Washington State Budget Woes: Where’s the Beef?

This is fairly off-topic (although we have covered this subject occasionally in the past), but with all the teeth-gnashing I’ve been reading about lately regarding the latest round of supposedly major cuts required to keep state spending in line with revenues, I thought it might be interesting to look at a couple of charts on the subject.

Here’s an example of the rhetoric floating around out there regarding the latest round of budget tightening, with the governor making the case for a “temporary” sales tax increase:

Seattle Times, November 21: Gregoire proposes half-cent sales-tax increase

Gregoire wants lawmakers to put a referendum on the March ballot asking for a temporary half-penny boost in the sales tax, which would bring in nearly $500 million a year. The tax would expire after three years and largely would go toward education, with smaller amounts for public safety and social services.

The governor’s proposal came after she outlined more than 160 proposed budget cuts to fill the gap. The cuts included eliminating state-subsidized health insurance for the working poor; reducing the K-12 school year by four days; and allowing early release of prisoners who are at low to moderate risk of reoffending.

Some reductions would be rescinded if the tax increase is approved.

“I have seen the ramifications of the cuts,” Gregoire said. “I can’t live with it.”

Today, protesters descended on the state Capitol in Olympia to protest these allegedly intolerable cuts.

Here’s a look at Washington’s total budgeted spending for each biennium, with the budget hole that everyone is making a big deal about overlaid in green:

Washington State Spending by Biennium

When the total budget is $74 billion, cutting $2 billion doesn’t seem like quite as big of a deal. We’re talking about 2.7% of the budget. It also seems worth noting that even with these annual cuts we keep hearing about, the total budget has still managed to grow 5.2% since the 2007-2009 biennium.

Of course, straight dollars don’t quite tell the whole story, so here’s a chart in which I’ve indexed total state spending to 100 in the 1999-2001 biennium, and plotted it alongside an index of population, multiplied by the growth in national CPI (less shelter):

Washington State Spending by Biennium

State spending has managed to grow a total of 61.7% over the last twelve years (after the $2B in cuts), vs. a total growth of 55.5% for population times inflation. So I can’t help but wonder… where exactly is the pressing need to increase state taxes or cut vital services?

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

60 comments:

  1. 4
    robotslave says:

    @3

    And let’s not forget that every child would have a required minimum amount of food, parents would go to meetings with food providers to improve the food, your kids wouldn’t be allowed to say grace, food would be free to everyone with the cost covered by property taxes, your childrens’ future food would depend on how well they ate and on their after-food activities, deeply religious people would practice subsistence agriculture, food reformists would push for food stamp programs and pilot foods, and…

    …well, you have to admit, the analogy was pretty stupid to begin with.

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  2. 5
    robotslave says:

    Tim, I’m quite confused. I’m looking at the governor’s budget proposal, and I’m having a lot of trouble squaring the numbers you’ve cited with the numbers in the report.

    I’m specifically having trouble comparing your charts to this chart (pdf).

    In the governor’s chart, there’s a total budget of 23.8 billion, of which 15.1B is protected; the 1.4B revenue shortfall needs to come out of the 8.7B in discretionary spending (they round up to 2B to allow room for error in revenue projection).

    A 2B cut from 8.7B in discretionary funds seems like a much bigger deal than the 2B cut from 76B in spending in your chart.

    What’s the source of this rather sharp discrepancy?

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  3. 7

    Does anyone really believe a tax increase proposed for “only” three years would last for only three years? Also, if we’re dealing with a biennium budget, why does the tax increase need to be for three years?

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  4. 8
    doug says:

    A couple notes:

    There are a lot more people living in poverty than there were pre-crash. This also likely explains some of the growing budget. Cutting services when people are already hurting can cause quite a bit of pain. I’d rather pay a bit extra. But I’d also rather we didn’t have an enormously regressive tax. C’est la vie.

    A lot of budget woes at bothe the state and federal level can be directly tied to two things that people don’t really want to talk about.
    1) Too many baby boomers are retiring, and we never put enough money away for them. This has been a known problem forever, but people simply have been living in denial, hoping that someone will magic it away.
    2) Health care costs are increasing far faster than wages.
    If you’ve paid even cursory attention to budgets in the last 5 years, you know this.

    The sad truth is, the boomers haven’t start retiring en masse. That’s when the stuff hits the fan. Pensions will be cut, or else we’ll get even more ridiculous ideas, like Lindsey Graham’s proposal that we pay all benefits full strength for everyone retiring by making the younger generation work until they’re 70. You know, rather than raise taxes a bit. Pure generational and class warfare and totally disingenuous denial of the actual problem. If that happens, prepare for real riots.

    Note: Why is “cuts” in scare quotes? That is silly. Gregoire demands “increase” in taxes.

    That’s not to say that certain things aren’t ridiculously expensive. $5 BILLION to replace the 520 bridge? (with little added functionality) $400 MILLION spent on the project before anything has actually been done? That pays for over 400 state engineers working full time on this thing for 10 years. How did they spend that? Time to get better contractors, WA.

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  5. 9

    RE: Dan @ 2

    I Can Speak for Health Care

    I do bio-engineering board work for a small medical care service company. The cost of health insurance has been escalating for those of us lucky enough to have health insurance, IMO, to help subsidize/pay for the parts of health care coverages [i.e., Medicare/Medicaid or none at all] that cover only 0-30% of the actual costs….it would explain why health care reform had no tax increase [albeit there is a hidden tax increase] and 70% of the uninsured in health care reform will be dumped on totally inadequate Medicaid.

    As we hit 2014 and assuming the Supreme Court allows it, making all of us without health insurance buy it, will really be a sock in the Seattle area real estate stomache IMO, as it drains what’s left of our net pay way down lower and less will qualify for adequate loans.

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  6. 10

    RE: Hugh Dominic @ 3
    I Can Speak for Private Adult day Care Versus Special Ed at Public Schools

    The private school costs about $360/mo for caregiving families, versus public….but the hours are longer, the food is free and they pay and arrange all transportation costs….

    The programs are more varied and the staff less intrusive too.

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  7. 11

    RE: Kary L. Krismer @ 7

    You’re Right Kary

    The minute they get into our pocket book, their hand is super glued to it.

    I watched Olympia transform into a clogged transportation mess as state government over-grew the last 5 or so years, it used to be sparce traffic in the good ole days before state over-spending….have you driven I-5 lately by Olympia and the Army base lately at rush hour? A parking lot.

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  8. 12

    Gregoire Has Occuppy Seattle Forces Attacked With Weapons Over Budget Deficit Sales Tax Increase

    Article in part:

    “…“The poor and underprivileged have been taking the brunt,” he said. “How do you make cuts when others have been so greedy?”

    Karen Washington, a Spokane home care worker, said she’s worried about how cuts could affect her clients’ ability to pay for medication, as well as their impact on her as a worker. Washington said that while the state needs to raise revenue, the sales tax increase proposed by the governor would hurt low-income workers like herself.

    Washington said she hopes lawmakers consider other taxes, including removing tax exemptions for some businesses.

    “It’s not an either or situation,” she said. “It’s not sales tax or cuts. It’s not education or health care. They have other options.”…”

    http://seattle.cbslocal.com/2011/11/29/occupy-protesters-tasered-arrested-at-washington-state-capitol-building/

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  9. 13
    interested says:

    I want things but I don’t want to pay. Police, Fire Dept., Parks, Hiking Trails, no that is not it I only want to pay for things I want — I don’t need the Police I can take care of myself so why should I pay for that service? I always find it funny about taxes — no one wants to pay BUT everyone wants those specific items that benefit them — if you think that is not true I believe one can find for themselves at least one item that is paid for by taxes that effects you directly – – and that one thing may not affect a lot of other people. It is not socialism to be social and have a commitment to community and nation.

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  10. 14

    By interested @ 13:

    I always find it funny about taxes — no one wants to pay BUT everyone wants those specific items that benefit them

    That’s why I seldom vote for initiatives–they’re almost never revenue neutral.

    Years ago the citizens of Washington voted to issue a large amount of bonds to pay for road construction.

    The next year, Tim Eyman’s first $30 car tab initiative passed, wiping out the existing method to pay for the bonds.

    So the voters wanted roads, but didn’t want to pay for roads.

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  11. 15
    robotslave says:

    OK, Gary, I spent some time looking over the budget breakdown, and I guess I’m still confused.

    Tax revenues go to the General fund. The 1.4B shortfall is in tax revenue. This suggests that cuts have to be made in the General fund. Is this not the case? Could the legislature instead cut other parts of the budget, and transfer the savings into the General fund?

    The Governor seems to think 2B in cuts have to come out of 8.7B in discretionary spending in the General fund, because things like grants and federal and local funding can’t be transferred into the General fund.

    Tim seems to think the 2B in cuts could be made from the total 76B state budget.

    Who’s right?

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  12. 16
    The Tim says:

    By doug @ 8:

    There are a lot more people living in poverty than there were pre-crash. This also likely explains some of the growing budget.

    Almost all of the difference in the two lines in that last chart opened up before the crash. ’05-’07 difference: 12.6 points. ’11-’13 difference (pre-cuts): 10.7 points.

    Note: Why is “cuts” in scare quotes? That is silly. Gregoire demands “increase” in taxes.

    Because we’re spending $71B in the biennium ending in 2011. Lawmakers had planned to increase that by $3B to $74B in the 2011-2013 biennium. Even after the $2B in “cuts,” we’re still increasing spending by $1B over the current biennium. That’s why I put the quotes.

    That’s not to say that certain things aren’t ridiculously expensive. $5 BILLION to replace the 520 bridge? (with little added functionality) $400 MILLION spent on the project before anything has actually been done? That pays for over 400 state engineers working full time on this thing for 10 years. How did they spend that? Time to get better contractors, WA.

    Agree completely. Let’s also not forget that they spent ten years considering a variety of options for the Hwy 99 viaduct and in the end decided to throw out everything and choose an option even more expensive than the most expensive choice that was previously on the table.

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  13. 17

    By robotslave @ 15:

    OK, Gary, I spent some time looking over the budget breakdown, and I guess I’m still confused.

    Tax revenues go to the General fund. The 1.4B shortfall is in tax revenue. This suggests that cuts have to be made in the General fund. Is this not the case? Could the legislature instead cut other parts of the budget, and transfer the savings into the General fund?

    Assuming you meant Kary, I think those other items any dollar less spent would result in either a dollar less in revenue (e.g. less money from the Feds), or money locked in an account that can only be used for that purpose (e.g. road building). Neither would help with the budget deficit.

    This isn’t really my area though. I know enough to know that the state tax system is extremely complicated. If you don’t believe me, check out this link discussing how the Real Estate Excise Tax (REET) can be spent.

    http://www.mrsc.org/subjects/finance/reet/reetweb.aspx

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  14. 18

    By The Tim @ 16:

    Agree completely. Let’s also not forget that they spent ten years considering a variety of options for the Hwy 99 viaduct and in the end decided to throw out everything and choose an option even more expensive than the most expensive choice that was previously on the table.

    That’s the Seattle exception to my post 14.

    In Seattle you could propose an initiative for a new tax, where all the money collected would be flushed down a toilet, and it would pass 60/40.

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  15. 19

    […] disingenuously, I would think, Seattle Bubble’s The Tim is asking, in a post titled “Washington State Budget Woes: Where’s the Beef?” exactly why it’s so hard to make what look like incremental cuts. He’s not the […]

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  16. 20
    doug says:

    “Almost all of the difference in the two lines in that last chart opened up before the crash. ’05-’07 difference: 12.6 points. ’11-’13 difference (pre-cuts): 10.7 points.”

    My point is, more people are depending on an already tight state budget to get them through this rough period. A lot of fat has already been trimmed from social services, methinks.

    “Because we’re spending $71B in the biennium ending in 2011. Lawmakers had planned to increase that by $3B to $74B in the 2011-2013 biennium. Even after the $2B in “cuts,” we’re still increasing spending by $1B over the current biennium. That’s why I put the quotes.”

    Well, now I feel silly. That makes sense. Although I’m pretty sure that that budget increase is actually below a simple increase for population growth and interest.

    “Let’s also not forget that they spent ten years considering a variety of options for the Hwy 99 viaduct and in the end decided to throw out everything and choose an option even more expensive than the most expensive choice that was previously on the table.”

    Don’t even get me started. That was the worst. I’m so glad I moved out of Seattle, as much as I love my birth city.

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  17. 21
    interested says:

    RE: The Tim @ 16 – Tim who is the magic THEY — it seems it is alway easier to blame THEY or to say THEY did it but come on the majority of people — not the THEY but the MAJORITY took their time on all sorts of options when it came to transit — because if WE had decided that the first initiative decided the issue based on democracy — one person one vote — then the second or third initiatives were not worth OUR time — those items would not have been on a ballot so then WE would not had to vote for again and again about the same item. I just don’t get it this THEY argument.

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  18. 22
    The Tim says:

    RE: interested @ 21 – As far as I know there was only ever one public vote related to the viaduct before the deep-bore tunnel was deemed the chosen option: the March 2007 yes/no vote on tunnel and replacement, in which both “Surface-Tunnel Hybrid” and “Elevated Structure Alternative” received more “no” votes than “yes.”

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  19. 23
    Scotsman says:

    Aw, give ‘em the money you greedy buggers. It’s for the children. /sarc

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  20. 24
    gr8day says:

    Good topic Tim.

    Sometimes I think that I would like to see an income tax, not increased sales tax. The main reason the Governor wants to raise the sales tax, is to keep benefits for the poorest. But if we increase the sales tax, the poorest are hurt the most. According the Seattle Times, “the poorest households in Washington pay 17% of their income in taxes, while the top percent pay less that 3%.”

    Sometimes I think that if we did enact an income tax, the state legislature would eventually have everyone at 10% income tax, plus sales tax, and there would be another spending spree.

    Sometimes I think we need to be sure we are really helping those who cannot help themselves. We should focus on deciphering between the unable and the unwilling.

    Sometimes I think we just need to spend less.

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  21. 25
    Matt the Engineer says:

    RE: gr8day @ 24 – “Sometimes I think that if we did enact an income tax, the state legislature would eventually have everyone at 10% income tax, plus sales tax, and there would be another spending spree.”

    That seems to be a common theme of thinking the goverment spends as much as it can. I don’t share this fear, but I think it’s an easy one to solve if we wanted to. Component 1: Just make a rule that the state government can only collect $X (where X is indexed to inflation), and it can’t collect more than that without a public vote. Component 2: Remove all of our silly restrictions on what you can tax – gas money has to be spent on roads, we can’t tax income, blah blah blah. Everything is fair game. Component 3: Direct the legislature on what our general goals are. For example: Overall tax on below poverty level should be 1%, overall tax on median income should be 10%, overall tax on 1% top income should be 50%. Then let the legislature figure out the details, based on how best to meet these goals and shape society as they (we) see fit (global warming a problem? shift more tax toward emissions. productivity down? increase the marajuana tax. etc.).

    This is not rocket science.

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  22. 26

    By gr8day @ 24:

    Sometimes I think that if we did enact an income tax, the state legislature would eventually have everyone at 10% income tax, plus sales tax, and there would be another spending spree..

    Since the constitutionality of an income tax is greatly in doubt (notwithstanding the opinion of Bill Gates Sr.), I’ve always thought the best thing would be a constitutional amendment simultaneously allowing for an income tax and preventing a sales tax.

    Besides the regressive issue you mention, that would also allow for a more steady income flow to the state.

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  23. 27
    David Losh says:

    Actually you would, or should, look at California, Oregon, and Washington going back to the great migration of the 1960s. The West coast got an influx of people to California that migrated North.

    The real problems started then, and going into the 1970s with public hiring being the stimulus of the day. By the 1980s there were huge public sector hiring drives. We are now paying the pensions, and retaining those positions from that period of time.

    On top of that we added massive amounts of new employess to handle all of that new revenue of the 1990s.

    No one wants to cut, no one wants to look at ineffective departments, or administration. Every one wants to look at police, teachers, and fire people, no one wants to look at the thousands of government departments that do nothing but pay salaries.

    There are professors that make extraoridary salaries for hiding. You’ll find that a thousand fold in all corners of government. The problem is that once you fire these people you add to an already over extended welfare system because these people don’t know how to do anything other than go to meetings, and send memos.

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  24. 28

    A lot of the money in the state budget is protected, like Medicaid and state pensions. Medicaid has been taking an increasing chunk of the budget for quite some time. So without looking at both expenditures which are protected and also at revenues, those pretty graphs don’t mean a whole lot. Washington state has pretty high unemployment. Although the Seattle Bubble readership may make far more money than the state median income out there, there are plenty of people out there who have cut expenditures, maybe not unemployed but living hand to mouth. This reduces sales tax revenue to the state. Also, an increasing number of people buy things online as opposed to shopping at a local retailer. With that, the online folks generally don’t charge sales tax, further eroding the revenue to the state.
    So what are they supposed to do? Some of their expenditures they’re legally not allowed to touch, and those expenses are increasing. At the same time, revenues are down.
    The politicians are not without blame. When times are good, politicians are attracted to spending like flies are attracted to sheeyut. When times are good, that’s the time to be wise and exercise restraint, put money aside. But that horse is long out of the barn.

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  25. 29
    Basho says:

    You have to wonder because you are looking at numbers that you don’t understand. The first thing you need to do when evaluating the budget numbers is exclude capital expenditures. In corporate accounting when a company buys a building for 10,000,000 they record no expense at the time of purchase. The building is expensed over its useful life through depreciation. In government accounting, when the state buys a building for 10,000,000 they record an expenditure of 10,000,000 immediately. The second thing you need to do is use an inflation index that is relevant to the state’s cost of providing services. The state’s costs primarily consist of labor, so an index like the national employment cost index is far more relevant than the CPI.

    WA state had operating expenditures of $40.5B in the 1999-2001 biennium and $63.5B in the 2009-2011 biennium, for growth of 56.7%. For comparison the national employment cost index growth (for private sector workers using 1/01 as the start date an 1/10 as the end date) * WA population growth (from 2000 census to 2010 census) = 49.1%. Thus the growth of the budget in excess of that which would be attributable to increased wages and population amounts to $3.07B. Growth in excess of 49.1% in the categories of “Medical Assistance Payments and Long-Term Care” alone amount to $2.25B. In other words, 73.2% of the “excess growth” in state spending is accounted for in the “excess growth” of those two categories alone.

    Pension expenditures aren’t a significant factor in these numbers, as only contributions the state makes to the pension plan are counted as “expenditures”. The change in net pension liability (the difference between plan assets and the estimated plan liabilities) has no effect on the expenditure or budget numbers. Pension checks don’t affect the numbers either, as these are paid out of plan assets.

    It is difficult to makes cuts of $2B because there are legal and practical barriers preventing the reallocation of most funds in the state budget. For example, the state cannot just cut transportation spending by $2B and use the money to fund Medicaid because the State Constitution dedicates gas tax money to “highway purposes”. Fortunately government accounting separates out legally restricted funds from legally unrestricted funds. Unrestricted funds are accounted for in the “general fund”. In Washington the general fund is economically the “Near General Fund” which includes separate funds used to fund general fund purposes. Over 90% of the approximately $30B near general fund is used to fund higher education, K-12, Medicaid, other DSHS services, corrections, bond retirements and interest payments. All the big money is protected by legal requirements (e.g. K-12, Medicaid, debt service). So the choices are to either raise taxes, drastically cut unprotected programs (like higher education), or cut protected programs and risk a court injunction preventing those cuts from going into place.

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  26. 30
    Jonness says:

    By Kary L. Krismer @ 26:

    Since the constitutionality of an income tax is greatly in doubt (notwithstanding the opinion of Bill Gates Sr.), I’ve always thought the best thing would be a constitutional amendment simultaneously allowing for an income tax and preventing a sales tax.

    I think the best solution for Federal taxes is to spend less. We can start by capping Medicare and Social Security for 5 years during which we cut the Military by 5% per year.

    As for State taxes, cut…

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  27. 31
    wreckingbull says:

    Pretty sad how we like to screw those who need help the most. I have a family member that collects six figures in state pension, collects social security, and has now gone back to the state to work on short-term contracts. Triple dipping. Can’t touch her pension though, as that would be illegal, and ooh we won’t want to end up court.

    Meanwhile, some poor sap is trying to enter their junior year at a state university and is already 90K in the hole, with only the prospect of minimum wage jobs when he graduates.

    Good times! The more I see us swirl down the crapper, the more I realize that some sort of violent upheaval is probably how this all pans out.

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  28. 32
    Azucar says:

    RE: Jonness @ 30

    “I think the best solution for Federal taxes is to spend less. We can start by capping Medicare and Social Security for 5 years…”

    I agree, or will even go further by saying I think the age threshold for Medicare and Social Security should be raised by a couple of years. People always get up in arms about doing things like that because “it’s taking away what was promised and what they paid into the system during their working years”, but I say that the benefit is continually growing and growing even if it remains constant because life expectancies have been increasing. Back when the life expectancy was in the low 70’s, having a standard starting age for SS benefits of 65 meant someone could expect to collect them for about 6 or 7 years. Now that life expectancies are in the high 70’s people can expect to collect the benefits for twice that length of time… with the increase of the age to 68 that has been addressed a little, but obviously not nearly enough (I’m pretty sure that life expectancy has increased by more than 3 years in the time that SS has been around).

    Starting the benefits at a later age isn’t “taking away” anything. It’s adjusting the system to reflect what is happening.

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  29. 33
    WatchHom says:

    They should limit the state or federal government employee pensions to no more than $100k/year per person. I can’t image that government employees who enjoy the best benefits and the most stable job with least stressful work still collect more than 6 digits annual pension. It’s outrageous! How can fund for pension is protected but fund for other public services isn’t protected? The cut seems always start with public services and education but not from the inefficient government employees.

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  30. 34
    2kt says:

    RE: WatchHom @ 33RE: softwarengineer @ 12

    $100K for a pension limit? Some limit that is; name a few private sector pensions that pay that kind of change?

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  31. 35
    Dan Panic says:

    100k pension! I can’t imagine many positions in state government that should warrant a pension like that.

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  32. 36
    Macro Investor says:

    I always vote against any increase in revenues. No matter what it’s for, or how large or small. Why? Because 90% of what gov spends is a waste. It’s all just insider deals with lobbyists, hiring friends/relatives, political patronage and outright theft.

    Ask yourself this — if your personal spending was 3% too high, how hard would that be to fix? One less latte? Yet, politicians won’t even make an honest attempt. STARVE THE BEAST.

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  33. 37

    By Ira Sacharoff @ 28:

    Washington state has pretty high unemployment.

    There was a state legislator on King News recently who was quoted as saying that Washington had the highest unemployment in the country and that his county (Mason) was the highest in the state. I know the former isn’t true, and really doubt the latter is.

    These are the people making decisions for us!

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  34. 38
    wreckingbull says:

    RE: 2kt @ 34 – Or, better yet, name a few (available for new employees) private pensions PERIOD. Not too many left.

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  35. 39
    John Bailo says:

    I’m not sure what details of the “Population Index” are…growth times inflation?

    The growth in Washington State in real population was a mere 13 percent overall.

    http://goo.gl/t2R0g

    And given shrinking housing prices, that should mean lower costs of living, not higher.

    Having a Government grow 4 times the growth in population, and then end up unable to meet that same budget, and to ask for percentage increases in retail tax (after bloating it from 8% to 10% in the first place) seems like robbery to me.

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  36. 40

    RE: Kary L. Krismer @ 37
    Ferry County and Grays Harbor County both have unemployment over 12%. Mason’s is 9.9%.
    As of October 2011, the unemployment rate in the state was 9.0%, the same as the national average. I looked it up. You’d think members of the state legislature would also have that ability.

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  37. 41

    RE: wreckingbull @ 38
    Not very many private pensions left, but there still are private 401k’s were the employer matches the contributions of the employee. Also, in many public pensions, there have been changes for newer employees requiring both 30 years of service and 65 years old before being able to collect a monthly amount without a penalty. In WA state, PERS III is a small defined benefit plan combined with the employee selecting from a number of mutual funds and other investment choices. I know folks in this plan who can’t retire because they made investment choices that didn’t work out as planned. They were given a choice 10 or 15 years ago of keeping their pension money in the regular defined benefit plan or switching to the new plan offering them more choice and responsibility.
    I’m not sure that giving people choices in things they know nothing about and who don’t really have the skills to figure things out is such a wise move.

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  38. 42

    RE: Ira Sacharoff @ 40 – I think Ferry County is almost always one of the highest unemployment areas in the state. Sort of makes you wonder . . ..

    Parts of Mason County are benefited by federal employment, such as whatever they call Puget Sound Naval Shipyard now. It would be very surprising for them to have one of the highest rates. As you mention, you’d think a representative from their area would know that.

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  39. 43
    wreckingbull says:

    RE: Ira Sacharoff @ 41 That is why the traditional public pension is such a gold mine for the recipient. Taxpayers make up the difference between market returns and golden promises.

    When my 401K balance went pear-shaped in 2008, all I heard was crickets chirping.
    In your example, those that chose the 401K-like vehicle lost out because they lost the taxpayer backing.

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  40. 44
    Jason says:

    RE: Basho @ 29 – So after Bosho’s informative explanation to The Tim’s query, there’s still a political faction that doesn’t believe “the choices are to either raise taxes, drastically cut unprotected programs (like higher education), or cut protected programs and risk a court injunction preventing those cuts from going into place.” ???

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  41. 45

    RE: Jason @ 44 – There’s also impossible options, like make government efficient. ;-)

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  42. 46
    F says:

    The proper measure of how much money is spent by government is as a percentage of Gross State Product or as a percentage of Gross State Income (which should be identical by identity). By that measure, taxation in this state has basically not changed in 35 years: http://www.taxfoundation.org/taxdata/show/486.html. The dramatic apparent increase in the state budget comes entirely from a combination of inflation, population increase, and increase in incomes.

    A total of 9.3% of the Gross State Income goes to state and local government, below the peak of 9.9% in 1995, and below the national average of 9.8%.

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  43. 47
    F says:

    I have a theory that people are especially unhappy about taxes in Washington because they are so incredibly regressive. In fact, they’re the most regressive in the country (We’re No.1!): http://www.itepnet.org/whopays3.pdf

    Averaged over the entire population of the state, we only pay 9.3% of our income for state and local taxes. But, the average person pays more like 15% of their income in state and local taxes, and the bottom 80% of earners on aggregate pays about the same. And the top 20% pays only about 6% of their income. So if you ask the average person if they want to raise taxes, the answer is “hell, no”. Because they are already paying a higher proportion of the taxes than the top 20% of earners.

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  44. 48
    expatom says:

    Tim, Roboslave brings some actual facts into the discussion that shows the lie of your graphics (however unintentional). More than two-thirds of the state budget is tied up legally and cannot be moved around by the Governor or the Legislature. Once you look at just the General Fund, which is the only portion that can be freely moved around, you realize that the additional cuts coming down the pike are not trivial as you have spuriously suggested. There are some good arguments for not increasing the sales tax, but man up to the fact that without it there will be sharp pain dealt to a lot of venerable people, including kids whose parents cannot afford private school. You really should do better research before putting this kind of stuff out.

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  45. 49
    The Tim says:

    By expatom @ 48:

    More than two-thirds of the state budget is tied up legally and cannot be moved around by the Governor or the Legislature.

    Don’t the governor and legislature make the laws, a.k.a. define what is legal? And if we’re in such an emergency situation, doesn’t that justify taking those sorts of extraordinary measures?

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  46. 50
    Scotsman says:

    RE: Ira Sacharoff @ 41

    “I’m not sure that giving people choices in things they know nothing about and who don’t really have the skills to figure things out is such a wise move. ”

    Ira- you surprise me- I had no idea you were such an elitist. ;-) If we let them vote, where they can have an impact on many people’s lives, why not let them plan and care for their own retirements? In reality few beat the market. So adequate retirement is more a function of the compounding returns you assume verses what the market gives. In short, everybody wins or loses together.

    Of course, we could come up with something like social security which is really nothing more than a ponzi scheme based on tax receipts and call it a retirement plan, but what fun would that be?

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  47. 52
    gr8day says:

    RE: Pensions

    I watched a TV show about a year ago about a city that had spent its entire pension fund. Literally robbed the fund to pay for services. The 75 year old former police chief was now a mall cop. They featured a little old lady – former teacher and widow that had counted on her pension as she had paid into it, but the city stopped sending her money every month. It was a “60 minutes/dateline/48 hours/documentary” type of show.

    It really woke me up to the fact that our legislators can do this – spend retirement funds until they are completely gone. If one city can do this, than others can too – even the feds can overspend to the point that SS is nothing (or next to nothing) – even for those that paid in for 40 years.

    I wish I had written down the name of the city, as I cannot recall it right now. I still remember the interview with the mall cop and the retired teacher – their faces are seared in my memory. These people do not have 100K pensions – more like 12-20K. The very thought of a 100K public pension is offensive.

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  48. 53

    By The Tim @ 49:

    By expatom @ 48:
    More than two-thirds of the state budget is tied up legally and cannot be moved around by the Governor or the Legislature.

    Don’t the governor and legislature make the laws, a.k.a. define what is legal? And if we’re in such an emergency situation, doesn’t that justify taking those sorts of extraordinary measures?

    Not necessarily.

    If the Feds give the state money to be spent on roads, it has to be spent on roads. The alternative is to not take and spend the money, but there’s no change in the deficit.

    If the state borrows money on a bond to be spend on a bridge, it has to be spent on a bridge. Again, not doing it will not change the deficit, and secondary effects might actually increase the deficit.

    When it comes to K-12 education, the state’s constitution mandates minimal expenditures, and courts have sometimes issued rulings in that area which need to be complied with.

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  49. 54
    Macro Investor says:

    By gr8day @ 52:

    RE: Pensions

    It really woke me up… even the feds can overspend to the point that SS is nothing (or next to nothing) – even for those that paid in for 40 years.

    Glad you are aware now. I wish everyone would “wake up”.

    BTW, SS is spent every year on other things. When you hear the US budget is “in deficit” that means the total amount of taxes, plus SS and medicare taken out of our paychecks, is spent. Plus they borrowed a trillion or 2 and spent that too. Those 40 years of payments aren’t in a savings account somewhere. They’re gone.

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  50. 55
    expatom says:

    Kary’s post gets at the reasons why so much of the budget is tied up. If voters approve a property tax levy for flood control for example, it is both illegal and unethical to use a dime of that money for anything else. At a minimum, it would require a new statewide referendum to free up any of that cash for something else. The county is in the same position: of a $5+ billion budget only about $600 million is fungible between programs through the general fund. So the relevant denominator in your stats is the general fund.

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  51. 56
    gr8day says:

    Macro @54 RE:Pensions/Social Security

    I understand that the premise with SS is that the current workers pay for the current retirees, So, yes I do realize the $$$$ I have sent in for many years has been spent.

    I once read an opinion that one of the things we can do is allow younger LEGAL immigrants to this country. It would beef up the number of those that will be paying for the baby boomers.

    I can’t believe it is legal for a city council to spend the pension fund. Just like some of the posts here – road money has to go for roads, eduction money has to go for education. Shouldn’t the $$ people pay for their pension or SS be spent on pension/SS???

    And again, a 100K public pension is offensive, I am still offended.

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  52. 57

    RE: gr8day @ 56 – In the private sector a lot of pensions are underfunded. Apparently the public sector has no more of a legal requirement to fund such things either.

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  53. 58
    gr8day says:

    Kary @57.

    While I understand that private/public pension are underfunded. They have estimated 8% returns when that is unlikely, they are not taking in enough to cover what they had promised etc etc….

    It is quite another thing to intentionally spend the funds on something else – to the point that there is nothing left. And then stop sending the 80 year old widow in the trailer park her monthly pension. And this was done by city officials. Oh how I wish I had written down the name of the city. I tried to find it on-line, but cannot seem to find it now.

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  54. 59
  55. 60
    ChrisM says:

    RE: Kary L. Krismer @ 57 – Even better, the federal program to guarantee failed private pensions is certainly bankrupt as well.

    http://www.washingtonpost.com/business/economy/government-pension-agency-braces-for-american-airlines-bankruptcy/2011/12/02/gIQA4LYEMO_story.html

    “The Pension Benefit Guaranty Corp. is already facing a $26 billion deficit, the largest in its 37-year history, after being staggered by company failures across the country during the recession.”

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