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Wednesday, November 18, 2009

Worsening budget deficit will interfere with Democratic legislative ambitions

Tomorrow, the Washington State Economic and Revenue Forecast Council is due to release its latest revenue forecast, which is expected to show that the state's budget shortfall will reach a staggering $2.5 billion.

Governor Chris Gregoire and legislators have been preparing for the 2010 session under the assumption there would be a shortfall of between $1.5 and $2 billion, with the latter being the worst case scenario.

But it's probably going to be even worse than that.

Painfully colliding with this reality is House Speaker Frank Chopp's agenda for the 2010 session, which is still in draft and has yet to be approved by the House Democratic caucus. The agenda, which Chopp outlined in a presentation to King County Democrats last Sunday, comprises several initiatives.

They include improving healthcare coverage for children (Apple Health), strengthening environmental protection (EverGreen Washington), and bolstering higher education (Opportunity Pathways). Among the more specific agenda items in Chopp's presentation was a bullet which read:
Hold the line
Protect against further cuts in services for people with mental illness, developmental disabilities, long-term healthcare needs, and chemical dependency.
There was a similar bullet under the "Paramount Schools" slide which read:
Recharge the system
Re-direct existing revenues and increase funding for public schools, at both the state and local levels.
We wonder whether such objectives are realistic or even possible, considering how serious the budget shortfall is. We say this not because we don't agree with these objectives, but because we doubt the Legislature has the courage or the resolve to find enough new revenue to prevent cuts to essential public services.

After December, Democrats will be able to set aside the undemocratic, unconstitutional restrictions imposed by Tim Eyman's Initiative 960, but it is unlikely they will raise any of the state's three major sources of revenue (the sales tax, property tax, and the business and occupation tax). Sin taxes and fees will probably go up, however, and some of the more odious and unnecessary tax exemptions might be repealed. But that won't raise $2.5 billion.

Washington State might not be in such a pickle if we weren't so dependent on consumption taxes. A new edition of the Institute on Taxation and Economic Policy's report Who Pays? was released today (PDF), and we get the dishonor of being the state with the most regressive tax structure. That's right: Out of all fifty states, Washington's tax structure is the most backwards. We're worse than every state that is governed by Republicans. That's pretty appalling.

Here are some actual numbers: Washington's poorest residents pay an average of 17.3% of their income in taxes, and middle income families pay about 9.5%. But the Evergreen State's wealthiest families pay only 2.9%.

This situation has existed for years, and was discussed in the Gates Commission report released back in 2002, but the Legislature has chosen to dither rather then do anything about it. Tax reform, even though it is desperately needed, is simply not on the House Democratic agenda that Frank Chopp presented.

We have to ask: Why are we wasting this crisis?

It makes little sense to lay out a grand progressive action agenda when existing services are in danger of being eviscerated:
The governor said that to cut $2 billion, the state could eliminate all community colleges, close the Department of Commerce and close the Department of Revenue, and it would still only eliminate $1.72 billion. Cutting all state funds for the University of Washington and Washington State University would save $1 billion.

And closing the Department of Corrections would be $1.6 billion.

She did not advocate doing any of those things.
So, to summarize, we've got Frank Chopp talking about helping with student loans whilst we have Governor Gregoire saying existing financial aid is in danger of being wiped out. By acknowledging the elephant in the room, Gregoire is at least sizing up the challenge and making it concrete, which is critical.

The same cannot be said of Speaker Chopp, who should be delivering half hour presentations discussing options for tax reform rather than offering better and more memorable names for progressive policy directions.

Comments:

Blogger Sarajane46th said...

I agree with your timely post. We definitely need to repeal I-960, repeal some of the non-performing tax breaks and begin to tax the wealthy who've had all the benefits of this state's #5-ranked business climate to make their millions. The reason we are the 8th most taxed state in the nation is that we have the 8th highest personal income. I suggest we tax services in the same way that we tax goods, since this is now a service economy, that we tax financial transactions as NY does, and that we reform the L&I retro system so that it doesn't pay excessive rebates.

November 19, 2009 2:47 AM  

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