Search Results for: structural revenue deficit

There are two main arguments against seeking new revenue to help close the current budget gap.  The first—that an economic downturn is exactly the wrong time to raise taxes—comes down to an argument over economic philosophy, and it is certainly reasonable to debate the anti-stimulus impact of tax hikes versus the anti-stimulus impact of reduced government spending… the cost in human suffering aside.

But the second argument—that our current budget crisis is largely due to out-of-control spending, and thus should be solved by slashing the same—well, that ultimately comes down to facts… facts that upon close evaluation, simply don’t support the thesis.  In fact, as I’m about to show you, far from ballooning, Washington state government tax revenues have actually shrunk over the past 15 years, when adjusted for population growth and inflation.

The heart of the out-of-control spending argument comes from the simple fact that the state’s “near general fund” spending jumped from $25.6 billion during the 2003-2005 biennium to about $32.6 billion for the 2007-2009 biennium that ends in June… an undisputed 27.2 percent increase over four years.  (Or so says the conservative Washington Policy Center.)

That’s a big jump, and it doesn’t take a spreadsheet jockey to intuit that it far outpaces population growth or inflation or even overall growth in the state economy over same period.  During last year’s gubernatorial campaign, Dino Rossi repeatedly argued that such spending growth was unsustainable, and he was right.  That’s why nobody was arguing to sustain such growth rates.

In fact, the jump was an anomaly made possible by a spurt of real estate bubble fueled revenues, and largely exaggerated by the fact that the starting point, the 2003-2005 budget, embodied a substantial dip in both revenue and spending growth as the state struggled to recover from the previous recession.  Spending did jump 27.2% during the first Gregoire administration, but only relative to the low point that immediately preceded it.  This four-year snapshot may have been useful to Republicans for rhetorical purposes, but it doesn’t take into account population growth or inflation, and it hardly says anything about long term budget and revenue trends.

So, if the anti-taxers are going to argue that the current budget crisis is the result of out-of-control spending rather than a revenue shortfall, let’s take a look at long term tax revenue trends, and see what the data tells us.  And since the TABOR crowd absolutely insists that population plus inflation is the proper metric for limiting growth in government, let’s start by tracking state tax revenues over time, and adjusting as such.

The chart above tracks WA state government tax revenues per capita over the 15 year period between 1994 and 2008, indexed to year 2000 dollars.  The red line tracks per capita taxes, adjusted for the commonly used Consumer Price Index All Urban Consumers (CPI-U), while the blue line tracks per capita taxes adjusted for the Implicit Price Deflator for State & Local Government Consumption (IPD).  Tax revenue and population totals were drawn from US Census Bureau data.  And for those doubting my math, you can download my spreadsheet here.

As you can clearly see, even using the less applicable CPI-U index, per capita state taxes in Washington have remained relatively flat over the past fifteen years, ranging from a low of $1,978.42 in 2001 to a high of $2,265.47 in 2007, and currently hovering damn near its fifteen-year average.

But as I’ve previously explained, the CPI is the wrong measure for tracking the growth in cost of government, as the highly-educated, labor-intensive services governments tend to provide (doctors, nurses, teachers, etc.) do not benefit from the same sort of productivity gains that technological advances have bestowed on economic sectors such as manufacturing.  That’s why the IPD is widely accepted as the most accurate measure of inflation, even by the conservative Heritage Foundation, which insists that “the IPD measures inflation more accurately than the CPI.”

The US Bureau of Economic Analysis also breaks down the IPD into various economic sectors, and it is per capita state taxes adjusted by the IPD for State and Local Government Consumption that is tracked by the blue line… data which clearly shows even the 2005-2007 jump in revenues as nothing more than a spike in a trough, and our 2008 revenues having come in at a fifteen year low.

The trend is clear even adopting the anti-tax frame: adjusted for population growth and the most accurate measure of inflation for the types of products and services governments consume, state tax revenues have consistently trended down over the past fifteen years. And that’s before the dramatic drop in revenues resulting from the current economic crisis.

Quite simply, Washington state suffers from a long term structural budget deficit, that while masked by the good times and exacerbated by the bad, continues to drive down per capita revenues in real dollars over time.  Even the conservative Tax Foundation, Tim Eyman’s think tank of choice, shows WA’s state and local taxes plummeting from 10.4% to 8.9% of personal income over the past 15 years, ranking us dead even with Mississippi.

So where is the evidence of a state government out of control?  Apart from a four-year snapshot taken entirely out of economic, demographic and historical context, there is none.  Zero.  Zip. Nada.

Our economy will eventually recover, but unless we address our long term revenue deficit, our state government will emerge smaller than it was before the crisis, and its ability to provide services and invest in infrastructure will continue to shrink over the decades hence.

I’ve used the term “structural deficit” a lot over the past few years, only to have it pooh-poohed by the anti-tax/anti-government reactionaries on the right, so I thought it might be useful to spend a little time discussing exactly what I mean.

Washington state relies on the sales tax for about 56.5% of general fund revenues, one of the highest ratios in the nation, and yet as this study paper produced by Economic Opportunity Institute cogently explains, our sales tax base over time gradually represents a smaller and smaller portion of our overall economy.

The sales tax base is growing more slowly than demand for state investments and the economy overall. Historically, sales taxes have been applied to goods and not to services. However, personal spending on services is steadily growing, and spending on goods is falling as a percentage of personal consumption. Goods and services subject to Washington sales tax represented 32% of total consumer spending in 1959, but only 26% in 2000.

And when your tax base shrinks, you really have only three options:  expand the base, raise the tax rate, or shrink the role of government in our economy and society.  And despite all the rhetoric about state government growth in real dollars over the past two budgets, Washington lawmakers have largely chosen the third option over the past couple decades, steadily shrinking both revenues and spending as a percentage of our overall economy.

As the following chart prepared by the Washington State Budget and Policy Center shows, both state revenue and spending have fallen or remained flat since 1995, relative to the state economy.

(It is also interesting to note that the projected budget gap in the 2009-11 biennium is not due to an explosion in state spending, but rather to a precipitous decline in revenues.)

Yes, I know that for many of you on the right, this data may appear counterintuitive, but it is widely supported.  Indeed, even according to the conservative Tax Institute, the organization whose data Tim Eyman has long used to support his own anti-tax agenda, Washington’s state and local taxes as a percentage of personal income have fallen from 10.4% in 1994, when the Tax Institute ranked us at 17th nationally, to a 35th place 8.9% in 2008, well below the national average of 9.7%.

Different organizations may calculate different raw percentages, but they all generally report the same ranking and the same relative decline.  According to the Tax Institute, Washington’s 2008 state and local tax “burden” was exactly the same as that of Mississippi. That’s a fact.

And these numbers should come as no surprise.  Our over-reliance on a retail sales tax levied on an ever shrinking portion of our economy makes this long term structural deficit inevitable, and unless we reform our tax system to broaden the base, or permanently increase sales tax rates, the ability of our government to provide the services taxpayers expect and demand will continue to shrink in proportion to its revenue base.

There is a legitimate debate to be had over the proper size and scope of government… but we’re not having that debate.  Instead, even as Democrats dominate the Legislature and the governor’s mansion, the lower-tax/smaller-government Republican agenda is winning by default.

As I have repeatedly stated, there is no state budget deficit, despite the claims of Dino Rossi and his (perhaps unwitting) collaborators in the press. Our current budget is actually running a small surplus, and the next biennium budget will be balanced, as is constitutionally required.  The question facing voters is not if the budget will be balanced, but by whom, and based on what priorities.

To call a revenue forecast a “budget deficit” is thus inexcusably misleading, as when one thinks of budget deficits, most voters think of the enormous federal deficits (only made even more enormous by the Bush administration) in which our government borrows money to pay for expenditures that far exceed tax revenues.  That can’t happen here in Washington state, under any administration, and to suggest otherwise, even through semantic inference, is simply irresponsible.

And it is equally irresponsible and misleading to suggest, as the amen editorialists at the Seattle Times relentlessly insist, that this projected $3.1 billion revenue deficit—the difference between projected growth in state revenues and projected growth in state expenditures at current levels—is the result of profligate spending on the part of Gov. Chris Gregoire, when in fact, as the chart above clearly illustrates, it is simply the result of declining state revenues.

According to a policy brief prepared by the Washington State Budget & Policy Center, while remaining relatively flat for the past decade, state spending has declined from 6.6% of personal income in 1995 to 6.1% at present.  Meanwhile, state revenues as a percentage of personal income will decline from 6.6% to a projected 5.6% by 2011.

Yes, our revenue deficit has been exacerbated by a worsening economy, just as the problem was masked by the boom years, but the real culprit here is not out of control spending, but rather a long-term structural revenue deficit that results from a tax system that overly relies on a steadily shrinking segment of our economy: the sale of goods.

This is a fact—a fact that is constantly and conveniently ignored in press accounts of this issue—and unless we eventually fix this structural deficit, preferably by shifting to a fairer tax system that doesn’t leave WA the most regressive state in the nation, our state government, and the services it is able to provide, will steadily shrink, regardless of which party controls the legislature or the governor’s mansion.

If the Times is looking for a legitimate budget issue on which to attack the governor, it is not state spending, which during her administration has thus far grown in virtual lockstep with growth in revenues and growth in our state economy.  Rather, the most substantive critique of Gov. Gregoire comes from the left, where she has disappointed fair tax advocates by failing to take the lead on much needed tax restructuring.

The Dino Rossi campaign will no doubt be crowing tomorrow morning about the state’s revised revenue forecast, which now predicts a $3.2 billion budget shortfall for the 2009-2011 biennium, but it should be remembered that the projected deficit is a revenue problem not a spending one, stemming from a long-term structural deficit and a weakening economy.

State spending as a percentage of the total economy has in fact remained flat for much of the past decade, while our antiquated tax structure has continued to rely on an ever shrinking portion of our economy.  Our media and political elite have thus far studiously avoided and serious discussion about tax restructuring—the Democrats out of fear of a voter backlash, and the Republicans secure in the knowledge that to do nothing virtually assures their vision of a dramatically smaller government by default.

No doubt the Governor and the Legislature face tough short term choices during the next session, as they do during every economic downturn.  But if we want to solve our long-term structural deficit while maintaining the quality of life Washingtonians have come to expect, then we need to rely on more than mere tough talk and a rainy day fund.  We need to start talking about an income tax, or some other broad based tax designed to fit the realities of our twenty-first century economy.

The Seattle Times thinks that Gov. Chris Gregoire’s budget is too high because it leaves the state with projected budget deficits out into the future.

Well, yeah… but even a budget that merely keeps pace with growth in demand for public services (which roughly tracks growth in personal income) would result in projected budget deficits out into the future. In fact, even if we ratchet government down and only try to have spending keep pace with population growth plus inflation, we’ll still end up with budget deficits projected indefinitely out into the future.

That is because we have an inadequate and unfair tax structure that simply cannot keep pace with our economy, resulting in a structural budget deficit as far as the eye can see.

For too long the state has dealt with this structural deficit by delaying investment in critical infrastructure. The result is a multi-billion dollar backlog in transportation maintenance and construction, and a higher education system that’s fails to accommodate all our state’s college bound students… and at an ever increasing tuition cost. Spending per K-12 student is amongst the lowest in the nation, and Spokane and Seattle area teacher salaries adjusted for local cost of living are near the bottom of the 100 largest metropolitan areas nationwide.

There is a popular fiction — which the Times editorial board fails to refute — that Washington is a high tax state. It is not. In fact, it’s rather middling. And average state and local taxes as a percentage of personal income have dropped steadily since I moved here in 1992. I pay no state income tax, and while my property taxes have more than doubled since I purchased my home in 1997, they are less than half that of a similar house in the Philadelphia suburb in which I was raised.

A tax structure that heavily relies on taxing the sale of goods simply cannot sustain adequate revenue growth in our 21st Century service economy. It has also created the most regressive state and local tax structure in the nation.

If you earn less than $20,000 a year you live in the highest taxed state in the union. If you earn over $200,000 a year you live in one of the lowest. Unless and until we reform our tax structure so as to tax all families more fairly, we will never adequately address our state’s long term structural budget deficit. And we’ll never have a fair and adequate tax structure until we implement an income tax.

One of the original taglines for HA was “an (almost) daily blog on Washington state politics and the press,” and my original intention was to focus mostly on media criticism. I was a child of Watergate who grew up idolizing journalists as defenders of democracy, but my accidental adventure as a subject of media coverage gave me a personal tour into how the sausage was made that left me, well, more than a bit disillusioned.

And thirteen years later, disillusioned I remain:

Republicans and Democrats in Olympia worked hard to produce thoughtful education plans, but both fall short. Trying to spend as little as possible is usually the right thing for them to do. But in this case, it’s likely to prolong the legal fight that’s kept the state in limbo and shortchanged students for decades.

Oh Jesus. First, Republicans and Democrats in Olympia most definitely did not work hard to produce thoughtful education plans. The Republicans were obstructionist as usual, gleefully seeking to use the McCleary crisis to stick it to Seattle homeowners while strategically defunding the rest of state government. There is absolutely nothing thoughtful about their levy-swap smoke and mirrors—it was bullshit when Rob McKenna ran on it, and it is bullshit today. Their only goal is shrinking state government, period, whatever the cost in human misery, because they are a stupid, deceitful, mean-spirited, and profoundly pathological party. (Notice the lack of the word “thoughtful” in that string of adjectives.)

As for the Democrats, I don’t question their motives, but my God could we possibly elect a bigger bunch of fucking cowards? Vote to raise taxes, goddammit—bigly!—and then run on your record of trying to get something the fuck done! You lose elections when you stand for nothing. Try standing for something besides “values” for a change, and you may be pleasantly surprised at the polls.

Second, “trying to spend as little as possible is usually the right thing for them to do”…? Really? Try supporting your goddamn thesis, Brier, instead of laying this steaming turd out there like it’s some undisputed gem of fiscal wisdom! It’s not. It’s a steaming turd. In reality, the big problem in Washington State has long been that we are not spending enough money—on education, on mental health, on our foster care system, on transportation, and on many other crucial public goods and services. And we’re not spending enough money because we’re not raising enough money. Which brings us to the third sentence of this trite piece of editorial fluff:

Um, you know who’s really “shortchanged students for decades,” Brier? Your fucking garbage pit of an editorial board, that’s who!

Yeah, sure, I agree with the main thesis of your column, but you and your fellow editorialists need to take a little personal responsibility. Your publisher and your ed board have aggressively opposed meaningful tax reform for decades, despite being repeatedly confronted with actual math that proved our current funding crisis was inevitable. INEVITABLE, goddammit! Totally unavoidable! We have a structural revenue deficit. It’s baked in to our absurdly antiquated (and cruelly regressive) tax structure. This is what comes from an over-reliance on a sales tax that grows revenue slower than the natural rate of growth of the cost of providing public services at a constant level. There’s no getting around it.

So instead, of vague platitudes and half-hearted half-references to the need for “new taxes,” it’s time for you and your paper to get out in front of this issue and demand that legislators pass an income tax. Because you fucking well know that taxing income is the only option that raises the “ample” funding you claim you want. And while we don’t need you to apologize for the selfishly destructive role your paper has played in creating this crisis, you damn well better acknowledge it if you and your ed board ever want to be taken seriously on budget issues again. (Assuming you ever were.)

Wait. No, actually. Fucking apologize. Because honestly, your paper has been so fucking dishonest on this issue that none of you deserve even an emphysematous whisper of a voice in this debate until you issue an institutional mea culpa for being so goddamn awful for so goddamn long.

And oh, if you think this rant was worded a bit too strong, prove me the fuck wrong.

The Washington State Supreme Court held a hearing yesterday to give state lawyers a chance to explain why the legislature should not be held in contempt for failing to make adequate progress toward meeting the terms of the court’s landmark McCleary decision. And while I’ve seen a ton of media coverage on the hearing, I haven’t seen much mention of the ginormous elephant standing quietly in the back of the courtroom: taxes.

In McCleary, the court ruled that the state was failing to meet its constitutional “paramount duty” to amply fund our K-12 schools. Exactly how much more money McCleary requires the state to spend on basic education is unclear, but we’re talking billions. Roughly an additional $4.5 billion in the 2017-2019 biennial budget. Give or take. That’s equivalent to over 13 percent of our current $34 billion biennial budget!

And the honest to God truth is that there is simply no way to meet this obligation without raising tax revenue. Everybody knows it. There isn’t $4.5 billion in waste, fraud, or abuse available to cut. So there are only two choices: raise revenue, or defy the court.

If I wielded the unfettered powers of a benevolent dictator I’d just overhaul our entire antiquated tax structure and replace much of it with an adequate, fair, and sustainable income tax. Problem solved. But our non-dictatorial democratically elected legislators aren’t entirely without options either.

The first revenue item on the table should be a substantial hike in the state property tax, which is, after all, a school levy. Given our current fiscal crisis it is just plain stupid that the state is currently using only $2.39 per $1,000 of value (and falling!) out of its $3.60 per $1,000 of value statutory cap. We can’t responsibly use it all, for various technical reasons, but we could generate at least another $1 billion per biennium in state property taxes, easy.

Next (and I know this is being bandied about in some circles in Olympia) the state could raise at least another $1 billion or so per biennium through a targeted capital gains tax that only hit, say, the top one half of one percent of Washington households. It would be a new tax, with some ramp up time and administrative overhead, so it’s not as easy as just hiking the property tax, but it’s perfectly doable.

Hike the state school levy, tax capital gains, close a few hundred million dollars in unproductive tax “preferences,” and cross your fingers that a strong economy bumps up other revenues, and before you know it the supremes could be congratulating legislators on a job well done. But let’s not pretend that we have a snowball’s chance of meeting McCleary without raising taxes. It just can’t be done.

The sad truth is, we have more than just a structural revenue deficit in Olympia. We have a structural honesty deficit. And we can’t begin to address the former until we fix the latter.

 

There’s a lot to ridicule in this Freedom Foundation blow-job from the Seattle Times editorial board, but for the sake of brevity, I think I’ll just focus on this single sentence:

These agreements are among the reasons for the disastrous run up in state spending during the bubble years of the 2000s.

Forget for a moment the editor’s ridiculous assertion that our public employee unions are somehow to blame for our state’s budget woes. Instead, I’m just going to rip into the underlying premise. For in fact, there was no run up in state spending during the 2000s, disastrous or otherwise. And unlike those lying liars at the Seattle Times, I’ll show you the data to prove it:

The chart above was copy and pasted directly from the pages of the Washington State Office of Financial Management (OFM), and while it does show a modest rise in spending from a low of $187.73 per $1,000 of income in 2000 to a mid-decade high of $205.75 in 2004, it only comes on the heels of a steep eight-year decline from a peak of $224.37 in 1993, followed by an immediate drop to $196.41 by 2006. Viewed through any reasonable time frame, this is nothing more than a blip.

But in fact, the “disastrous run up” the editors are really referring to is the 2007-09 biennial budget, in which Governor Christine Gregoire briefly restored voter-approved teacher COLAs, as well as COLAs for other state workers who hadn’t seen a raise in years. Squint closely and you can see it on the chart. That’s what the Seattle Times has been bitching about all these years.

Indeed, if there’s anything remarkable about the 2000s, it’s that state spending remained relatively flat compared to the more erratic oscillations of the previous two decades. State and local expenditures pretty much track the 50-state average (though slightly below) throughout the decade, fluctuating right along with the economy.

Seriously, take a look at that chart, and show me the “disastrous run up in state spending.” You can’t. Because it’s not there. And it’s not there for a very good reason.

The OFM chart above tracks Washington state and local taxes as a percentage of personal income, and not surprisingly, tells a similar story to state and local expenditures. Because, you know, one pays for the other.

In this case, taxes peaked at just below $125 per $1,000 of personal income in 1989, settled to about $119 over the next few years, before falling into an eight-year decline that bottomed out at $98.91 in 2002. Tax revenues did recover over the next few years to $109.43 in 2006, before falling off the cliff during the great recession. By 2011, the latest year for which OFM provides data, taxes had dropped to under $95 per $1,000 of personal income, the lowest effective average tax rate in the 31 years charted!

And again, throughout the 2000s, Washington’s state and local taxes largely track fluctuations in the 50-state average, if quite a bit below it. In 2011, Washington’s tax “burden” ranked 37th nationwide.

Now I know what some of you right-wing skeptics are thinking: lies, damn lies, and statistics, amirite? Goldy’s talking state and local expenditures and taxes as percentage of personal income in an effort to obscure some inconvenient truth.

Well, no. Taxes and spending as a percentage of personal income is a metric that inherently incorporates the impact of both economic and population growth, as well as inflation, thus presenting the most accurate picture of relative taxes and spending over time. And if you’re worried that OFM’s inclusion of local taxes muddies the picture, considering that the editors were only talking about state spending, well, you’re kinda right. When you break out just state taxes, the decline per $1,000 of income becomes even starker:

There’s your run up in state taxes for you—from a half-century low, up slightly mid-decade, and then off the cliff again. Disastrous! Just not in the way the Seattle Times implies.

And if you’re still not convinced that there hasn’t been some sort of secret hidden run-up in state spending that would prove the editors’ claim, just take a gander at this:

State workers are in fact the state’s largest expense, but do you see any sort of run up in state hiring during the 2000s? No you do not. In fact, the gap between population growth and state FTEs widened slightly throughout the first half of the decade before the state started madly shedding government workers during the Great Recession.

Go to the OFM website. Look at all of the charts. By any reasonable metric the “disastrous run up in state spending” that the Seattle Times has been pouting over for years, simply did not happen! The entire premise upon which the paper has built its relentless attack on public employee unions—that state spending is out of control—is entirely unsupported by the data. Indeed, what these charts actually show is a structural revenue deficit that has left state government unable to grow state services and investments commensurate with our needs.

McLeary, anybody?

And while none of these charts speak directly to the editors’ claim that public employee unions are bankrupting the state by extorting extravagant contracts through secret negotiations, given the context, where exactly are all these overpaid state workers? More than 45 percent of state general fund spending goes toward K-12 education, and yet the National Education Association reports that Washington state teachers—already paid well below the national average—actually saw their inflation-adjusted wages fall by 8.5 percent from 2002 through 2012. Are they really arguing that we should cut teacher pay even more?

And if it’s not the dastardly teachers union that is to blame, then who? Is it our state troopers who are overpaid? The men and women risking their lives fighting fires in Eastern Washington? The evil, evil members of perpetual Seattle Times boogeyman SEIU 775 NW, who now earn an extravagant starting wage of $11.06 an hour to wipe the poop off your grandma—a modest pay hike earned not through some secret back room deal, but through binding arbitration?

As I have said for years, there is a legitimate debate to be had over the proper size and scope of government, but the Seattle Times editorial board refuses to engage in it honestly. Instead, they obstruct debate through dog-whistle attacks on public employee unions and the relentless repetition of an out-of-control-state-spending meme that is entirely contradicted by the facts.

It is not state spending that is the problem, but state revenue. You could bust the public employee unions, convert their pensions to 401Ks, slash their health care benefits, and freeze their pay, and you still wouldn’t have enough money to fully fund McCleary. Even worse, in another ten years or so, we’d be right back to where we started. Because that is the nature of a structural revenue deficit. And no amount of lying or union-bashing can ever change that.

I certainly agree with the Seattle Times editorial board in lauding the work of Public Health – Seattle & King County director David Fleming, who is stepping down today after seven years on the job. Under Fleming’s leadership, Public Health has been one of the most proactive and effective agencies in the region.

But what I do take issue with is the editors’ envisioned role for Fleming’s successor.

There is much work to be done.

The department faces an estimated $15 million budget hole this fall caused by federal budget constraints. The next director will have to balance fewer resources with the demands of a fast-growing, diverse population.

Fleming’s successor should pick up where he left off by advocating for policies and funding in areas where data show the highest need and investment can have the highest impact:

That’s right: the editors want Fleming’s successor to “pick up where he left off,” but with “fewer resources,” despite the increased costs of serving our “fast-growing” population. It’s no secret that his department’s budget squeeze contributed to Fleming’s decision to step-down—the Seattle Times reported as much. And yet in the same breath in which they acknowledge the important work that Public Health does, the editors simply state as fact that the new director will have to serve a growing population with shrinking resources.

More sound public policy advice from the something-for-nothing crowd.

But it doesn’t have to be like this. Whatever the loss of federal funds, the city and county could backfill this money with local revenue—assuming I-747’s stupid fucking 101 percent limit wasn’t gradually drowning local government in a bathtub. About 45 percent of the county’s general fund revenue comes from the property tax, yet as I have previously explained, thanks to the 101 percent limit on growth in regular levy revenue, the property tax can’t even keep pace with inflation, let alone population-plus-inflation (not to mention economic growth, with is the most accurate measure of growth in demand for public services). To further complicate matters, another 14 percent of county general fund revenue comes from the sales tax, a tax base (the sale of goods) that has been steadily shrinking as a portion of the overall economy for more than 60 years.

What we have here should be familiar to anybody who is willing to honestly discuss Washington’s state and local tax system: a structural revenue deficit.

The editors’ advice—always—is that government must recognize this new fiscal reality and reduce the size and cost of its operations to match its reduced revenues. But it can’t work. For even if you believe that this new fiscal reality is more appropriate than the significantly higher relative revenue levels state and local governments enjoyed just a decade and a half ago, our ability to fund government services will continue to fall. That is the nature of a structural deficit.

If the Seattle Times really cared about maintaining public health, rather than simply urging the new director to magically do more with less (year after year in perpetuity!), the editors would take the lead in urging the repeal of the 101 percent limit, and replacing it with something more rational. The original purpose of the limit back when it was first imposed at 106 percent (or inflation, whichever was higher), was to prevent shocking annual increases in property taxes. But it was not meant to limit property taxes over the long run—that is the role of the statutory cap that limits the total amount of state and local regular levies to $10 per $1,000 of accessed value.

Tim Eyman’s arbitrary 101 percent limit is a perversion of this policy.

If Washington were a high-tax state this push for lower taxes might be understandable. But we’re not. As a percentage of personal income, Washington’s state and local taxes are now some of the lowest in the nation. And dropping. In this context, there is simply no rational argument for maintaining a 101 percent limit on local property tax revenue growth that is gradually starving local governments of the ability to meet their citizens’ most basic needs.

Everybody knows that Washington’s tax structure is immensely unfair. It is the most regressive in the nation. And by far. But it is also unsustainable. And we could really use some editorial leadership to help move us toward a solution before it is too late.

Yesterday morning I tweeted out a photo of an overflowing trash can at a neighborhood park, admonishing my fellow Seattleites to hike out your own garbage when the park trash can is full. Because honestly—be a mensch. Well, this morning my dog and I arrived at the park to see a Seattle Parks & Recreation pickup truck driving away, and the weekend’s mess completely cleaned up.

Your tax dollars at work!

I mention this because one of the memes in every anti-tax campaign is that government needs to prove that it can be less wasteful with taxpayer money before we give them any more of it—and when we hear that relentlessly coming from the likes of the Seattle Times editorial board, what they really mean is “fuck those lazy, overpaid, unionized public employees.” You know, the lazy, overpaid, unionized public employees whose job it is to pick up our trash.

The problem with increasingly relying on voter-approved levies to run our parks is that these levies must be written in a way to attract voters, and “Pick up the trash after voters’ lazy asses” is not exactly a winning bullet point. Yet routine maintenance is the bulk of what the parks department does. And so rather than writing budgets based on what our parks really need, we’ve been writing them based on what might appeal to voters at the polls—and that, along with our city’s structural revenue deficit, is what has led to the parks’ $270 million deferred maintenance backlog.

Let’s be clear: voter-approved levies represent a relatively new way of funding our parks. Seattle’s first parks levy wasn’t until 2000, and that maintenance backlog has exploded since. So how’s all that “direct democracy” working out for you, Seattle?

If anything, Seattle voters have had too much of a say in how we run our parks, not too little. Give our parks department the stable revenue it needs to do the unsexy everyday work of maintaining our parks. Vote “Yes” on Prop 1.

Seattle Times editorial columnist Thanh Tan raises the issue of “good governance” in regards to Proposition 1:

The Seattle Times opposes Prop 1, and published an editorial Wednesday arguing it is not the only option to save parks. The League of Women Voters of Seattle-King County urge a ‘no’ vote because its members take issue with Prop. 1′s proposed governance model, which replaces the current parks levy with a new taxing district overseen by the Seattle City Council.

The Municipal League of King County recently came out with a ‘yes’ recommendation, though it noted that “as a matter of good governance, parks operations should be funded through the City’s General Fund. The Municipal League believes a YES vote is the best practical measure available for addressing parks funding shortfalls, but is concerned that approving this measure will result in a continued practice of reducing allocations for essential city services from the General Fund.”

And I agree 100 percent! As a matter of good governance, parks operations should be funded through municipal general funds. As should libraries. And basic road maintenance. And affordable housing. And universal preschool. And veteran and human services. And the new juvenile detention center. And so forth.

The problem is, thanks to I-747’s arbitrary and absurd 1 percent annual cap on revenue growth from existing construction, our general fund revenues simply can’t grow commensurate with our needs. As a 2012 report from the Seattle Parks Foundation clearly explains:

Initiative 747 reduced the allowable annual increase in the property tax from 6 percent to 1 percent per year, well below the rate of inflation. Another ballot measure, Initiative 776, restricts counties from collecting vehicle license fees. It should be noted that the voters of Seattle voted against both measures by substantial margins, but they passed statewide and therefore apply in Seattle. As a result of Initiative 747 alone, the City of Seattle’s property tax collections in 2010 are at least $60 million less than if the measure had not passed. The impact of the loss is compounded each year the limits remain in place, so annual losses increase by approximately $15 million per year, meaning that the estimated loss for 2011 will be at least $75 million. This estimate assumes the City Council would have limited the tax increase to the rate of inflation in the City’s labor costs (3.5 percent to 4.5 percent annually, which includes the cost of health care). If one assumes the City Council would have increased property tax to the statutory limit of 6 percent per year, the 2011 loss would be $126 million.

That’s not pro-Park District propaganda. That’s math. And that’s the reason why the city has been forced to increasingly rely on levy “lid lifts” to fund basic services like libraries and parks—not as a matter of good governance but as a matter of last resort.

So the “good governance” argument is bullshit, not because it’s wrong, but because we simply no longer have that option. Tim Eyman (and the feckless cowards in Olympia who reinstated I-747 after the courts tossed it out) have deliberately taken that option away.

The fact is, like the state (if to a lesser extent), Seattle has a structural revenue deficit. The cost of maintaining government services at a constant level largely tracks economic growth, yet our tax system does not. Regular property tax levy growth is bizarrely capped at 1 percent. Year after year, sales tax revenue shrinks as a portion of the overall economy as the sale of goods becomes an ever smaller piece of the economic pie. Yet there are statutory limits on the extent to which we can use special levies to make up the shortfall. A municipal park district would get around that, by allowing the council to pass through to the parks department otherwise untapped taxing authority.

So again, arguing that good governance would dictate that parks be funded through the general fund is like arguing that good environmental stewardship would dictate that we save the carrier pigeon from extinction. Absolutely true. But too damn late.

We need a Metropolitan Park District because that is the taxing authority we have. Vote “Yes” on Prop 1.

If you’ve ever wondered what it tastes like to lick Brad Smith’s asshole, just ask the editors at the Seattle Times:

THE state’s two biggest companies took a gamble on Washington a few years back, and at long last the state has finally paid off.

Back in 2011, Boeing and Microsoft pledged $25 million apiece for the Washington State Opportunity Scholarship program. The program, run by the College Success Foundation, defrays costs for low- and middle-income students when they major in science, technology, engineering, math and health at Washington colleges. Each student is eligible for as much as $17,000.

So Boeing and Microsoft save hundreds of millions of dollars a year in state tax breaks and tax loopholes—denying the state the funds necessary to adequately fund higher education and other crucial investments—and yet we should cheer them as civic heroes for spending a mere $25 million each (0.03 percent of their $164 billion in combined 2013 revenue) to subsidize educating their own workforce?

Hooray for capitalism!

The “gamble” Boeing and Microsoft took was that this feeble gesture would provide political cover for their roles in perpetuating the structural revenue deficit that undermines Washington’s K-12 and higher education systems as a whole. And it was a gamble that has paid off handsomely under the credulous watch of our state’s editorial boards.

When the Washington State Supreme Court handed down its historic McCleary decision, ruling that the state had failed to meet its constitutional “paramount duty” to provide for the ample funding of our public schools, Democrats cheered at the opportunity. The court ordered the state to add billions more to K-12 spending. Finally we would reverse decades of foolish disinvestment. Hooray!

Except, it’s beginning to look like Republicans and their drown-government-in-a-bathtub agenda are going to end up the big winners.

The indisputable mathematical truth is that we simply cannot meet McCleary and maintain existing government services at constant levels, without raising new revenue. It can’t be done! And anybody who tells you otherwise is either a liar or an idiot. Washington state has a structural revenue deficit. There is absolutely no way we can magically fund McCleary through economic growth alone. The math doesn’t work. Which means there is no way the state doesn’t eventually find itself in contempt of court.

It is going to happen. It is inevitable. Barring a farfetched pro-tax Democratic sweep in this November’s legislative elections, the state will not meet the McCleary mandate.

So how will the court react? Legislators enjoy immunity, so the court can’t throw them in jail on contempt charges, as much as they might deserve it. And the court lacks the authority to levy taxes itself. So the only remedy really available to the justices would be to order drastic across-the-board cuts in discretionary spending in order to repurpose those funds to our public schools.

Which is exactly what the Republicans want!

The Republicans correctly view McCleary as an unparalleled opportunity to defund the rest of state government in the disingenuous name of educating our children. But as the Washington State Budget & Policy Center correctly observes, such a policy would force “devastating cuts to health care, public safety, child care, and other important investments kids need in order to succeed in the classroom.” It would be a total fucking disaster.

But the alternative—doing nothing—would be a disaster too. For if the Supreme Court is proven toothless in the face of legislative insubordination, then the system of checks and balances inherent within our constitution would be forever broken.

Washington State is headed toward a constitutional crisis. There is no avoiding it. And Democrats better start preparing themselves to handle this McCleary crisis a helluva lot better than they handled the McCleary opportunity.

I’m gonna tell you something nearly every Democrat in Olympia knows, but most are too chicken-shit to admit: Washington’s taxes are too low, and without substantial tax restructuring, few if any of the draconian budget cuts being proposed will be temporary.

Remember the boom years of the 1990’s, when our local economy clicked into overdrive and new residents flocked here for great jobs and the good life?  Between 1990 and 1999, Washington’s population increased by over 21 percent, even as state and local taxes as a percentage of personal income swelled to a thirty-year high, peaking at 10.4 percent by mid-decade.

Since then, lawmakers and initiative writers have fed the public a steady stream of tax cuts and business exemptions, ultimately slashing state and local taxes below 8.9 percent of personal income by 2008, a thirty year low. And with revenues dropping faster than incomes as the Great Recession came on, and recovering slower than incomes in its aftermath, new data will surely show our state and local tax “burden” dropping yet a couple tenths of a percent further over the past two years.

For much of the past decade, both tax revenues and our economy were propped up by the real estate bubble, but with that fantasy having popped, Boeing moving production out of state, the Microsoft dynamo reaching maturity, and population growth dramatically slowing, the bill for the past fifteen years of public pandering and disinvestment is finally coming due. Our current level of taxation, and the manner in which its burden is distributed, is simply insufficient to sustain a level of essential services and public investment necessary to maintain our quality of life and assure economic growth.

No state relies more on the sales tax than Washington, which at over 62 percent of total revenues tops out at nearly twice the national average. But the sale of goods as a percentage of the total economy has been steadily shrinking for the past half century, requiring a series of sales tax rate increases just to keep revenues in pace with growth in demand for public services and investment… a demand that closely tracks growth in the economy as a whole.

What this describes is a structural revenue deficit that barring a broadening of the tax base or a steady increase in rates, assures that state and local government as a percentage of our economy will continue to shrink, and with it, its ability to provide the services and investments we want and need. Health care inflation, economic booms and busts and other cyclical factors can merely delay or accelerate the inevitable.

The math is undeniable.

I’ve said it before, and I’ll say it again: there is a legitimate debate to be had over the proper size and scope of government… but we’re not having it. Instead, even as we continue to elect Democratic majorities, we’re getting the Republican agenda by default. And unless Democrats start providing a little leadership and confronting voters with the hard truth that in government like everything else, you get what you pay for, our state is going to increasingly look less like the Washington of the 1990’s, and more like the Arizona of today… only without all the sunshine and warm weather.

Yes, you read that headline right. The Seattle Times editorial board has endorsed a state income tax. You know… back in 1969….

A single-rate income tax, adequate safeguards against rocketing property tax and appropriate reductions in other taxes must be devised if the state is to meet its budgetary needs and solve the school support dilemma.

And in 1970….

Property, sales, business and other excise-taxing sources are bearing too heavy a share of the public-expenditure load. Yet vast amounts of fluid wealth in the form of income escape state taxation. This should begin to bear a fair share of the burden. If H.J.R. 42 is defeated, the additional burden on property and excise tax will become unbearable. For these reasons we recommend approval of No. 42.

And in 1972…

Events now on the horizon leave no doubt but that the state administration and the Legislature will be negligent if they do not permit the voters another opportunity to make a judgment on a state income tax and interrelated fiscal policies.

Fiscally, the state is drifting toward shoals; time is running out for it to continue to fund basic responsibilities in public services with its jerry-built tax structure; nor can the state’s businesses and industries develop the immense number of new jobs needed to accommodate the present jobless as well as the younger generation now phasing into the employment market.

And in 1973…

The Times has been a strong advocate of the principle that a state income tax should be instituted as a means (1) to distribute the tax burden more equitably, (2) to gear public revenues more responsibly to economic growth, (3) to reduce pressures on present tax sources, and (4) to provide education with more dependable revenues.

You can read all these editorials and more in Andrew Villeneuve’s extensively researched and well argued historical retrospective on the Times’ tragic descent into editorial dotage over at the NPI Advocate. Really… read the whole thing.

So what’s changed between 1969 and 2010? Not the fundamental laws of economics or our state’s long term structural revenue deficit. No, what I’d argue has changed is the Seattle Times.