Changing the world, one little kid at a time!
For those who are interested the state is maintaining a website with information about the meetings the task force is holding. You can sign up at this website for notifications of meetings, perhaps the most interesting part of what is, for now, pretty empty and forlorn.
http://www.leg.wa.gov/jointcommittees/EFTF/Pages/default.aspx
Every time we start up a new group of legislators looking at how to fund a particular project (in this case the K12 Finance Joint Task Force) there are questions about the budget from members not familiar with it. Here are a set of reference links that should be useful for anyone seeking to understand how the overall budget for Washington State works.
(9/25/2014 Fixed link to DC study and updated it to the 2012 version.)
There were a number of questions asked in today’s K-12 Finance Task Force meeting about how taxpayers in different income strata experience Washington’s tax system. I’m providing some links to interesting data while we wait for more up-to-date information from the Office of Financial Management, which their representative Julie Murray promised in Sept-Oct.
At the school funding task force meeting this morning we discussed and adopted the a work plan for the exercise. The document describing this work plan is available here: Initial Plan for K-12 funding policy development . Below is the intro text from this document:
In January the Washington State Supreme Court ruled (in McCleary) that the state was not meeting its constitutional obligation to “amply provide for the education of all students residing within its borders…” The decision was unanimous, and came with a very strong enforcement model from the court that is still being worked out.
The New York Times ran an article a few weeks ago that a constituent sent me for comment. He wanted to know if the same fraud occurred in Washington.
In some states doctors providing care under workers compensation were running schemes that resulted in their making crazy money selling drugs directly to patients. You can read the article for details, but the question the article begs is “What about Washington?”
I rooted around a bit and found out that we stopped allowing this several years ago based on similar concerns. Running all the prescriptions through a single POS system allows us to track drug use, contraindications for multiple drugs, and to prevent fraud like what’s shown in this article.
I’m sure there are other ways inventive people come up with to scam the various state systems (Medicaid, Workers Comp, etc.), but we ride the data to try to prevent as much of it as we can.
This week I attended a meeting hosted by the Mockingbird Society where foster youth and young alumni of “the system” present proposals they’ve worked on in small groups for a year on how to improve their experiences. This isn’t the first time I’ve attended this event, and it won’t be the last.
These young people make incredibly powerful presentations that get right at the heart of how to make our foster care system actually work for the kids instead of the adults. It’s frustrating because the solutions seem like they should already have been done, and some themes repeat year after year. Every year we take some of the ideas they present on and try to get them implemented.
I didn’t take notes on everything, but some of the ideas struck me as immediately implementable and almost criminal that they haven’t happened yet. We will follow up with the youth and the Mockingbird Society to make sure we are taking care of what needs to happen.
Richard Davis of the Washington Research Council posted today about the risks facing the Washington State budget. I don’t always agree with Dick, but he usually has something to say worth listening to. I do agree with him this time, that the largest risk we currently face is that Congress will fail to come to an agreement on how to handle the budget before automatic sequesters kick in.
We would see tax increases and spending cuts at a time when most responsible economists think that they would do significant damage to the economy. He says:
Domestic politics, though, are the greater threat. At the end of the year, absent presidential leadership and congressional action, the nation heads off the fiscal cliff. That’s when the Bush-era tax cuts expire and the automatic spending cuts adopted in the 2011 debt ceiling negotiations kick in.
Higher taxes and reduced spending will strangle an already gasping recovery. The Congressional Budget Office says that unless Congress relaxes fiscal restraints, the economy will go into recession in the first two quarters of 2013.
It’s worth reading the whole post. The comments I posted on his blog:
The New York Times had an article this week about pension costs faced by states and large cities across America. Their argument is that the rate of return assumed by the plans is too high because returns for most funds over the last decade have been lower than the estimate. They say that 8% is the rate most states use, and it’s what Washington has been using for the past few years.
Washington is in the enviable position of having a mostly fully-funded pension system. We are one of the best-funded systems in the country. The Pew Center on the States does a comprehensive review periodically and serves as a clear basis for comparison between states. They ding Washington for not funding health care benefits for retires, which we largely do not offer, so its no surprise that we haven’t funded it. Many of the local governments in Washington do have significant liability here, and have done a haphazard job of putting aside money to pay for these.
I think it’s interesting that the Pew folks ding us for having the system 100% funded. At the beginning of the decade we were 120% funded, and we’ve allowed this to decline to the current levels, but if you look at the chart you can see that once we brought the funding level down to 100% we kept it there. Overfunding pension accounts isn’t necessary and consumes resources that could be spent on something more important.
The Times article seems to want states to lower their expected return. We are doing this in incremental steps every biennium with a target of 7.5%. I’m a little concerned about using the 10-year returns as the baseline – the last decade included two significant recessions, one of which was (and still is) the worst recession since the great depression. Our 40-year return is above 8%. This may or may not be a better basis for comparison. We will watch the returns and adjust as we go.
Pensions are something that require a long time horizon to think about. Making abrupt changes based on short-term data is dangerous, but so is not making decisions that adjust the funding levels if there really are fundamental changes in the economy.
The Economic and Revenue Forecast Council has updated its forecast, as we do every quarter. This is the preliminary forecast. The final will be done in a couple of weeks when we get updated numbers from Global Insight, our vendor for national data. We modify that with specific data from Washington, and change a couple of parameters in the model to make it work better for our purposes. These are described in the text of the report. It’s worth reading the summary for some insight into where our economy is going.
In short, we’re pretty much on track for a normal forecast. Of course, I am not an economist (I do get to play one on TV) so I can’t predict exactly what this will mean for our revenue forecast, but I don’t expect too much change as a result.
http://www.erfc.wa.gov/forecast/documents/p0512.pdf
Thank you for allowing me to represent you in the Washington State Legislature. It’s an honor and a privilege. This year was pretty “special.” There’s nothing like a little drama to spice up a legislator’s life. This session had it all – defections on budget votes, protesters requiring hearings to be shut down, people being arrested, and a sleep-over to end the session.
This newsletter only addresses operating budget issues. Lots of other interesting things happened or are happening (520 bridge construction, for example) and I will address those in the next document.
We left the 2011 regular session with a budget that most neutral observers thought was a pretty reasonable product. It was balanced and had a healthy reserve of over $700 million. The final vote was a bipartisan one, with significant participation from Republican Senate members. Since then we’ve had pretty significant declines in our revenue projections due to the economy and faced about a $2 billion projected shortfall coming in to the December special session.
In that session we solved about $500,000,000 of the problem, leaving about $1.5 billion left to fix in January. We got good news in the forecasts, reducing the problem to about $1 billion, which we addressed in this year’s supplemental budget. Our negotiating process was bi-partisan, as was the final voting pattern.
The budget has no cuts to education. This means early learning, K-12, and higher education were left whole. This is a miracle, and was not accidental. I felt strongly that in light of the Supreme Court decision on school funding we could not in good conscience make reductions here, and as the budget committee chairman my opinion was able to prevail.
