Unpacking Initiatvive 1033
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Unpacking Initiatvive 1033

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Amidst the current economic downturn, strategies abound to control government funding and spending capacities to satisfy financially-stressed voters of all political persuasions. Initiative 1033 ...

Amidst the current economic downturn, strategies abound to control government funding and spending capacities to satisfy financially-stressed voters of all political persuasions. Initiative 1033 (I-1033), a preeminent measure on the Washington State November ballot this fall, proposes draconian limits on state, county, and municipal government financing. If passed, I-1033 will restrain revenue growth (and, thereby, expenditures) to a point where, increasingly, governments cannot fund basic services such as education, public health, and law enforcement. The following examines I-1033’s intent, and uses positive and normative economic perspectives to evaluate its merit.

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Unpacking Initiatvive 1033 Unpacking Initiatvive 1033 Document Transcript

  • John Dortero October 10, 2009 PUBM 571 – Government Finance Unpacking Initiative 1033 Amidst the current economic downturn, strategies abound to control government funding and spending capacities to satisfy financially-stressed voters of all political persuasions. Initiative 1033 (I-1033), a preeminent measure on the Washington State November ballot this fall, proposes draconian limits on state, county, and municipal government financing. If passed, I-1033 will restrain revenue growth (and, thereby, expenditures) to a point where, increasingly, governments cannot fund basic services such as education, public health, and law enforcement. The following examines I-1033’s intent, and uses positive and normative economic perspectives to evaluate its merit. I-1033 Basics Following its predecessors, namely I-601, I-1033’s purpose is to continue reducing Washington’s property tax burden, by stringently limiting local and state government revenue growth. Specifically, I-1033 would index general fund revenues to population growth and inflation. While allowing voters to enact new taxes or increases, revenues collected beyond the population growth and inflation index are mandated to be refunded as property tax rebates. The baseline for I-1033’s implementation in 2010 will be 2009 revenue levels, inflation rates, and population (WA Secretary of State, 2009). Positive Economic Perspectives I-1033 uses a two-fold measure to calculate annual allowable revenue collections: year-to-year changes in both population growth and the Consumer Price Index (CPI). The Washington State Office of Financial Management (OFM, 2009) translates this into the following equation: Calendar Year (CY) 2010 revenue limit = CY 2009 General Fund Revenue × (1 + 2009 %∆ Population) × (1 + 2009 %∆ Inflation) Notably, the equation applies the 2009 recession year as the base from which revenue limits would be calculated. Accordingly, OFM estimate of I-1033’s financial impact spans CYs 2011 – 2015, as Washington’s Fiscal Years (FY) 2009-2011 budget has already passed (OFM, 2009). OFM forecasts a $5.9 billion reduction in state general fund revenues over the five-year period, plus reductions of $694 million and $2.9 billion to support county and municipal governments, respectively (OFM, 2009). Furthermore, OFM’s illustration of I-1033’s fiscal effects points to a long-term infrastructure funding shortfall for Washington similar to Colorado’s following the passage of its analogous Taxpayer Bill of Rights (TABOR) legislation in 1992. In the decade following TABOR’s enactment, Colorado’s spending on education, health care, and highways dropped sharply to the bottom 5% among states nationally (Nicolas & Hedges, 2009). 1
  • John Dortero October 10, 2009 PUBM 571 – Government Finance Normative Economic Perspectives Initiative 1033’s sponsors – Tim Eyman, Jack Fagan, and Mike Fagan – bluntly express their discontent with Washington’s property taxation and overall government spending on the web site, www.permanent-offense.org. Eyman, a long-time profiteer of Washington’s initiative process, has perpetually advocated anti-government measures akin to I-1033, such as I-601. Moreover, Permanent Offense faults the State’s spending patterns resulting from weakening I-601 over the past decade for periodic, multibillion dollar deficits (2009). Consequently, I-1033’s introductory text assails Washington’ revenue system (namely, taxation): This measure is intended to protect taxpayers by reducing our state’s obscene and unsustainable property tax burden by controlling the growth of government to an affordable level. It is long overdue. (Washington Secretary of State, 2009) Conversely, opponents of I-1033 span the political spectrum. For example, both King County Executive candidates, Dow Constantine and Susan Hutchison, strongly oppose I-1033 in claiming its potentially devastating effects on the County’s established services and dependence on a highly educated workforce (Seattle Times, 2009). Also, No on I-1033 Committee and Permanent Defense, I-1033’s leading opponents, warn that the multibillion dollar scale of public infrastructure cuts – chiefly to education, health care, and transportation systems – will far outweigh aggregate property tax refunds (2009). Moreover, I-1033 opponents assert that the recession is far from over, and I-1033 would exacerbate the economic “trough” (No on I-1033 Committee, 2009). Also, newspaper editorial boards across Washington, including the Seattle Times (2009) and Tri-Valley Herald (2009), oppose I-1033. The Herald captures I-1033 opponents’ premier argument: “…Washington needs tax reform. (However,) the measure would use the worst economic recession in decades as the base line for establishing limits on county and city revenue growth…” (2009). Analysis Eyman and other I-1033 proponents view the measure as imperative to controlling the expanse of government, equating taxation as government’s excessive reach into personal liberties, namely privacy. However, Eyman’s long history of forwarding similar initiatives, like I-601, evidence disregard for the economic and social consequences borne by the most vulnerable Washingtonians: school-age children, senior citizens, those without health insurance, and commuters dependent on public transit. Furthermore, I-1033’s proponents operate from a misperception that Washington is a high-tax state, relative to other regions of the U.S. Conversely, as of 2006, Washington was below the national average in both property taxation and overall per capita state/local tax burden, as shown on the following page: 2
  • John Dortero October 10, 2009 PUBM 571 – Government Finance Note. From Comparative State and Local Taxes, by Washington State Department of Revenue. Copyright 2008 by the author. While Washington’s revenue system has flaws, the majority of funds collected go directly into essential service investments, such as education, public health, and transportation infrastructures. I-1033’s opponents have a powerful example in Colorado’s TABOR fallout, and rightfully argue for governments’ long-term capacities to meet the growing and changing needs of its populous. Conclusion Scrutinizing government budgets at all levels is imperative. Democracy demands open and accountable representation and public financing, and Washington’s initiative process is one tool to forward this ideal. Moreover, government’s fundamental role is to create the policy fabric for an equitable and orderly society (Gruber, 2007). Ensuring the public’s uniform access to services, whether education, clean water, electricity, or transportation, necessitates adequate funding. I-1033 clearly threatens the ability of governments at all levels to meet their constituents’ minimal needs. Given the positive and normative economic perspectives, as well as Washington’s Constitutional mandate that basic education be the State’s paramount duty, I-1033 should be rejected. 3
  • John Dortero October 10, 2009 PUBM 571 – Government Finance References Gruber, J. (2007). Public Finance and Public Policy. (2nd ed.). New York: Worth. Nicolas, A., & Hedges, C. (2009, August 27). Toxic Twins: I-1033 Mirrors Colorado’s Corrosive TABOR. Retrieved October 10, 2009 from Washington State Budget & Policy Center Web site: http://www.budgetandpolicy.org/documents/I-1033andTABOR082709.pdf No on I-1033 Committee. (2009). Vote No: Initiative 1033. Retrieved October 9, 2009, from http://www.no1033.org Permanent Defense. (2009). No on Initiative 1033: Reject Tim Eyman’s Jobs Killing Initiative. Retrieved October 9, 2009, from http://www.permanentdefense.org/no1033/ Permanent Offense. (2009). Voters Want More Choices: Solving Problems Politicians Won’t, In Washington State. Retrieved October 9, 2009, from http://www.permanent-offense.org Reject Initiative 1033; right ailment, wrong cure. (2009, October 9). The Tri-City Herald. Retrieved October 10, 2009, from http://www.tri-cityherald.com/opinions/story/747753.html Reject Initiative 1033, the wrong restraint on state spending. (2009, October 9). The Seattle Times. Retrieved October 10, 2009, from http://seattletimes.nwsource.com Washington Secretary of State. (2009). Initiative Measure No. 1033. Retrieved October 9, 2009, from http://www.secstate.wa.gov/elections/initiatives/text/i1033.pdf Washington State Department of Revenue (2009). Comparative State and Local Taxes. Retrieved July 23, 2009 from http://dor.wa.gov/Content/AboutUs Washington State Office of Financial Management. (2009). Fiscal Impact Statement for Initiative 1033. Retrieved October 9, 2009, from http://www.ofm.wa.gov Where King Co. executive candidates stand on Initiative 1033. (2009, October 8). The Seattle Times. Retrieved October 9, 2009, from http://seattletimes.nwsource.com 4