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