I-1033: the devil’s advocate is in the details

A No on I-1033 campaign staffer recently related to me a conversation he had with a local reporter, who repeatedly challenged him as to what was wrong with population-plus-inflation as a limit on government growth? “He was playing devil’s advocate,” the staffer explained.

Hmm. Maybe. Or maybe not.

This is a really complex issue, further complicated by the fact that population-plus-inflation does indeed sound like a reasonable and intuitive metric for maintaining government services at current levels, as it reduces spending to a simple per capita formula, that is easily adjusted for population and inflation: if we spend x amount of dollars per person in 2009, simply multiply x by the 2010 population, adjust for inflation, and voila… a new budget that reflects a constant level of per capita spending.

Rinse. Wash. Repeat.

In fact, this formula is so obvious and so intuitive, that rather than playing devil’s advocate, I think it a safe bet that the reporter in question was genuinely confused as to why population-plus-inflation, as implemented in I-1033, would steadily and inevitably erode government spending and reduce the level of services provided over time. So as a service to my friends in the media, I thought I’d attempt to explain the issue with a handful of bullet points.

I-1033 uses the wrong inflation index.
One of the core problems with the population-plus-inflation formula is the thorny question of how we measure inflation. I-1033 uses a broad measure, the Implicit Price Deflator  (IPD) for the gross domestic product, an index that both ignores regional variations in the inflation rate, and more importantly, dramatic differences between different economic sectors.

As I’ve previously explained the cost of delivering government services rises significantly faster than the general rate of inflation, largely because the kind of highly-trained, labor-intensive services governments tend to provide (doctors, police officers, teachers, etc.) do not benefit from the same sort of productivity gains that technological advances have bestowed on economic sectors such as manufacturing. The more accurate index would be the IPD for State and Local Government Services, which when applied to recent state budgets shows a precipitous decline in spending when contrasted with the Consumer Price Index.

Quite simply, providing a constant level of services per capita requires a constant level of purchasing power. I-1033 doesn’t provide that, and will inevitably result in steadily declining per capita revenues, properly adjusted for inflation.

Different populations require different services…
… And of course, different services carry different costs. For example, an aging population has higher health care costs, while a baby boom would increase the cost of providing public education. The population-plus-inflation formula simply cannot account for the associated costs (or savings) of demographic shifts, as it treats all individuals exactly the same. Likewise, the formula cannot account for changing behavioral patterns within demographically stable populations… for example the unexpected rise in public school enrollment during the current recession, as families sought to cut private tuition costs.

Consider this ironic Catch-22: if our current K-12 education reforms succeed in raising both graduation rates and the rate of college attendance, it would inevitably increase demand for slots in our heavily subsidized state college and university system. Quite simply, a well educated student becomes even more expensive to educate, a reality that I-1033 and its strict per capita cap, doesn’t anticipate. Lacking the ability to raise per capita spending to accommodate the increased demand its own policies helped to create, the state would be forced to either deny these students a higher education, or shift money from elsewhere… perhaps even K-12 budgets.

Growth in personal income is the measure that best tracks growth in demand for public services.
As explained in the Gates Commission report, and numerous other scholarly works on the subject, the economic number that most closely tracks growth in demand for government services is growth in total personal income, that is, total economic growth.  This is because (and perhaps counter to popular misconceptions) the majority of state and local government services are commodities, and we tend to increase our per capita consumption of commodities as our income grows.  Roads, sewers, schools, courts, public safety, libraries, parks, public health… these and other government services are all things we consume more of the wealthier our society gets, and thus personal income, not population-plus-inflation, is the best measure for tracking growth in demand for these services. It also is the best means of accounting for regional differences in the inflation rate, as wealthier states tend to have higher costs of living.

This is why comparative studies of government revenue, spending and debt always focus on government spending, revenue and debt as a percentage of the GDP. Government spending as a percentage of personal income not only broadly measures the ability of government to meet the demand for public services, it also measures the ability of the economy to afford the government services provided. In this context, population-plus-inflation is virtually meaningless.

Colorado.
Yeah, sure, nobody in our state media has written at greater length or greater depth on tax structure and revenue issues than I have over the past few years, but still, I’m just some foul-mouthed blogger, so why should you believe me?

Well, don’t. Just look to Colorado where the experiment with TABOR has proven to be a complete and total fucking disaster. Population-plus-inflation simply does not provide government the revenue necessary to maintain a constant level of services. It didn’t in Colorado, and it won’t here. That’s a fact.

Population-plus-inflation also doesn’t provide government the flexibility necessary to respond to the changing wants and needs of its citizenry, but that’s a topic for another post.

Comments

  1. 1

    Michael spews:

    The basic assumption of I-1033 is that we’re over taxed, have too many state employees and don’t get a very good return on our govnmt’ dollar. Those basic assumptions are flawed and that can be shown by spending 5 minutes at http://www.ofm.wa.gov/

    Seen any media reports that point to the mother load of data available at the OFM? I’m starting to wonder if reporters even know the OFM exists.

    Take a look at this one for a start
    http://www.ofm.wa.gov/trends/tables/fig504.asp

  2. 2

    YLB spews:

    This reminds me of what Grayson, the Dem Rep from Flordia said about the Republican plan for health care.

    Grayson at first was curious so he grabbed one of those pieces of paper Republicans were waving at Obama during his address to Congress. It was totally blank.. Naaaah. There has to be something..

    So then he went digging further and found a Republican plan. It boiled down to:

    1) Buy health insurance (or not) but don’t get sick.

    2) If you do get sick, die quickly.

    http://www.huffingtonpost.com/.....03996.html

    So now we come to the Timmy LIE-man plan:

    1) Don’t need government services

    2) If you do need government services, like a cop or a fireman or a judge to hear your small claims complaint, you’re on your own. I don’t know – carry a gun. That solves a lot of problems for wingnuts it seems.

    Ok who can improve on that?

  3. 3

    SJ spews:

    Great Essay

    The problem is we lack the media that used to concense this sort of issue and serve it up with the eggs and bacon.

    Combine Goldy’s analysis with the initiative process and the image of what an unread, poorly advised electorate can do to destroy democracy is all too clear.

  4. 4

    Queegmire spews:

    I think you missed the simplest argument against I-1033. Since each years cap is based on the previous years revenue adjusted for inflation and population, a year with low revenues will impact all future revenue caps.

    Ask someone if they were willing to take a 5% decrease in pay when their employer is having a bad year and they would probably consider it. Now tell them that that 5% decrease will effect their income for the rest of their lives no matter how well their employer does in the future and they would laugh in your face. That is what I-1033 would do to the state even if you could fix all the problems described in this post.

  5. 5

    commenter spews:

    you seem unable to boil it down into the essence. perhaps afraid to just say “we’re actually undertaxed, as government can provide many things more cheaply than the private sector?”

    Writing ten paragraph long answers that quibble with the exact nature of the formula and its elements is DEFENSE.

    you need to be on OFFENSE.

    Btw might help if you tell us what we need the additional funding for….smaller classrooms? health care? transportation that makes the economy grow?

    The utter inability to articulate why this is a bad idea is perhaps not unrelated to the current polls on this measure. That’s a way of saying it in many words. In fewer words, the message sucks big time.

  6. 6

    Chris Stefan spews:

    @5
    Ok I’ll boil this down real simple like.
    3/4 of the King County general fund is spent on criminal justice. That is sheriffs deputies, prosecutors, courts, jail guards, etc. So when people complain about the “wild inflation” in the county budget ask them how many jail guards should be fired, how many prosecutors, how many deputies.

    Passing I-1033 means letting criminals literally get away with murder, at least as far as King County is concerned.

  7. 7

    Cascadian spews:

    This argument is too complicated.

    Maybe argument by analogy is better: Imagine if your boss slashed your income every time the company had a bad year and said you would never get a raise again that was greater than the cost of living. How would you feed your family and keep your house after a couple of bad years?

    That’s not quite persuasive enough, but it’s better than a defensive five-point argument that people will just stop listening to the second you tell them it has five points.

  8. 9

    Puddybud is shocked SHOCKED spews:

    Of course HA’s kook-aid poseur ylb arschloch forgets the real Republican health care proposal. It was posted on HuffPo. Puddy placed it here before. Of course you only use tctmgr when you want to make chronologically illogical attacks.

    Now to the second worthless point from HA arschloch. Where is the loss of “government services”? Sounds to Puddy you are a standard re-run, a name Puddy gave you because you retread all the stupid stuff again.

    As Puddy remembers the libtardo press and TV campaign against I-695. When you see Puddy say they think libtardo. They=Libtardo. All the libtardo opponents made a number of dire and very silly predictions. Remember the scream over Boeing and Microsoft leaving the state? How about the stupid screech over need for a state income tax to cover the lost revenues? They claimed a draconian state of emergency would happen to WA State. They had police, fire and nurses scream and shout regarding what would happen to WA State if I695 became law. They said police officers would be laid off. They said basic county health services would die, flu shots would end, and child immunizations would stop. They said restaurant inspections would end and more salmonella-like food issues would increase, school safety would be jeopardized, & daycare checks would all be cut. Our cars would have to be taxed differently, roads would get large potholes and bridge repairs would stop and bridges would fall down because there would be no new WA State highway projects and up to 70,000 transportation department and private jobs would disappear. Remember the WA State budget reserve? They would spend it profligately. Wait a minute… Queen Chrissie did that anyway.

  9. 10

    IAFF Fireman spews:

    Then how come the VAST MAJORITY of public safety unions are staying out of this race? If it’s so bad, why don’t the endorse the No on campaign?

  10. 12

    Puddybud is shocked SHOCKED spews:

    Once again you deliver a link from a whackamole kook-aid. So monomaniacal. Sorry fool, re-run AKA ylb arschloch don’t compute! Puddy don’t drink the libtardo kook-aid.

    Amazing how ylb arschloch has nothing to say about the last paragraph. That’s because re-run AKA ylb arschloch’s head exploded!

  11. 13

    Chris Stefan spews:

    @8 SJ
    Not just courts, but parole officers, the jail, sherrifs department, prosecutors office. I’m also only talking about the general fund. Some county departments have a dedicated funding source such as sewers and transit.

    That does bring up another question: do things like the transit tax or public utiltty fees count toward the I-1033 limits?

  12. 14

    Puddybud is shocked SHOCKED spews:

    Yep Puddy finds it again…

    Hey ylb arschloch remember when Nancy Pelosi said this…?

    ““I think we all have to take responsibility for our actions and our words. We are a free country and this balance between freedom and safety is one that we have to carefully balance,” Pelosi began.”

    So will the Squeaker of the House take Dummocrapt Grayson to the woodshed for his comments? NOPE cuz they stink alike!

  13. 15

    YLB spews:

    Once again you deliver a link

    WAAAAAAAAAHHHAHAHAHAHA!!!!

    There he goes again. I got the fool trained.

    A trained seal. Ar! Ar! Ar!

  14. 16

    YLB spews:

    14 – Sorry Stupes I don’t click on those right wing bullshit links of yours or look at the hideous face of the ugly fantasies that swirl around the black hole between your ears.

  15. 17

    Laurag spews:

    I think that people who are opposed to this measure should be more vocal. I agree that the simple arguments will quickly make the point to the public.

    With the cuts that have been experienced this year, and likely another billion in 2010, it seems that people have already noticed less service. Nicole Broeder had a stupid editorial in the Seattle Times about losing faith in government because some guy couldn’t get his car tabs as fast as he thought he should. Yeah… just wait. As soon as less service affects the average disaffected Washingtonian, then they will whine. But they will never have the intellectual capacity to understand the connection. Brodeaur couldn’t make the connection, why should Joe Public?

    Colleges and Universities are crammed to the gills and colleges and universities have taken real job cuts. Maybe not where YOU think it should have happened, but it happened, and it comes out of the services that students receive. If you take any higher education instituition that IS NOT UW or WSU, and you will see institutions operating at minimum capacity at maximum load. There’s no where else to cut without utterly changing the experience the precious darlings pay for.

    Idiot Eyeman is just making sure that in a few short years the quality of life in Washington will be pretty much like rural Mississippi.

  16. 18

    Steve spews:

    @15 “Ar! Ar! Ar!”

    LMFAO!!

    You’ve been doing a yoeman’s job of it these past few weeks giving Puddy the ol’ what for. Well done.

  17. 19

    Bax spews:

    IAFF Fireman — if public safety unions are staying out of this race, that’s because they’re not paying attention. I-1033 would be particularly devastating to fire districts. They are essentially solely funded by property taxes. If total property tax revenues increase above the inflation + population growth formula, they have to be used for property tax refunds for that particular district. That’s going to lead to layoffs, staffing reductions, and most likely station closures.

    The better question for you is this: why you would support an initiative that will have severely negative impacts on your fellow IAFF members?

  18. 20

    Puddybud is shocked SHOCKED spews:

    Steve,

    ylb arschloch? The bozo who can’t fight out of a wet paper bag? the fool who got schooled in #9? Got me trained? Fell off the wagon and restarted drinking your well known Steve’s Stupid Solution again?

    Toooooooooooooooooooooo

    Damnnnnnnnnnnnnnnnnnnn

    Funnnnnnnnnnnnnnnnnnnny

    Keep da faith “broutha”. Let Puddy know when ylb arschloch answers the last paragraph of #9. Don’t worry Puddy won’t wait.

    bwaaaaaaaa haaaaaa haaaaaaa haaaaaaa haaaaaaa ROTFLMBBAO!

  19. 21

    Luigi Giovanni spews:

    Again, David, you’re letting the hubristic side of your nature take control.

    You overestimate the number of “my friends in the media” who follow you.

    As regards those that still follow you, you have no credibility when it comes to arithmetic, mathematics, or statitics:

    http://horsesass.org/?p=18670

  20. 23

    YLB spews:

    or statitics:

    I guess because you and your right wing fellow travelers have cornered the market on “credibility”.

  21. 24

    Trolling for Trolls by SJ spews:

    @13 Chris ..

    What strikes me is that most of what you describe as general fund is what I consider irreducible costs. Also, most of this has no real need for democratic .. as opposed to professional .. managers.

    The county’s police and court duties overlpa with state and city functions. While we need all of this, I would guess that a rational management system on a county wide basis would eliminate some waste. E.g. I really do not understand the services we receive from Mr. Reichert or the current sheriff that could not be served by a much more limited marshal service for the courts combined with the state patrol.

    Also, without letting our trolls go to far. a lot of what they list may add up to few dollars but ti really does not makes sense for the County to be spending Council time finding bucks ot pay for parks and museums.

    It would be refreshing, if there were rational people left on the right, to have some business type actually prop0ose efficiencies that did not demonize welfare recipients, illegal immigrants and other modern replacements for succubi of the past.

  22. 28

    spews:

    Send in the cadaver dogs, Tim Eyemann must be dead.

    I do not know if there has been one report where king of the boilerplate did not paste in random paragraphs from handouts that double as fast food menus.

  23. 30

    nolaguy spews:

    Anyone have a chart of WA .gov spending vs the inflation rate over the last decade? I’ve searched and can’t find one, and I’m too lazy aggregate the data myself…

    Many states, WA included, did a terrible job of forecasting the slowdown in the economy. They also spend like 7-9% increases in tax revenue were going to be the norm.

    I think spending and budgeting need to take this into consideration. State economic forecasters should be fired.

  24. 31

    Chris Stefan spews:

    @30
    you also have to factor in at the very least population increase. Not to mention the overall inflation rate doesn’t reflect the actual costs of delivering government services.

    Lets take prisons for one. The cost of housing a prisoner has been rising faster than the overall inflation rate. In addition the number of inmates housed has been growing faster than the population.

    This is just one example, many other government services see costs rise faster than the overall national inflation rate and see demand increase faster than population.

    As David pointed out the demand for government services most closely tracks income and not other factors.

  25. 32

    spews:

    nolaguy @30,

    Well, the chart I provide kinda tells the story, but here’s a link to the spreadsheet behind it, and you can look at the data yourself. As you can see, adjusted for the CPI, per capita revenues have been flat over the past decade, while adjusted for the IPD for State and Local Government services, per capita revenues are substantially down. And these trends don’t even include 2009.

  26. 33

    commenter spews:

    @6

    no need to be snarky, I am saying please defeat this measure and hey if you want to you need an actual simple message people can get in ten seconds.

    sorry for disclosing to you how the real world of elections works.

    The message you suggest — passing 1033 means letting murderers go free….is a much better one than the wonky essay. Because it’s short.

    However, it has a problem that you could cut other parts of the criminal justice system so that murderers don’t go free, so it’s false.

    Try again ok?

    (Hint: maybe we the progressives SHOULD be out there with a plan to cut the criminal justice budget? You don’t think we over incarcerate?)

  27. 34

    commenter spews:

    Ms. Stefan– you say transit and sewer have dedicated budgets but so what? it’s all money right?

    you think there’s no way metro could be more efficient? you think that brightwater project at double the cost with stalled boring machines underwater was efficient?

    until the progressives recapture the mantle and legitimacy of effecting efficiencies the blanket statements that “government always needs more” ust won’t wash.

    you point to jails. well, if our jail costs are rising faster than our population why don’t we cut those costs let out the nonviolent and reduce the terms of parole for those who are out of jail? we’re just funding a vast army of guards, parole officers and defenders and prosecutors all feeding off the public trough without making us more safe.

  28. 35

    Roger Rabbit spews:

    Population-plus-inflation fails to take into account technology advances or growing affluence. If our state had enacted PPI in 1880, our kids would still be going to school in one-room schoolhouses with all 6 grades in the same room. Not the best way to prepare our students to compete in a global economy, in my opinion.

    Click here for photo of Eyman High School, circa 2015: http://tinyurl.com/yeexj79

  29. 37

    Ekim spews:

    I-1033 and Howard Hanson Dam

    I just went to this program on Howard Hanson Dam and what those in the Green River Valley can expect as reality for the next 3 to 5 years. Since the dam is in bad shape it can’t do it job of flood control properly. If we get a storm like last January expect flooding. Depending on the severity of the storm flooding could range from maybe 5% of the valley to pretty much the whole thing.

    Not worried because you don’t live here? Well surprise, surprise. The Kent Valley is the 5th largest distribution point in the USA. If it gets flooded and you live in the Northwest, expect massive shortages of everything.

    Fixing the problem requires money and lots of it. Federal, county and city budgets are affected. Repairs will take as long as 5 years to complete before we can go back to being complacent.

    So my question is, what kind of monkey wrench will I-1033 throw into getting this fixed?

    Flood Disaster Preparedness
    Green River Valley – Howard Hanson Dam