Gregoire vs. Rossi: Budget Footnotes

After two debates between Governor Chris Gregoire and former state Senator Dino Rossi, the budget has taken center stage. And even though we’re dealing in facts—straight budget numbers—the candidates have two completely different versions of the budget story. It’s a little maddening to listen to.  

Gregoire has repeatedly insisted that Rossi doesn’t  “understand the values of the people of the state of Washington,” pointing out that Rossi balanced the 2003 budget “on the backs of seniors and children.” And ultimately, she explains, Rossi’s budget created a $2.2 billion deficit anyway—which she had to balance.  

Rossi, for his part, has insisted that Gregoire is a “tax and spend liberal” and that her current budget is careening toward a $3.2 billion deficit.

Their respective responses? Rossi claims that he didn’t leave a deficit. Gregoire claims the state currently has a surplus. 

I tried to get to the bottom of this disagreement after their first debate. I’m not sure I was successful. 

Thank God then, that at their second debate last week, moderator David Postman pulled a question out of the hat (questions at the Association of Washington Business debate last week were submitted by AWB members) that addressed the budgeting stand off.

Postman, in his last gig as chief political correspondent for the Seattle Times before starting his new job in media relations for Vulcan, by the way, quoted a question from AWB member Jim Suits, president of Summit Capital Advisors in  Tacoma.

Postman: “Governor Gregoire, you claim you inherited a  $2.2 billion deficit from the budget written by Senator Rossi. Senator Rossi you say the budget was balanced and you detect a current problem the same way you did back then. You can’t both be right.” 

(Big laugh from the audience)

 “Here’s your chance to each take two minutes to try and convince us all you’re right.” 

Okay, HA readers, take off your partisan hats. I’m going to print both candidates’ answers verbatim.  

 Gregoire:

Well thank you for the question. The record is clear. When I came into office in January 2005,  Washington state was sitting on a deficit, a $2.2 billion deficit that we had to balance the budget with.  Now, how did we do it? Well, we lived within our means, and we also made cuts, and we also had some new revenue.

Now, I noticed my opponent is constantly attacking me for this new revenue. In fact he’s attacking the people of the state of Washington. Because guess what? When it came to the transportation investment, it was voted on by the people of Washington who said, ‘Yes it’s time we got  our infrastructure up and growing. We want safety. We want congestion relief. Just invest.’ And that we have done. And we have shown results

 The other thing they said is, ‘You know what, we’re also going to agree we need to have an estate tax in this state, making sure that that top one percent are paying for education’ — that’s where the money is dedicated.  Sixty two percent of the people of the state of Washington said that’s what they wanted to have done.

So we balanced the budget then, we can balance it again.

But Let me be clear about the rhetoric you’re hearing from my opponent. Today we sit on a surplus. We are one of a handful of states that do. We have literal money in the bank. The projected, and I emphasize the word ‘projected,’ deficit is for 2011.  Who knows what happens between now and then, but I’ve already begun curbing spending. About $290 million. For example, I have said we will not be able to move forward with the Family Leave Act. It is suspended. I have made it clear that we are not going to continue to hire, and we are going to cut contracts. We’re going to save money and we’re going to continue because I want to continue to have one of the largest surpluses in the history of the state– which I left this last legislative session with. $850 million. Those are the facts. That’s the truth. I inherited a $2.2 billion deficit. And balanced the budget. And today we have a surplus.

 

Rossi:

Well, those aren’t the facts and this is the truth

(Audience laughs)

I actually resigned the state senate in December 2003—a year before she took office. And there were a couple more supplemental budgets written, and the incumbent, as AG, lost two lawsuits worth a half a billion dollars. So if there was a projected deficit, I think we need to look in the mirror.

The bottom line, though, is that an hour after she was sworn in as governor, even though during the course of the campaign she said, ‘Now is not the time to raise taxes, oh no we’re not going to raise taxes,’ one hour after she was sworn in, the Seattle Times asked her to repeat her no taxes pledge, [and] she says, ‘Oh well I never really meant no new taxes.’ Then she raised our taxes by $500 million including the death tax, which is chasing entrepreneurs out of our state. We need to eliminate the death tax in the state of Washington. 

(Audience applause)

Well, you know what. She’s going to raise your taxes again during the course of this effort, and it’s somewhat ridiculous, since I resigned a year earlier, [that] she blames me for somehow having a deficit.

What ended up happening, by the time the budget was written, money was flying into the coffers of the state. She raised taxes a half a billion dollars on the very same budget she was raising spending by 13 percent. That’s a classic definition of a tax and spend liberal if you ask me. That’s exactly what happened. There’s your truth.

Postman got the last word (and laugh): “Jim, I hope that cleared it up for you.” 

I’ll get to my footnotes (and my scorecard) on Gregoire’s and Rossi’s answers in a moment. But first, I checked in with Jim Suits at Summit Capital Advisors in Tacoma yesterday (who told me he’s a strong Rossi supporter) to see if he felt like the candidates answered his question. 

Nope.

“They both gave me what we often refer to at the office as an IRS answer,” Suits says, “100% correct and 100% useless.” Suits says that while both candidates are “good at spin,” neither one “got to the heart of the matter.”  And for Suits, “the heart of the matter” is: Why did balanced budgets, one balanced by Rossi and one balanced by Gregoire, both slip into deficits?  

“What Gregoire said was absolutely right,” Suits says. “Today, September 29, we do not have a deficit. And what Dino Rossi said is also right. We had a balanced budget in 2003. The issue I was trying to get to was, if they’re both right, how could we end up with a deficit?

Right. And the answer is this: Rossi’s budget wasn’t sustainable and Gregoire’s current budget isn’t sustainable. Democrats will tell you that these budgets aren’t sustainable because we have a revenue problem (thanks Tim Eyman), and we can’t meet all the needs that the public wants us to meet, like paying for quality education. And Republicans will tell you it’s a spending problem—because government is out of control.

The Democratic claim seems tied to a larger issue about Washington’s tax system: Our regressive sales tax doesn’t generate the kind of revenue that a progressive income tax would. It also seems subjective. For example, does everyone think spending $64 million to provide health care to 38,500 uninsured kids, as Gregoire did in 2007, is a state responsibility?

The Republican claim is inaccurate on its face. For example, when Rossi declared his candidacy in October 2007, he staked out his run on this fact: State spending had increased 30 percent under Gregoire. 

But his number didn’t address a relevant question to his “tax and spend” equation: Did spending increase because government raised taxes to get more revenues or did spending increase because a robust economy increased state revenues without a tax hike?

Guess what the numbers showed? The 30 percent increase in spending was directly tied to a straight up increase in revenues without a tax hike. Revenues were $22.5 billion in 2003 and they grew by 31 percent to $29.5 billion in 2007.   

As to the candidates’ answers to Suits’ question. Here are my footnotes and my scorecard.

1. Gregoire is absolutely right about the half-a-billion tax increase. According to Glenn Kuper at the state budget office, the estate tax—which voters reaffirmed in ’06—accounts for the tax hike. He says it brings in about $100 to $150 million a year. Score 1 for Gregoire.

2. Gregoire is technically right that we don’t have a deficit right now, and in fact, we have a surplus. But come on. The point is: Her program is not sustainable. Minus 1 for Gregoire.

3. The Family Leave Act is suspended? Okay, that sucks. And second: According to Sen. Karen Keiser (D-33, Sea-Tac)—Olympia’s leading advocate for family leave legislation—that’ll save us $72 million in the next biennium, knocking only about 2.2 percent off the projected deficit. Minus 2 for Gregoire.

4. Re: The $850 million surplus (a budget that included a heaping increase the state’s housing trust fund). Savvy budgeting. Plus 1 for Gregoire.

5.  Rossi: “We need to eliminate the death tax in the state of Washington.” Okay, all three people Rossi’s promise affects were in the fancy shmancy ballroom that night at the AWB debate. Meanwhile, 62% of the voters said they approve of the tax. Minus 1 for Rossi

6. Rossi says Gregoire raised taxes by $500 million and spending by 13 percent—making her a classic “tax and spend liberal.” Honestly, I don’t know what 13 percent  is a reference to. I emailed and called Rossi’s spokeswoman, Jill Strait, to get some clarity on that. (Rossi typically says Gregoire raised spending by 30 percent. I know 13 and 30 sound the same, but I’ve listened to the tape over and over, and he definitely says thirteen.) 

Strait has not responded. 

However, for starters, Rossi’s accusation that the $500 million in taxes is somehow odious doesn’t make sense. As Gregoire noted, the voters approved the money. Meanwhile, for his accusation to have any bite, there’s got to be a direct relationship between the $500 million in new revenue and the 13 (30?) percent spending increase. Namely, Rossi needs to show that the tax is burdensome and the spending is frivolous or out of whack. Given that Rossi hasn’t been specific about the fat in the budget, his point doesn’t track. Minus 2 for Rossi.

Comments

  1. 1

    Mr. Cynical spews:

    Josh–
    I would never play golf with you for money.
    Why??
    You cheat on your scorecard!

    Rossi was absolutely right about the Supplemental Budgets approved AFTER he left office. Those were spending increases he did not authorize and were above & beyond what was in the Budget he approved. Don’t you get it??

    Bottom-line–
    Gregoire lied about raising taxes 4 years ago during good times…and will lie about raising them now.

    PS–
    Do you really want Rossi to name the names of jobs he will cut right now??

  2. 2

    ivan spews:

    Fact: The voters approved an increase in the gas tax. The projects that this funded are under way now.

    Fact: The voters approved tying raises in teacher salaries to the cost of living index.

    Fact: The voters approved smaller class sizes.

    Fact: The voters approved, overwhelmingly, tying raises in the minimum wage to the cost of living index.

    Gregoire didn’t do it. The Legislature didn’t do it. The taxpaying voters did it, by initiative, in direct elections, in all cases.

    So when Gregoire says Rossi “doesn’t share the values of Washington’s voters,” in these cases that is correct. Rossi’s positions are minority positions.

    I think Gregoire is not spelling this out to the voters as well as she might, but we’re working on her to do just that.

    Rossi’s orcs — like that asshole Cynical — can’t spin this away. When taxpayers in this state know what they’re getting, and it’s what they want, they vote for it — directly.

    We also know, from Rossi’s own words, that he opposed every single measure that I mentioned above. Every one. If you want this state to move forward, why the hell would anybody vote for Rossi?

    Oh, yeah, the “deficit.” Here’s a clue for you rightards. Gregoire will balance the budget because THE LAW REQUIRES HER TO.

    Josh’s statement that her budget is “unsustainable” is pure bullshit. It’s true in a narrow sense, but so what? Every governor has to adjust the budget because the revenue situation is different in every case — and because IT IS REQUIRED BY LAW.

    If Gregoire’s budget is “unsustainable” as this stage of the biennium, so was every other single governor’s budget “unsustainable” at this stage of the biennium. They made adjustments. OK?

    It all boils down to who gets what, and who gets it first. Rossi wants his rich buddies to get it first — that’s hardly a secret.

    Gregoire won’t balance the budget on the backs of working people — but she will balance the budget BECAUSE THE LAW REQUIRES HER TO — and at the end there will be no deficit.

    NO DEFICIT, Dino. NO DEFICIT, Josh. Get it?

  3. 3

    Roger Rabbit spews:

    This is a complicated subject that calls for a complicated answer.

    1. The Seattle Times this morning criticized Rossi’s “deficit” ad as “inaccurate.” Which it is. As Gregoire and the Times both noted, the state currently has a surplus. Future deficit projections are just that: Projections, which can be way off, because state revenue fluctuates wildly due to its dependence on the sales tax, which in turn depends on the whims of consumer spending. No one actually knows how much money the state will have to spend in the next biennium. Given the probability of a national recession, Gov. Gregoire is being prudent by anticipating a revenue decline, as an economic slowdown undoubtedly will cut into consumer spending and consequently into sales tax revenues.

    2. Gregoire and the Democrats in the Legislature didn’t enact the estate tax, nor did they raise it. They cut it in half. Explanation: Washington had an estate tax for years. So many years, in fact, that it was tied to a provision of the IRS Code that Congress has repealed. In legal parlance, it was enacted by incorporating by reference the language of the federal tax law which was repealed. Consequently, in a highly technical decision based on the wording of the statute in disregard of legislative intent, the Washington Supreme Court decided the congressional repeal of the IRS provision invalidated the Washington tax. The Legislature merely re-enacted it — and, in so doing, increased exemptions and cut by half the amount of revenue that Washington’s long-standing estate tax will raise in the future. So, this legislation was merely a housekeeping measure to correct a wording problem — except for the huge tax cut the Legislature gave to the rich people who owe estate taxes. Gregoire, by signing the bill, went along with the tax cut.

    3. Due to inflation and a growing population, state spending has to go up just to maintain existing services at current levels. We’re currently in a high-inflation environment — created by the reckless fiscal policies of the Republicans at the national level. This inflation pushes up both costs and sales tax income, although it tends to push up costs faster than income — just as it does for individuals. When Rossi bandies around state spending figures in percentages, he’s not adjusting for inflation.

    4. Not all of the spending increases of the last 4 years are due to inflation, though. Several years ago, Washington voters approved two initiatives to increase teacher pay and reduce classroom sizes, but the Legislature delayed implementation of those initiatives because of a funding shortfall. Gregoire put that money into her budgets. In doing so, she carried out the will of the voters. Gregoire’s budget also contained pay raises for state employees who went 6 years without a cost-of-living adjustment. Those raises weren’t simply a matter of fairness to the employees. When state pay falls too far below the competitive market, the state loses experienced employees and incurs higher costs for recruitment, training, and errors by inexperienced employees.

    5. The only tax increase under Gov. Gregoire has been the gas tax increase approved by voters. Contrary to Republican claims, the projects funded by this increase are not just a few megaprojects in King County but literally hundreds of projects all over the state which are being completed on time and on budget. Some of this spending is catchup on necessary maintenance. During the 10 years from 1994 to 2004 that Republicans controlled the state senate and were able to block spending, Washington’s road infrastructure was allowed to rot because of GOP intransigence and unwillingness to spend money on roads. Also, the gas tax — unlike the sales tax and most other state taxes — does not go up with inflation so it has to be periodically raised by the Legislature to bring in enough money to pay for the same amount of roads and maintenance. These legislative increases to the gas tax have occurred many times and are nothing new. Now let’s look at what Rossi is promising voters: A bigger 8-lane 520 bridge that he’s promising to build for much less money than the proposed 6-lane bridge — and he hasn’t explained how he can do that. He’s also promising to build more roads without raising taxes — by raiding other state programs. He doesn’t say which programs. But because half of the state budget goes to education (Washington, unlike other states, counts the revenues that support public schools as part of state revenue and spending, even though that money is merely funneled through state government to school districts), and the other two big components of state spending — social services and transportation — account for most of the rest, there is in fact very little discretionary spending in the state budget that a Governor Rossi would be able to raid for increased road spending … unless he’s willing to cut money for schools or release convicts from state prisons. There’s a reason why Rossi refuses to say what spending he would cut: Because he either won’t make the cuts he’s promising, or would make irresponsible cuts the public would never knowingly accept.

    Unfortunately, the state budget is so complex that it can’t be explained in a sound bite or bumper sticker slogan, so it’s easy for Rossi to make outlandish and misleading claims — and difficult to refute his assertions, because the explanations are complicated and require a much greater understanding of the budget than 99.9% of Washington citizens have.

    Very few of our state’s citizens take the time and effort to understand the budget. Instead, they trust the judgment of the people they elect to manage our state’s public resources wisely. Gov. Gregoire has done that, and so has the Democratic-controlled Legislature. Prior to the Democrats getting control of both houses of the legislature in the 2004 election, our state suffered a decade of budget crises because state Republicans exhibited the same kind of reckless fiscal management we’ve seen at the national level for the last 8 years. The bottom line is the gullible voters who still believe Iraq was behind 9/11 are easily sold the Republican propaganda that Democrats have raised taxes and spent recklessly at the state level. These are lies, but lies are easily sold to uninformed people who believe with their gut instead of thinking with their head — and who are too lazy to get the facts.

  4. 4

    spews:

    It’s a “projected” deficit? By past metrics it very well could be considerably worse than the projection. And there is precedence . . . when was the last time a state projection was less than projected?

    Indeed, Rossi had better amend the ad to point out that the 3.2 billion deficit could be more, much more.

  5. 5

    Mr. Cynical spews:

    ivan–
    Hope you have your heart medication handy.
    Seems like you are overworking your heart trying to spin this fiasco Gregoire created for Washington taxpayers. If you keep up this pace, your heart will explode! I’m concerned for you ivan.

    You cannot deny Gregoire’s own people confirm there is a $3.2 BILLION shortfall for the next Budget ivan. Gregoire even used the word “shortfall” Deficit is one of many synonyms for “shortfall”.

    Perhaps the angry KLOWNS in the Gregoire Camp aka TEAM HORSESASS ought to consult their Thesaurus before getting so lathered up. Gregoire herself used the term SHORTFALL…which is synonomous with DEFICIT.
    Just to save you LEFTIST PINHEADED KLOWNS a little time & grief (it’s the Christian thing to do!) here are some references—

    2 thesaurus results for: deficit
    Synonym Collection v1.1
    Main Entry: deficit
    Part of Speech: noun
    Synonyms: arrears, default, disadvantage, impairment, inadequacy, shortage, shortfall

    Roget’s II: The New Thesaurus
    Main Entry: shortage
    Part of Speech: noun
    Definition: The condition or fact of being deficient.
    Synonyms: defect, deficiency, inadequacy, insufficiency, lack, paucity, poverty, scantiness, scantness, scarceness, scarcity

    Come on ivan…stop parsing words and get to the meat. Gregoire overspent.
    And the excuse about “voter approved”.
    Things were obviously changing economically. That’s why voters elect “Leaders”.
    Gregoire choose to punt and increase spending blaming Bush & Voters….rather than lead and say “Now is not the time to increase spending 33%!”

    Gregoire is not a leader.
    Leaders adapt to changing conditions.
    Rossi is a Leader…just ask Gary Locke!!
    Locke was a leader too.
    Priorities of Government was an excellent approach to budgeting…which Gregoire shitcanned.

  6. 6

    michael spews:

    Yeah, what Ivan said.

    And yeah, while Gregoire’s budget isn’t sustainable, it wont be the final budget for ’09&’10 because the budget has to balance.

  7. 7

    Roger Rabbit spews:

    @4 And it could just as easily be much, much less because projections are nothing but educated guesses based on assumptions that can change overnight.

    You are pissing into the wind, my friend.

  8. 8

    Mr. Cynical spews:

    michael–
    And the problem is when you adopt unsustainable budgets like Gregoire did…they invariably lead to TAX INCREASES to next go-around.

    Look, Gregoire lied about NO tax increases in the 2004 election…and you think we should trust her now??

    Fat Chance.

  9. 9

    Roger Rabbit spews:

    In other news, the fishwrapper reports this morning that Bush’s former #3 man at the CIA pleaded guilty to fraud charges related to the Duke Cunningham bribery scandal and will do prison time.

  10. 10

    ivan spews:

    She’ll cut spending if she has to, Cynical, because the law requires her to, just like it requires EVERY GOVERNOR TO, and all your bullshit means nothing.

    Your candidate’s entire campaign is based on lies. Your candidate is a ruthless, nasty prick who put a head tax on old people in nursing homes and cut 40,000 poor kids off Basic Health.

    Nobody likes a prick, Cynical. Your candidate is a prick, and so are you.

  11. 11

    Roger Rabbit spews:

    @8 Hogwash, Cynical! Every time there’s a recession, the state budget that preceded it is unsustainable. Every time. Why? Because state revenue is tied directly to consumer spending. And whenever the economy grows, the preceding budget is unsustainable. Why? Because this state can’t meet its citizens’ needs by perpetually operating on recession-level budgeting. What we have in this state is perpetually recurring boom-and-bust budget cycles. Why? Because of this state’s unsustainable tax structure that relies on the sales tax instead of a state income tax. No other state has adopted Washington’s tax system. Why? Because it doesn’t work. But 45 other states have adopted a state income tax. Why? Because it does work. So why hasn’t Washington adopted the rational tax system that works for 45 other states? Because of Republican intransigence and obstructionism.

  12. 12

    Mr. Cynical spews:

    Ahhh, but Roger….this time is different because Gregoire signed increased spending bills KNOWING the recession was facing us.

    Gregoire and TEAM HORSESASS is sooo on the defensive about the Budget Trainwreck she created that Gregoire & her ilk are forced to make weak excuses for her $8 BILLION of increased spending in the face of a recession.

    Excuses? EXCUSES!?
    We don’t need no stinking excuses!

    Gregoire==Governor Excuse-Maker

    Making excuses doesn’t help folks who personally cut expenses and are struggling to make ends meet, does it.
    Gregoire lacks leadership skills.
    That’s an understatement.

  13. 13

    Mr. Cynical spews:

    ivan–
    So give us some insight on exactly what expenses Gregoire will be cutting??
    Ohhhhhhh, I get it..
    We need to TRUST her! Re-elect her on blind faith. Good ivan, peddle that manure.

    Oh and ivan…
    Why must you be so mean to me??

    It wreaks of desperation when you call a fellow citizen who pays much more in taxes than you do…a prick?
    That is mean…and uncivil.
    You owe me an apology….fatso.

  14. 14

    Roger Rabbit spews:

    @12 Budget trainwreck? What are you smoking? Why do you hate schoolkids? Why do you want to dump elderly nursing home patients on the curb? Why do you want to turn vicious criminals loose from our prisons to prey on society? In short, what part of the budget would you cut, Cynical? Be specific — and show your math work, or the answer won’t count.

  15. 15

    Roger Rabbit spews:

    @13 Cynical, because you are a Republican, you are by definition a prick. Therefore, no apology from Ivan is needed or due you.

  16. 16

    Roger Rabbit spews:

    @13 (continued) A Republican complaining about a Democrat being “mean” and “uncivil”? You gotta be kidding! That’s like Junior Gotti complaining about crime.

  17. 17

    ArtFart spews:

    To all the silver-spoon kiddies in The Highlands and Hunt’s Point and their political shills whining about how the “death tax” might make a little denty-poo in their oh-so-pampered lives after Mummie and Daddie BigBucks croak:

    BOO FUCKING HOO!

  18. 18

    Roger Rabbit spews:

    I see Cynical still hasn’t posted a rebuttal to my comments @3. That’s because there isn’t one.

  19. 19

    michael spews:

    @8

    In order to pass a balanced budget spending will be cut and taxes will be raised by whoever the next governor is. Hopefully most of the new revenue will come from closing the ridiculus giveaways and loop holes (do we still let ranchers write off their bull semen purchases?) we have in our tax laws.

    If Rossi gets elected he’ll probably blame the Democratic house and senate for the new taxes. Gregoire will probably blame the times we are living in and George Bush. Of the two Gregoire will be closer to the truth.

  20. 20

    Mr. Cynical spews:

    15. Roger Rabbit spews:
    “@13 Cynical, because you are a Republican, you are by definition a prick.’

    ROG, HOW MANY TIMES MUST I REPEAT MYSELF??
    Once more I guess:
    I am not a Republican.
    I am disgusted by both political parties…just a wee bit more the Dems than the R’s.

    I AM A Proud Conservative Rog, if we must have labels.

    Bush is not a Conservative….but his budgetary excesses shall he be judged.

    I vote for whoever most reflects my views and by their past actions.
    Hence, I support McCain and Rossi.

  21. 21

    Mr. Cynical spews:

    Rog–
    Re: your post at 3–
    It makes for some nice fairytale, half-truth bedtime stories. There is some truth mixed in with some glaring omissions….like the fact Gregoire could have postponed all those raises and new hires in the face of recession. Factors changed drastically from the time of the Initiatives to the time of enactment.
    A true leader would have addressed the drastically changing circumstances and held back.
    Instead, Gregoire closed her eyes and went full-steam ahead.
    That is not leadership Rog.

    Hence, we are now in a major pickle.
    The Underfunded State Retirement Fund makes it even worse….you keep trying to marginalize or minimize that. It is now in the $8-9 BILLION range Rog.
    It was clearly circumventing the intent of the NO BUDGET DEFICIT part of our Constitution…using an increasing underfunding of the Pension Fund to fund current spending increases.