by John Stafford
The State Legislature, at the beginning of its Third Special Session, finally reached agreement on the three key state budgets –operating ($38.2 billion), transportation ($16.1 billion) and capital ($3.9 billion), just in time to avert a government shutdown (and yes, there are still several unresolved sticking points, most notably the suspension of I-1351). These budgets are being touted as a success in many quarters: by Republicans, because they prevailed with their no-new-taxes agenda; by the Seattle Times, which states that, “By any measure, the accomplishments of the 2015 Washington State Legislature are historic” (July 5); and even by Governor Inslee, who claims that the operating budget is “…a great budget for Washington State.”
Don’t be deceived. This session was a debacle for the Democratic Party, for progressive causes, and for the glaring need for structural reform in Washington State. Andy Nicholas of the Washington State Budget and Policy Center writes: “This is simply not a sustainable budget no matter how you slice it.”
This article will provide a brief evaluation of the session, discuss the wide-ranging Democratic interpretations of the budget outcomes, and offer several closing observations.
LEGISLATIVE SESSION RESULTS
K-12 Financing. The State will spend $1.3 billion more on K-12 education in the next biennium to comply with the McCleary decision — a significant success. However, given that no new source of taxation was added to the budget, the capacity to continue to ramp up spending in the subsequent biennium (also required by McCleary) has not been provided for. In addition, another McCLeary requirement — levy reform to lessen the per pupil spending differences between rich and poor school districts – was not addressed (although several proposals were introduced by lawmakers). This failure could lead to further sanctions from the State Supreme Court, which is overseeing McCleary compliance. Finally, Initiative 1351 to reduce class sizes will not (in all likelihood) be funded. Grade: C
Higher Education: Tuition will be decreased by 5-20% (depending on institution) at the state’s colleges and universities, making Washington the only state in the nation to effect tuition cuts. While this is certainly a positive development, it is important to remember the context. During the previous five years, due to inadequate tax resources, tuition at Washington’s four year universities was raised 34% — twice the national average. Thus, lawmakers are celebrating this session’s success, which is merely partial remediation for prior sessions’ failure. Grade: B
Transportation. The very fact that the state passed a transportation budget is deemed by some to be a success, as the Legislature failed to do so in the prior session. Moreover, this budget provides for much-needed investments throughout the state. On the other hand, the budget contains a Republican-inserted, anti-environment, “poison pill” provision. This declares that if the state implements lower-carbon fuel standards, transportation funds will be automatically transferred from transit investments (a Democratic priority) to road construction. In addition, the transportation budget will be financed by a large increase in the gas tax (which is regressive), placing Washington State in a tie for the third highest gas tax in the nation. The Legislature did agree to provide $15 billion in new taxing authority for Sound Transit’s Phase III expansion. However, given that these new taxes (if approved by voters) will be levied in the Puget Sound region, providing this taxing authority is not seen as a significant concession from the Republican caucus, which is predominantly from Eastern Washington. Grade: C-
Climate Change. Governor Inslee’s initial budget proposal called for a cap-and-trade system to be introduced in Washington State. The Democrat-controlled House did not include this in their operating budget proposal – severely hampering consideration of the plan. Thus, there will be no price on carbon emissions in Washington State. This dereliction is compounded by the transportation budget’s aforementioned “poison pill” provision that disincentivizes lower carbon fuel standards. In short, Washington State will be taking no significant action on perhaps the major public policy failure of our time. State Representative Joe Fitzgibbon, Democrat from Burien, who voted against the transportation budget, asserts: “I’m not going to trade progress on climate change for any transportation project.” Grade: F
Tax Reform. Over the past two decades, Washington State has become a low tax state – we have fallen 25 ranks to become 37th in the nation in state and local taxes as a percentage of personal income. This precipitous fall is, of course, what has led to the numerous lawsuits over inadequate funding for K-12 education (McCleary), mental health, foster care staffing ratios, etc. Equally appalling, Washington State has the most regressive tax system in the nation. Three Democratic proposals to reform taxation – to both increase the tax level and make it less regressive – were introduced this session: a tax on carbon via the cap-and-trade system; a capital gains tax on high income individuals; and the extension of the business and occupancy tax to select service businesses. None of these were passed. Even worse, the increase in the gas tax will make our tax structure even more regressive. Thus, the state’s broken tax system (often referred to as the worst in the nation), which is at the root of so many of the state’s problems, will not be addressed in this year’s operating budget. Grade: F
Income Inequality: Measures to raise the minimum wage to $12 statewide and to implement paid sick leave were thwarted in the Republican-controlled Senate. These failures, coupled with the increase in tax regressivity, ensure that no significant progress will be made to address the challenge of societal income inequality – already at an all-time high, and continuing to increase. Indeed, Washington State is one of three states where the poverty rate has actually increased since the end of the Great Recession. Grade: F
Other: Given the divided nature of the state government, the scope of other legislative changes was relatively modest. Positive developments include: the rationalization of the recreational and medical marijuana systems; increased funding for mental health; modest and long-overdue pay raises for state workers and teachers. Grade: C+
Overall: In the 2015 session, modest achievements in select areas were overwhelmed by the ongoing failure to address the state’s foundational challenges. The state’s recurring problems have structural roots, and once again, the path chosen by the Legislature has been to use gimmicks and band-aids to make it through the session, rather than address the underlying issues. In sum, if one believes that inadequate taxation, high tax regressivity, high income inequality and the lack of a meaningful response to climate change are paramount issues facing Washington State, the 2015 State Legislative session offers virtually nothing resembling progress. It will be business as usual in Washington State. Overall Session Grade: D
Within liberal circles, four primary narratives have emerged to interpret the results of the legislative session.
(1) “This was the wrong time to take political risks.” This narrative holds that the Democratic Party, having lost the State Senate in the last election cycle, is not in a position to take extreme political risks. Engaging in such things as risking a government shutdown by taking a stand on the capital gains tax may cost the party dearly in the next election cycle. It is better to try to regain the Senate in the next cycle, and then push for structural change. This narrative acknowledges the disappointment of the session, but sees it as the cost of a broader, more pragmatic strategy.
(2) “This session will lay the groundwork for future change.” This second narrative, often linked to the first, suggests that by introducing such ideas as a capital gains tax, a cap-and-trade system, and a statewide minimum wage increase, the Democrats are preparing the way for eventual success in these areas. Structural change takes time, and this session represents the early phases of major reforms. Moreover, the change process can evolve in unpredictable ways. In support of this thesis, some point to the fact that the Seattle Times, for the first time, supported a capital gains tax; and to Carbon Washington’s efforts to put Initiative 732 – a revenue-neutral carbon tax – on the 2016 ballot.
(3) “Democrats were outsmarted by Republicans, and need to regroup.” This viewpoint maintains that Republicans developed a budget that offered much of what Democrats offered, but without a tax increase (instead relying on non-sustainable accounting gimmicks). Republicans then stalled during the First Special Session to wait for the improved state revenue forecast, which reduced the need for a tax increase. They also attempted to force the Democrat-controlled House to take a politically unpopular vote to support their proposed tax increase. In short, the Republicans outmaneuvered Democrats, making it virtually impossible for Democrats to generate the public support necessary to allow them to take a stand on structural changes (e.g., the capital gains tax) without incurring excessive political risk. One variant of this argument contends that the Democrats should have insisted on full funding of I-1351 in order to ensure that a new source of taxation was absolutely necessary.
(4) “The budgets are actually a success.” As noted above, Governor Inslee and several other Democrats have publicly praised the budgets. This is somewhat remarkable, given that the centerpiece proposals of Inslee’s initial budget – a cap-and-trade plan to simultaneously address climate change and raise taxes to provide funding for education and transportation, a capital gains tax, and future plans to raise fuel standards, were all thwarted.
At first glance, these four narratives seem inconsistent – some acknowledge an unsuccessful session, some see a silver lining in the cloud, and some claim outright success. Upon further reflection, of course, they can be seen as an integrated set of explanations – each intended for a different purpose and audience. Democratic leadership clearly decided to not take a stand on its major structural initiatives, capitulating on all major taxation and climate change proposals (this is narrative 1). This capitulation is then couched in hopeful terms – the groundwork is being laid for future success (narrative 2). In order to ensure that things go better next time, the party emphasizes the need for improved strategy (narrative 3). And finally, in order to manage the public perception that the Republicans prevailed at the expense of the Democrats, select Democratic leaders claim that the session is a success (narrative 4).
There are always multiple ways to try to recast events in various lights. There is also such a thing as cold, hard reality. The 2015 Legislative Session has been, in my view, a tremendous disappointment for liberals. I will close with several observations. First, it is important to acknowledge that the political calculus that party leaders confront when considering taking (or in the case of this session, not taking) potentially risky political positions is highly complex. It is much easier to analyze the situation from afar than to make difficult decisions from within. Second, however, it goes without saying that Washington’s necessary structural changes will never be made until the Democratic Party takes a firm stand on them. Tax reform, income inequality and global warming are not going to be addressed in a cordial, bipartisan manner. Third, by presenting the failures of the session as a success in order to manage public perception, Democrats implicitly legitimize (at least partially) Republican ideology. If the operating budget is indeed a success for Washington’s citizens, then perhaps tax level, tax regressivity, income inequality and climate change aren’t that critical after all, or at least they are deferrable challenges. Fourth, it has become all-too-convenient in Democratic circles to blame Republicans for state legislative failures. If Democrats are not willing to take a firm stand on their own issues, they cannot expect the public to, and they have more to blame than Republicans for their inability to achieve substantive reform. Fifth, structural problems require structural solutions. Implementing structural solutions, given that they are always controversial, requires powerful leadership, effective strategy and party unity. In my view, the Democratic Party stands to improve in all of these areas, and will have a difficult time addressing the state’s major challenges until it does.
John Stafford is a substitute teacher for Seattle Public Schools and a former management consultant in corporate strategy. He recently completed a run for State Senate in the 37th District. He is writing a monthly article on public policy for the South Seattle Emerald.