The recession has taken a big toll on jobs and family incomes – and on public revenue. The state has mostly cut services, not raised revenue, resulting in $10.5 billion in cuts. (Note: Federal aid in 2009-10, rainy day funds, and fee increases prevented deeper cuts.)

Cuts from 2009-11 include:

• K-12 education: Elimination of student achievement funds & teacher cost of living adjustments; 7,000 fewer K-12 employees.
• Higher ed: 4-yr college funding reduced 40%, 2-yr reduced 20%, with large tuition increases.
• Health care: 60,000 cut from Basic Health.
• Children’s services: Fewer children receiving health, childcare, and other services.
• Elder care: Reduced home-care hours for vulnerable seniors and disabled.
• Cuts to state agencies: Consolidation of state agencies, elimination of jobs.
• State employees: Mandatory furloughs and higher contributions for health insurance.

The U.S. health care system is possibly the most inefficient in the world: We spend twice as much per person on health care as other advanced countries, but we have worse health outcomes, including a lower life expectancy. The government, through programs like Medicare and Medicaid, pays for approximately half of the country’s health care, almost all of which is actually provided by the private sector. Thus, the bulk of our projected rising budget deficits are due to skyrocketing health care costs.

Click to use the interactive chart

The CEPR Health Care Budget Deficit Calculator shows that if the U.S. can get health care costs under control, our budget deficits will not rise uncontrollably in the future. But if we fail to contain health care costs, then it will be almost impossible to prevent exploding future budget deficits.

The Calculator lets you see what projected U.S. budget deficits would be if we had the same per person health care costs as any of the countries listed below, all of which enjoy longer life expectancies than the U.S. (Life expectancies are listed in parentheses.)

The yellow line shows projected deficits based on baseline projections from the non-partisan Congressional Budget Office (CBO). The blue line shows where the deficits would be if health care costs in the U.S. were to rise only due to the aging of the population and stay even with per capita GDP growth (based on CBO’s “Low Health Care Cost” projection).

Use the CEPR calculator »

In just four days, the Family Care Act enforcement bills now under consideration in Olympia must pass out of the House or Senate. We need your help to make it happen.

Since 2002, Washington’s Family Care Act (FCA) has helped ensure workers can use the paid time off they’ve earned to care for a sick family member. For the most part, it’s worked well — but state agencies don’t have the authority to stop employers from retaliating against workers who use the FCA.

Lawmakers are considering companion bills to provide modest FCA enforcement — but with so many bills vying for their attention, they need a nudge from you.

It’s easy: just call the state legislative hotline at 1-800-562-6000 and say you’d like to leave a message for your state Representatives and state Senator. (Alternatively, you can look up your legislators here and send each of them an email.)

Your own message will be most effective, but here are a few points to get you started:

• I urge your support for (“House Bill 1828” if speaking with your Representative; “Senate Bill 5263“, if speaking with your Senator).

• For most employees and employers in the state, the Family Care Act has been working well. Unfortunately, in some cases follow up and enforcement is necessary.

• When people can care for their families, we all benefit from reduced health care costs, and employers benefit from better productivity and higher morale.

• Children and adults get better more quickly when a family member is present. Follow up care improves when family members are able to hear doctor’s instructions.

With your help, we can get a Family Care Act enforcement bill on the Governor’s desk this year – thank you for your support!

Davis rightly notes that spending on health care is a major driver in Washington’s budget. But he overlooks the simple fact that the state doesn’t set the price for health care any more than you or I set the price for fruit. The state can set reimbursement rates for different services, or negotiate to some extent with private insurance providers on the costs of employee health coverage.

But at the end of the day, Washington isn’t really providing health care – it is paying for it. That means if that reimbursement rate isn’t high enough, doctors won’t provide that particular service. (Or the insurance company won’t pay the doctor enough to provide it.) Similarly, if the state isn’t willing to pay a certain premium for employee health insurance, then employees don’t get health insurance.

Davis seems to think that if states just budget less for health care, that will somehow drive down overall health care costs. His proposals? Push more people into the private health insurance market, make more government payments to private insurers, and have more people paying more money for their health insurance. In other words, the same failed ideas that got us into our current health care mess.

If he really wanted to lay out why the U.S. health care system has higher costs and lower performance than other industrialized countries, Davis would write about the well-documented inefficiencies of the private health insurance market, including high paper shuffling costs and big executive compensation packages, among many other cost drivers.

Rather than addressing those underlying problems, Davis just argues that since private sector workers are paying a lot more of their salary toward health care, public sector workers ought to do the same. The truth is, with people losing their health insurance right and left, making health care less affordable for thousands of Washingtonians isn’t going to make people – or the state budget – any healthier.

You can choose not to buy apples and get (cheaper) bananas instead. But what do you substitute for health care?

Aubrey Davis, EOI Board Member

by Aubrey Davis

From the Seattle Times: TWENTY years ago, Washington created the Basic Health Plan (BHP) to provide reasonable health care for people who work for employers that do not offer them insurance and do not pay enough for them to afford to buy individual coverage on the market. The BHP is partly financed by income-adjusted premiums paid by participants, and since 2002, partly by a voter-approved tax on cigarettes.

Today, facing a massive revenue shortfall thanks to the recession, lawmakers are weighing whether to shut down the BHP entirely. The consequences of doing so were vividly described by Times reporter Carol Ostrom’s story ["Amid budget crisis, hard health-care decisions: Where to cut?" Jan 13]. The loss would not only threaten people’s health, but their very lives. And it would eliminate a program that will be fundamental for the state’s participation in national health-care reform in 2014.

The irony is that the BHP, while financed by direct-user payments and a voter-approved tax, faces closure. Meanwhile, our state is forgoing billions in tax revenue through hundreds of corporate tax loopholes and exemptions that voters never approved in the first place, and that haven’t been seriously re-examined since.

Read the full column in the Seattle Times »

John Burbank, Executive Director

If you are a regular reader of Washington Policy Watch, you know that the next few years – much like the last few – will be rough going for Washington’s workers, families and children. But you also know that we can’t give up the effort to forge a path forward that restores middle class hope and opportunity.

That’s why – at a time when over 1 million Washington workers can’t take paid time off when they or their children get sick – we are building local coalitions to advance a minimum paid sick days standard.

That’s why we’re spearheading a statewide effort to defend Social  Security – and working with national organizations in the “other Washington” to increase Social Security benefits.

That’s why we sounded the alarm about the attack on Washington’s minimum wage law – and helped form a rapid-response team of labor and progressive organizations to successfully defend it.

And that’s why we will continue working for fair taxes that will sustainably fund public education, health care and the other public services that are critical to our economy and our way of life.

Real progress is possible if enough of us want it and work together to achieve it. Please consider making a tax-deductible contribution to help EOI lead the charge in 2011.

Thanks and Happy New Year!

~John Burbank
Executive Director, Economic Opportunity Institute

Washington’s Basic Health Plan: Enrolled Vs. Waiting List

Budget cuts have also resulted in cuts to services that help Washington’s seniors and people with disabilities stay as healthy and live as independently as possible. In-home care hours, adult day health programs, information and referral services and nursing home funding have all been cut.  Looking ahead, the number of seniors over age 85 is expected to increase more than twice as fast as the general population in coming years, increasing the need for long term care and other services – and the pressure on the state budget.

How Initiative 1098 will help

If passed by voters, thirty percent of net new revenues from I-1098 – about $700 million annually – will be dedicated to the Basic Health Plan, state and local public health services, and long term care for seniors and disabled people.

Want to read more, view citations, or see full size graphs? You can find the full brief (from which this post was excerpted) here: Why I-1098 is Right for Washington ».

Looking for more information about Initiative 1098? Visit the Economic Opportunity Institute website.

More reasons why I-1098 is right for WA: 1 | 2 | 3 | 4 | 5 | 6

Among the cuts: $479 million in voter-approved student achievement funding disappeared when tax revenues bottomed out, and $236 million for the Basic Health Plan, which subsidizes low-cost health plans for low-income working adults.

Okay, so those are big numbers. But what do they mean specifically for Washington residents?

For education, it means the average annual per-student allocation for student achievement will drop from $458 in 2008-09 to $0 in the coming year (click graph to enlarge):

For health care, it means more than 40,000 working adults have lost low-cost basic health insurance, while many of those remaining on the Basic Health Plan have higher premiums (click graph to enlarge):

This fall, Initiative 1098 offers Washington voters an opportunity to reform Washington’s taxes and help restore the state’s health and education systems. If passed by voters, $1.6 billion dollars in revenue would be dedicated to educating Washington children, and $685 million toward the health of working Washingtonians.

It will also position Washington’s people and businesses to compete in the global economy as we emerge from the recession, by providing $650 million in tax cuts that primarily benefit middle class families and small businesses. That money will be pumped right back into the local economy — stimulus and investment Washington state needs to get our economy moving again.

Looking for more information about Initiative 1098? Visit the Economic Opportunity Institute website.

Marilyn Watkins, EOI Policy Director

Initiative 1098, the tax reform proposal offered by Bill Gates Sr., will be good for Washington, and particularly beneficial for Southwest Washington. I-1098 will result in new investments in education and health care, tax cuts for small businesses and property owners, and a modest new tax strictly limited to the richest 1 percent.

Main Street small businesses struggling to survive this recession are among I-1098’s biggest beneficiaries. Under I-1098, more than 80 percent of businesses will be fully exempt from paying business and occupation taxes, and another 12 percent will receive a significant B&O tax cut.

For middle-class families as well as businesses, I-1098 also reduces the state portion of the property tax by 20 percent. That totals $400 million, money families and businesses can turn around and spend.

In order to invest in higher-quality education and more comprehensive health care, 1098 adds a modest tax which is strictly limited to adjusted annual gross incomes over $200,000 for individuals and $400,000 for couples. In other words, a couple earning $401,000 would pay tax on only $1,000. Couples earning less than $400,000 pay nothing.

According to estimates by Washington’s Office of Financial Management, 118,000 businesses will be newly exempt from B&O taxes, 39,000 additional businesses will see a B&O reduction, and only 38,400 out of 3.2 million filers — the top 1.2 percent — will pay the new income tax.

We all know that education is the key to opportunity. Businesses need a well-educated work force to operate efficiently and stay competitive. Yet Washington ranks a dismal 47th in K-12 spending, according to the Census Bureau. We rank 37th in awarding bachelor’s degrees and 39th in graduate degrees. And with more than 900,000 uninsured in Washington, health care has become unaffordable for too many.

Recent deep budget cuts have particularly affected Southwest Washington. Clark, Cowlitz, Pacific, Lewis, Skamania and Wahkiakum counties have suffered a 5 percent cut in the number of teachers. The waiting list for the Basic Health Plan now stands at a record 12,725 in the Vancouver area (9,000 in Clark County alone) and is rising.

I-1098 will raise $2 billion annually to restore these cuts. That money will not go to the state general fund, but instead will be dedicated to investments in lower class sizes, early learning, increased rigor in high schools, and greater access to higher education. I-1098 will also provide funding for the Basic Health Plan, long-term care and public health. In the Vancouver area, that means more than $50 million annually to hire teachers and more than 7,000 additional slots in the Basic Health Plan in Clark County.

With I-1098, Washington will join 43 other states that already have an income tax. Because 1098’s exemption is so large — the first $400,000 of income for couples is not taxed — the average effective rate on the top 1 percent of taxpayers will be just 4 percent. Neighboring states such as Oregon and California impose much higher effective rates on their wealthiest residents.

Wealthy opponents have made much ado over the fact that I-1098 includes an individual’s business income. But only 3 percent of business owners have incomes above $250,000 annually, and most states tax that same income and with much less generous individual exemptions. Moreover, business expenses, investments and losses will all be fully deductible.

Opponents also claim that after two years the Legislature will extend the income tax to all. But in Washington, the people have the last word. For instance, this November, the voters will decide on the new taxes passed last session and a new two-thirds requirement for future tax increases. The voters will decide on any change to the income tax as well, as I-1098 explicitly requires.

Let’s keep Washington a great place to live, raise a family and run a business. Please vote yes on 1098.

See the full article in the The Columbian »

John Burbank, Executive Director

This past month I flew back to Vermont, where my dad lives. He is 91 years old now, and just broke his hip. So he has a long recovery in front of him, and I was there to help him along and bolster his spirits when he needed some encouragement.

My dad is in a rehabilitation center, where he is learning to “hop” on a walker, and not put any weight on the bad leg. He gets tired, but he perseveres, and he is making progress. He maintains an enthusiasm and interest in life, athletics, politics, and his family and friends. I got him a Kindle, but I am not sure he has figured that out yet!

Without the great professional staff at his rehabilitation center, the physical therapists, the nursing assistants who make sure he is comfortable, and the nurses who look after him, my Dad would not be making progress every day. Without the EMTs who got him to the hospital, the specialist who replaced his hip, and the other doctors who supervise his care and progress, my Dad would not be alive now. Without Medicare, the medical bills would have started to pile up.

Let’s put this another way: My Dad wouldn’t have had much of a chance if we actually took U.S. Senate candidate Clint Didier’s advice: “We’ve got to get rid of this protecting the weak.”

My father-in-law is also one of those weak people we are protecting. His dementia is getting worse. He walks around, enjoys other people’s company, and watches the world as his window onto it shrinks down. He gets careful attention and care at his assisted living place and good health care for his various ailments. Medicare covers almost all his medical costs.

My father-in-law served in the Pacific during World War II. He was a naval officer at Iwo Jima. His hearing has been shot ever since. He ended up with his military pension and that’s about it. Should we neglect my father-in-law because he didn’t save much money? Too bad for him, but he is on his own! Perhaps he can appreciate the “freedom” that entails.

This is not just about old people. A colleague of mine just lost her husband. She has infant twins. As a survivor, she and her twins are entitled to Social Security benefits. If she was on her own, without Social Security, she would be in dire economic straits. Her emotional loss and devastation of the past year would be compounded with the fear of simply not being able to make ends meet.

So I have our government to thank for the well-being of my father and father-in-law, and the economic security of my colleague and her babies. Look around, and you realize that our ability to live and prosper, or make do, is only because we depend on each other. As kids, we are utterly dependent on our parents, our teachers, our friends, relatives, and neighbors, our local fire station and police, and our government.

As adults, our relationship with government morphs into a crucial interdependency. Our government makes society civil, establishing systems of law and order and justice which become the basis for commerce, employment, and advancement. We in turn pay taxes to enable government to insure the fundamentals of democracy, including “life, liberty, and the pursuit of happiness.” Our taxes enable government to pay for Medicare and Social Security for our parents, and unemployment compensation and community college worker re-training for our neighbors who have lost their jobs in this great recession. We are able to prosper, or at least persevere, thanks in large part to government. And as adults, we are also the beneficiaries of the investments, inventions, infrastructure, and leaps in productivity brought to us by our parents, grandparents, and great grandparents.

As old people, our health and well-being and quality of life depend even more on the investments of others, especially the systems of finance and health care that are possible only through our government. So when we talk about government, we are talking about our lives, our well-being, the comfort of our parents and the progress of our children. My Dad is not on his own, not now, never has been, and never will be, to the last of his days. And that is true for all of us, no matter how much we vilify the government that we ourselves elect!