriate

The concept of having each entity parcel its expenditures into three priority groups sounds good at first. If only it were so simple.

This algorithm makes the assumption that each agency or budget writer has the same overall priority. For example, that means school funding, public defenders, freight mobility board, etc. all are equally important and each shall have the same percentages of their budgets funded.

In real life, that just isn't so. Entire departments can be closed, implying that they were valued less than other entities. So, it still remains to congress (or the voters) to decide how much money each entity should get. From there, the priority algorithm can work.

pragmatic

Posted Thu, Mar 28, 2:24 p.m. Inappropriate

pragmatic,

You are right in your observation to a point. The way POG was implemented also generated information regarding the government activity under review. There is value in this information, despite the diversity of values perspectives that are inherent in public budgeting. So many decisions are taken in the Legislature in a nearly information free environment that even minor improvements are to be cherished!

Sounder

Posted Mon, Apr 1, 7:16 p.m. Inappropriate

"Revenue Neutral"- thats a great idea, IF, and only IF, we stay Demographic Neutral as well-
to function with Revenue Neutral budgets and taxes, we need-

Neutral Population- no growth, no inward state immigration, no more children born than oldsters die.

Neutral Incomes- no recessions, no layoffs, no Boeing downsizing, no changes in the absolute number of employed people, or ANY of the services they use. All businesses MUST keep making the same amount of money as last year, so they can keep paying the same taxes. NO slumps. No innovation or competition that will change business in any way will be allowed- we need that B&O; tax from those buggy whip makers.

Neutral Health- now, nobody is allowed to get old and get heart problems, or diabetes, or emphysema- because the health budgets are Neutral. Certainly, no infectious diseases can be allowed in the state.

Neutral Weather - no storms, landslides, floods, volcanic eruptions, forest fires, or earthquakes allowed on my watch, no-sirree.

Neutral Global Influences- all interest rate changes, inflation, global increases or decreases in the cost of apples or oil or coal or steel had better stop right at the State border, right? And no other country is allowed to change anything, either.

Neutral Age- no aging allowed- because old people use more government services, which ruins our Revenue Neutral setup we got going here. So, just stay 29 forever, please.

Neutral Entropy- no steel is allowed to rust, no concrete can crumble, no freeways can be worn by truck traffic, no 80 year old ferry engines can age another minute- All physical infrastructure has to be frozen in amber and not degrade in any way, forever.

There- done.

Ries

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