Few people in Seattle are aware that the state legislature is starting a new session this month. One of the topics on the legislature’s agenda will be fine-tuning the state’s budget for the next biennium.
Gov. Gary Locke released his proposed budget in mid-December. Amidst all the fanfare about education and transportation improvements, there’s been little or no critical coverage of his proposals.
For example, the budget boasts: “Thanks to the success of welfare reform and the tobacco settlement, budget cuts are less, education priorities are funded, and no state parks will be closed.” Some victory. Because of Referendum 49, which provided a blank check to fund transportation projects that will drain $471 million from the state’s general fund, we can only be thankful that the tobacco industry stepped in to save our collective asses to the tune of $323 million in payments to the State of Washington in the next two years. The remainder of the shortfall ($148 million) will be made up by dumping single mothers off of welfare and into low-wage service jobs. Notably, the state subsidizes childcare for parents in the WorkFirst program for only one year; after that, they’re on their own. And if what the state claims is true–that the average wage of welfare-to-work participants is $8.42 per hour–then single parents will be back on the dole in no time.
Although Gov. Locke has definite ideas about where the tobacco money should be spent, it’s an issue that’s far from settled. Republicans and fiscally-conservative Democrats in the legislature will have their own ideas about increasing transportation funding, tax incentives for businesses, B&O tax cuts, and the like. Locke wants to split the pie as follows: $150 million for an ill-defined “Tobacco Prevention Trust Fund,” $73 million to cover the shortfall in the Basic Health Plan (BHP), $81 million to partially cover an even larger shortfall in Medicaid to children, and the remainder to other health services.
But there are problems with this scenario. Group medical insurance premiums are rising much faster than inflation, and are expected to increase at least 10% nationwide this year; local premiums are rising at a steeper rate. That money for the Basic Health Plan may run out very quickly. If it does, the BHP may need to slash benefits or drastically increase premiums–just as it did back in early 1997 in a cynical move to eliminate a long list of people waiting to get on the subsidized plan (solution: cut back on the subsidy and those people will just disappear, then you can claim your program is a “success”).
As it currently stands, the proposed budget will fund the children’s Medicaid program only enough to cover most of the expenses for children on the plan; from now on their parents, whose incomes are less than 200% of the federal poverty level, will have to pay for part of the premiums. In political parlance, this makes it a “subsidy” program, and not an “entitlement.” Even worse, the legislature may decide to spend less of the tobacco funds on the BHP and children’s Medicaid than the proposed budget does.
There are other problems. Gov. Locke wants to be remembered as the “education governor,” but his increases in teacher salaries are a joke. What he will be remembered for is pork-barrel transportation projects and corporate welfare.
Of the total funds for transportation, the bulk will go to accommodating cars and freight transport. A full $600 million will go to “corridor investments”–i.e., widening and improving freeway bottlenecks for single-occupant automobiles. Slightly more ($650 million) will be spent for “core HOV projects,” which will build more HOV lanes throughout the Everett-Seattle-Tacoma corridor, ostensibly for car pools and buses. But as we all know, drivers seldom comply with the restrictions for driving in the HOV lanes. This money will simply widen freeways, and not provide a long-term solution. And another $340 million will go to “freight mobility projects” to specifically help businesses meet their deadlines for shipping stuff in and out of the Puget Sound.
But the corporate welfare doesn’t end there. Gov. Locke wants to help rural regions of the state hit hard by the demise of the local timber industry and the lack of demand in Asia for the state’s agricultural products. Instead of encouraging farmers to diversify or grow organic crops (which are in high demand here at home), to meaningfully fund environmental reconstruction and tourism, or to stimulate small, local businesses, Gov. Locke decided to go the easy route: a tax “incentive” for software firms to relocate to rural areas of the state. Yes, that’s right: software firms.
According to the budget: “A business and occupation (B&O) tax credit equal to $1,000 per employee is proposed for firms that manufacture computer software or perform custom-programming services in distressed counties. The credit can continue for each year the employee position is retained … currently 175 software-related firms are operating in distressed counties.”
The proposed budget also details an enormous tax break for high-tech “Help Desk” service companies that do software installation and customer service: “For the first seven years, the credit is equivalent to a 100 percent B&O tax exemption. Thereafter, the credit is reduced to two-thirds of B&O tax liability.” You read that correctly: 100% exemption. Of course, the budget doesn’t say exactly how much the state would be losing in tax revenues if Puget Sound software companies move out to the boondocks.
The budget also provides state money for the software industry. $73 million will go to rural infrastructure improvements: “Roads, water systems, and telecommunications systems.” Even more money (about $9.5 million) is earmarked for planning, permitting, and “pre-development” work to sweeten the deal for developers, too. Add in $30 million of federal money for rural road improvements designed specifically for business parks, and it’s obvious who the real state welfare recipients are.
This budget also underfunds two types of infrastructure that rural areas have long needed and asked for: funding for rural hospitals and clinics ($177,000), and funding for farmworker housing ($8 million to build permanent housing for an estimated 157,000 workers … which pencils out to only $51 per person).
Only a bunch of suits could come up with this poor excuse for a budget. Can the state legislature straighten out these problems, or will they add more of their own? It’ll be interesting to see.
The proposed budget is posted on the Web at http://www.wa.gov/ofm/budget99.