Washington State Capitol March 2020

Feigned helplessness is one of the least attractive qualities in a state or local politician. Dunking on Olympia, or on President Trump, is the cheapest kind of talk when policy tools exist in Washington to address our most serious problems. Not all of our current crises are solvable with money, but it could blunt the worst effects, and nothing is stopping us except political will at the state level.

Of course, it’s much easier to blame Donald Trump and Mitch McConnell for failing to rescue state and local governments. This blame is richly deserved: the federal government can borrow at very low interest rates, in a currency it can print in theoretically infinite quantities.

But quite aside from these advantages, the logic of deficit spending to solve urgent problems is evident to most people. It applies equally well to the State of Washington. Pick your crisis: bailing out restaurants and bars so they don’t have to spread the virus to stay solvent; resourcing schools to open safely; expanding unemployment insurance while we ban many business activities; building alternatives to policing before gutting the nation’s public safety framework; rejuvenating our forests so they burn less; housing the homeless; or indeed [heroically staying on-topic] undoing decades of progress in building a robust transit network here in Seattle.

Unlike many states, balanced budget rules are not in Washington’s Constitution, but merely a statute passed in 2012. Therefore, a simple majority vote from our Democratically controlled House and Senate, and the Governor’s approval, could start providing relief in one of the worst of times in at least 50 years.

I am not even close to the first person to have this idea. It’s time for the state to stop waiting for others to rescue it and mobilize its own resources to provide relief for a stack of emergencies that no rainy-day fund could anticipate.

46 Replies to “Collapse is a Choice”

  1. Politics aside, it’s worth asking the question how much money the state could borrow, even if it wanted to, and under what terms? I would assume the answer is both “not as much” and “not as good” as if the federal government were doing it. And, would investors even be willing to lend to the state without new taxes to provide a dedicated revenue stream for making the bond payments?

    The thought of having such debt payments hobbling the state budget when the next recession hits is not pretty.

    1. Exactly. We have a AAA rating for a reason – going into major deficit spending will wipe that out immediately. That pushes borrowing costs up – I doubt the downgrades would stop at AA either. Illinois is barely hanging on to an investment grade rating (BBB- I believe) and it has to pay interest rates that are 2-3x ours.

      Even if there is no interest, the principal on the bonds has to be paid back sometime. This ensures that our children and grandchildren must pay for spending we refused to back with a commensurate tax increase. Hardly seems fair.

      1. Our “children and grandchildren” will benefit far more from a complete education and an economy with less long-term unemployment than from slightly lower public debt service payments in the future.

      2. Putting the kids on public transit to get to school will be a non-starter. I don’t think Seattle Public Schools has the money to both re-open with social distance *and* fund all the yellow bus service that will be required by law. The City could use all that STBD money to help out. We’re going to kicking ourselves that it got down-sized, but I suppose another election in the spring could bring it back up and add property tax to the mix.

        Could the schools run an emergency levy in February to raise the property tax rate to cover the substantial extra costs for operating schools in person for the duration of social distancing?

        I assume SPS is already thinking outside the box, with seven-day operations, year-round rotation, evening school options, hybrid instruction, outdoor classes, assigning everyone on the same bus to the same class, re-opening starting with the youngest grades first, etc.

      3. Something bad might happen, so the leg shouldn’t do anything to mitigate the calamitous thing that has happened.

        Disagree.

      4. Martin is right. It makes sense to borrow in hard times, and then pay it back in good times. These are the hard times. The fear over bond rates is overblown. The state continues to grow, and is on solid ground if it decides to go into debt a little bit.

      5. “It makes sense to borrow in hard times, and then pay it back in good times.”

        The problem is, once you borrow, the debt service payments come due every month for the next 30 years, good times or bad. The issue is not whether we’ll be able to afford the debt payments during the good times, it’s what happens during future hard times. Do we borrow more, going into even deeper debt?

        Imagine what the state budget would like today if we had hundreds of millions of dollars in loan payments committed to pay for borrowing during the 2009 recession.

        COVID may be a one-time thing, but recessions happen regularly, and will most certainly happen again.

      6. Not against borrowing – I’m against borrowing without raising taxes to pay for it.

        Going into a permanent deep level of debt (like Illinois or New Jersey) is a horrible place to be. They have a fiscal crisis every single year, even in good economic times.

      7. The problem is, once you borrow, the debt service payments come due every month for the next 30 years, good times or bad.

        So what? Home owners do this all the time. I doubt there are very few in Seattle who regret it.

        Imagine what the state budget would like today if we had hundreds of millions of dollars in loan payments committed to pay for borrowing during the 2009 recession.

        It would look pretty much the same. The debt would have been paid off somewhere between 2015 and 2019. This is common. Debt caused by unfunded liabilities (which include pensions) go up and down. In the last decade, Montana is the only state to run a surplus every year. Almost all states (including Washington) ran a deficit in 2009. We will probably run a deficit this year (the question is how much). But for most states, those debts are temporary. California flipped its long term debt — after six consecutive years of deficits followed by six consecutive years of surpluses, California’s aggregate revenue edged up to 100 percent of its expenses in 2018.

        Not against borrowing – I’m against borrowing without raising taxes to pay for it.

        No one is suggesting that. No one is suggesting we mimic New Jersey, either. We are saying that we should go into debt now — when interest rates are really low, and the economy is reeling — and then raise taxes later. This is a sensible approach that any decent actuary would approve of.

        It really isn’t that complicated. A long term fiscal imbalance is a bad idea. But a short term debt — with low interest rates, paid off later — is simply a prudent policy, especially with an economy (and population) that is expected to grow. (By the way, it is no coincidence that states that have long term debt problems are also shrinking. California was able to avoid major issues with long term debt because they are still growing. The same thing is likely to happen to us.)

    2. One thing that I wonder if we could do is have the state issue our own money. The state could start paying people in “Washington State Dollars”, and then allow taxes to be paid in WSD.

      Technically the federal government is supposed to be in charge of money, but I believe that would only mean that the state would have to still accept taxes paid in USD. So that would limit the value of WSD compared to the value of USD, which is ultimately derived from the requirement to pay federal taxes in USD.

      We’d have to be very careful about the details, but it might be possible for us to issue debt denominated in WSD. If that is possible, the default risk would then be zero, as it is for the federal government issuing debt in USD. And then, just like for the federal government, in the worst case we would have to inflate away the debt.

      Otherwise, we have to borrow USD. Borrowing a currency that you can’t print can indeed be dangerous.

    3. States can print money. Let me repeat: states can print money.

      The legal status of such money is somewhat complicated, but in practice, California printed money within my lifetime (they called it “IOUs”, but they traded like money — they were money) and people accepted it. I’m not sure really small states with lots of cross-border trade could do it, but I KNOW California can print money, because it did. I strongly suspect Washington State can.

  2. All you need is the Legislature to meet in special session and pass bond authority legislation by a 60% majority. A piece of cake! (if you live in a fantasy version of Washington where a 60% majority could be possible to do that, a state that would long ago have enacted an income tax). You would then need to sell those bonds and risk increasing the price for all publicly issued bonds in Washington.

    The better solution if of course to have a functional national government, the sooner the better.

    1. Of course this is the kind of hardball that Democrats don’t tend to believe in, but the legislature could just draw a new district map to give themselves a bigger majority.

      A functioning national government would be better, but I don’t actually see how it’s possible anymore.

      1. Redistricting in Washington state after the 2020 census will be highly favorable to the Dems. Most of the statewide growth has been in Seattle/PS and in a couple of smaller purplish areas. Since the number of state representatives and senators is fixed, the effect will be to pack more districts into the blue areas at the expense of the red ones.

        Now if the Dems at the national level can just get some anti-gerrymandering legislation passed.

      2. It would be completely hypocritical for Democrats to claim that gerrymandering is unfair in states that Republicans control, yet do it themselves, in states that they control. Gerrymandering is just inherently unfair, and should not be done.

      3. I have to give credit to the Dems (the state legislatures and governors, mind you, not Congress in this case) for the ultimate anti-gerrymandering legislation: the compact for direct election of the president.

        Four years from now, your vote for president will hopefully mean something.

        I’m not suggesting that we engage in learned helplessness and wring our hands in the meantime. If Joe Biden knows he has to win the popular vote, his policies will shift. If you have friends in Colorado, remind them to vote Yes on Proposition 113. Every. Vote. Equal.

      4. The Washington State Legislature does not get to directly gerrymander. Each caucus appoints someone (not a legislator, but some party hack who will have their back) to the Redistricting Commission, which appoints a fifth member as chair. The tradition is that the existing districts are used as a starting point, and legislators rarely get redistricted out of their district. Getting more D Congressional districts means offering a trade-off to give Rs a fighting chance at a shot at a majority in the Legislature.

        It is true that having bipartisan redistricting commissions draw Congressional districts in D states while R legislatures directly gerrymander is a form of unilateral disarmament.

        But the larger and more brutal form of gerrymandering is Jim Crow laws to imprison and disenfranchise poor people. On that score, the big drama in Florida is how a million ex-felons got to be able to vote again, but the R-controlled legislature said they had to pay all outstanding fines and court fees first. I suspect it is more a case of counting votes on the SCotUS than learned helplessness that this new poll tax has not reached the supremes.

        The D-controlled Washington Legislature, for its part, could vote to remove felon disenfranchisement altogether, like Maine has done. They don’t seem terrible interested. But the more people who could vote in this state, the more time the 2024 presidential candidates will spend here. If the Ds care enough about wanting everyone to vote, they should let everyone vote.

    2. The feds have to be your Nanny too? The DEMON RAT states are run so poorly that the loan sharks won’t give you a dime!

      1. You don’t offer anything constructive about how debt works and you parrot insulting talking points that are not even accurate. Are you an adult or a 10-year-old?

  3. One quick way to “get the attention” of the knuckle-dragger counties is to pass a law mandating that they get state funding for everything other than K-12 education only in proportion to their tax contributions to the state budget.

    Isn’t that basically what rural Republicans are constantly arguing when they lambaste “librul [sic] Democratic cities”?

    No more nicely paved farm-to-market roads with two cars per hour in EWa.

    1. Erm, we eat those Eastern Washington apples, cherries, onions, tomatoes, wine, and wheat. The state highways and basic market access are fine. The things I’d complain about is the Spokane bypass freeway, which sounds like our unnecessary 509 extension.

  4. How about the fact that our democratic controlled legislature won’t allow the use of gas taxes to support transit… And in fact imposes sales taxes on transit projects to fund other programs with transit taxes

    1. Article II, Section 40 of the state constitution forbids spending gas tax dollars on anything except highway purposes. Not just something the legislature can decide to change easily.

      1. Ron, how could you NOT call it a “Highway” expense to increase the capacity of the existing track paralleling Highway 2 between Everett and Spokane?

        It’s not just a matter of how many automobile-loads of passengers a single train can clear out of the way of other motorists for whom their own car is their only choice.

        There’s no reason a passenger train can’t also pull these train-travelers’ own “rides” on the same kind of railcars in use on the English Channel Tunnel.

        From all my drives across Stephens Pass, I would’ve been glad to pay the motoring world something for the privilege of giving over my own steering wheel to the diesel-drivin’ trainman at the throttle. Put catenary overhead and I could roll

        So I’d surely consider myself tax-money ahead to help cover the cost of the Supreme Court case that I’m demanding my State legislators file to finally let my highway system get full use out of the railroad already running right alongside it.

        And since political activity time is as billable as any the per-minute waste caused by lamed operations, my accountant says absolutely no time like the present.

        Mark Dublin

  5. If the revenue shortfall is temporary, then borrowing would be prudent. Sometimes I wonder if our problems are temporary, though… are we going to find a good enough vaccine? Are people going to trust it enough to get vaccinated?

    I definitely feel like we don’t need to rely on federal funding to save ourselves. We are far from being a poor state.

    1. While some amount of borrowing is prudent to get through small, temporary funding constrictions, I would argue that there is no evidence to-date that the current situation is either “small” or “temporary”.

      Thus a 100% borrowing strategy to get through the next X years might just be mortgaging our transportation future to provide services today that there is no demand for.

      A better approach would be a mix of cuts to right-size the service levels while borrowing some to make it through just the next one or two years.

      1. No, I’m not saying abandon ST3 in its entirety, and I’m certainly not saying it will never be needed, but it would be prudent to look at all projects that are not currently under construction or have signed contracts for potential reductions in scope, delay, or elimination.

        Things that come to mind on the ST side for potential extended delay or elimination would be P&R facilities, the 130 St Station, BAR Station, and various Elle,nets of ST3. And we have to have a serious discussion about the Everett routing of LR now since Boeing seems intent on moving to SC.

        On the Metro side there is lots of low hanging fruit. Entire routes could be eliminated or truncated at LR stations, and both RR J and Madison BRT should be studied for elimination or extended delay

      2. “look at all projects that are not currently under construction or have signed contracts for potential reductions in scope, delay, or elimination.” That would describe ST’s current process exactly. ST2 projects (roughly) are moving full speed ahead, while ST3 projects are going not further than EIS pending the board adjusting scope and/or schedule.

        Given the long time scale of ST3, I seriously doubt any projects will be canceled or seriously de-scoped. Instead, less valued projects can just be delayed out 10~15 years, and be dropped in a future “ST4” vote.

        Similarly, for SDOT I don’t think it’s a good idea to cancel a project about to launch, given how difficult it is to establish momentum on a capital project (transportation or otherwise). So I wouldn’t cancel or curtail Madison or the J. That means more debt in the short term, which likely reduces the capacity for the next round of projects, but at least we gain the benefit of the currently active projects.

        If you oppose a project (like Ross opposing nearly all of ST3), this financial crisis is just an excuse to eject projects, not a reason. The long term rationale for any multiyear capital project is unchanged.

      3. @Lazarus — So you are saying we should continue with projects like Issaquah Link, or the extension to the Tacoma Dome, but abandon infill stations like 130th or Graham Street? That is crazy. Those infill stations will have much higher ridership per dollar spent (and save those riders a lot more time).

        The same is true for the bus projects. If you are sincerely interested in getting the best bang for the buck, or as you put it, making “a mix of cuts to right-size the service levels”, then the best thing to do is put the money into buses. RapidRide J, for example, will have way more ridership per dollar spent than Issaquah Link, Everett Link, West Seattle Link or Tacoma Dome Link.

        I’m not saying I would do that. Politics matters. You don’t want to piss off people in West Seattle, Everett, Issaquah or Tacoma. I’m just saying that it isn’t right to keep projects that are obviously a terrible value, while then turning around and killing off cost effective projects. The region made a commitment to quality transit, even if they didn’t understand the details. That commitment assumed good bus service to go along with the investment in rail.

    2. Rather than debate the proper role of each level of government subsidy, let’s hone in first on what proportion fares should cover. Is it 20 percent? 25 percent? 30 percent? 40 percent?

      Once we set that bar, it is possible to then debate how much should come from each level. However, without having a farebox threshold, there is no easy metric by which to determine how much of other general revenue should go to operate specific systems or routes. As much as transit anytime anywhere is an enticing objective, I’d imagine that the most ardent transit advocate would rather fund an increase in well-performing services as opposed to token ones in sparsely populated places with few to no riders.

      As much as we complain about expecting fares to cover a part of transit operations costs, many places in the US don’t achieve the farebox proportions that are achieved in most other western countries. https://en.m.wikipedia.org/wiki/Farebox_recovery_ratio

      1. Metro has a farebox threshold, but it is kinda fake and political.

        They measure and publish gross farebox recovery, not the more relevant yardstick of net farebox recovery.

        Metro, er, the County, has no time to pick and choose which revenue sources they want to use. It really is a matter of “You git what you git and you don’t throw a fit.”

      2. We should start from the ultimate goal, which is optimal mobility for people. A farebox recovery target does not improve mobility so it’s a side issue, and dwelling on it too much can be an abstraction or an excuse not to do anything. It’s like calls to defund the police 50% without knowing anything about what the existing budget is. To do it properly you’d go through the existing budget line by line, identify the “bad” items, and see what percent they add up to.

        Any fare is a friction to mobility, so the starting point should be zero fare, and any addition should be justified based on some values. That would require defining the values. One argument is that a small token fare deters most of the non-transportational uses, misbehavior, and overusing it because it’s free. Another approach is a sliding scale based on income. Or as Tallinn does, make it free for residents but not for others. It’s easier to justify a dollar amount (e.g., a $1 fare) or a percent of riders’ income than a percent of costs. The latter sounds like the city or all residents shirking their responsibility to have universal mobility, and that just adds friction to the city’s economy and well being.

  6. Transportation is already paying debt service in Wa and the interest amount is climbing. Legislature has shown little fiscal restraint and shouldn’t be trusted to run up additional debt, through bonding or otherwise.

      1. Me also.

        Why is it that every single road project doesn’t have a vote of the people, but every single transit project does?

  7. Martin;

    I’m with you on this. To have the Trumpers with their revolt against science undo all the hard work we’ve done with public transit from getting voter approval to permitting to building all these projects… only to have them push us to austerity by their recklessness with Covid19 with the help of weakling neoliberals & appeasers is going to border on if not be catastrophic. Of course, someone could just tell the Trumpers they’re gonna need paratransit, paratransit is hugely expensive per trip and the state helps cover that.

    So I have a simple solution to two major pressing problems: Let those of us in Puget Sound fund our ferries and the 2018 WSF strategic plan amply without a public vote; and we’ll also do ample funding to paratransit statewide. Also let us raise the debt limit for Sound Transit spine projects – Seattle will still get one connection and the other which promises to be hugely expensive to Ballard can be part of a Seattle-only ST4.

    That’s where I’m starting. This is not my final, take-it-or-leave-it position but…

  8. The difference between a state and a country is that a country generally has the ability to issue fiat money and can deficit spend with more options and fewer immediate consequences than a state. In essence borrowing from itself.

    A state does not have that luxury. It must borrow from the private markets and be subject to those liabilities immediately. It is constrained by its credit worthiness.

    This state has many options to raise revenue which they pigheadedly refuse to consider. Like actually taxing the incomes of high earners and companies, and the capital gains.

    Doing those two things would substantially improve the credit worthiness of the state and allow better terms for emergency borrowing.

    1. If the state had set up an infrastructure bank earlier it could borrow from it and pay interest to the taxpayers’ benefit rather than to external bondholders.

  9. And as we all have to do with our personal finances, it might be a good idea for this whole discussion of “borrowing” get down to specifics as soon as possible. Call it liberal or conservative, since in fact it’s both, practicality swings a lot more votes than do labels.

    But most especially useful as it’s long-overdue, car-owners can’t help but notice how much more our drive to work costs us for lack of the transit that used to spare us the very driving that we, our savings, and our car all hate the worst.

    Give me back my Intercity Transit 612 to my Tacoma Dome Link ride to Seattle via the 574 and I’ll let ORCA pretend I’m not a senior ’til we either get vaccine or at least a BREAK!

    Mark Dublin

  10. Edit first, Mark, “Post” second. Above reference to “catenary” is based on the likelihood that if my car is being carried over Stevens Pass on a carrier-car pulled by an electric locomotive, a plug-in battery charge en route should be a given.

    But a word or two to the wise, Mike. Because a it could cost ST an ST- or two in legal repercussions if I get accused of fare evasion on the grounds that I’m getting so much enjoyment out of my ride that Essentiality itself has been kicked squalling to the curb.

    Out the train window of today’s quick roundtrip Link ride between Angle Lake and Beacon Hill, the main front destination sign of every bus I saw was still ostentatiously picking unwinnable fights about the “E-word.”

    The kind of detail that casts eloquent “shade” on transit’s credit-worthiness as a borrower.

    Mark

  11. States can borrow from the federal government at virtually zero interest. Plus states can borrow if they exhaust their unemployment compensation trust funds, as most have done, and take years to pay it back.

    The State Of Washington already has large amounts of debt. As noted above keeping a AAA bond rating is critical, and in large part reflects how well a state has reserved its future retiree costs.

    I guess I don’t understand what this new borrowing would be dedicated to. If anyone thinks the residents of Washington think transit is a priority — now or ever — they are living in a bubble. The state had experienced a tremendous economic run over the last ten years, and actually was pretty fiscally responsible, until the 2019 legislative session in which the new Dem majorities went crazy with new spending (which Inslee ultimately vetoed). Too bad Seattle was not fiscally responsible during this same time of historic economic growth. Progressives always think it is someone else’s money.

    Most predicted a mild recession in 2021-22 before Covid-19 as part of the natural business cycle. Seattle has some self-inflicted wounds that probably would have resulted in a bigger downturn even absent Covid-19, especially when it comes to tourism, and the end of commercial development that was becoming saturated.

    Of course during the good times many demanded an income tax. Instead Washington uses the property tax. States like CA that rely heavily on the income tax have seen a significant reduction in income tax revenue almost immediately right during the peak of the pandemic, whereas Washington State and cities have not seen any reduction if based on the levy system. Remember that next time someone wants a state income tax in order to raise additional revenue rather than tax equity. You want to pass a state income tax? Do what CO did, and pass a constitutional amendment limiting all taxes to a percentage of GDP. At least if tax equity is the real goal.

    In today’s Seattle Times an article noted what most cities and the state are discovering: the fiscal impacts from Covid-19 are not as bad as thought, although of course there will be cuts. The one exception is Seattle, but that has to do with policy.

    ST 3 was IMO irresponsible. A $4.5 billion line from Issaquah to S. Bellevue is not reasonable. That money comes out of a limited tax capacity (unless like some you think taxes can go up forever) that has to cover our most important expenditures, like education, roads, water and sewer systems, police and fire, health care, ports, social services, and so on.

    This area spends a fortune on transit, and many think too much, or at least the mobility per dollar from some transit choices have not been worth it. Probably the best thing to happen to a very arrogant ST is a reduction in revenue, so for once ST has to prioritize, and ask itself what is the real mission of transit: equity, rezoning, global warming, even traffic congestion? No, the real mission is mobility for the poor and working class who can’t afford to drive and park.

    Without that there is no public good from transit, and no reason to subsidize it. After all, why subsidize with general tax revenue a Microsoft employee who wants to take a train from Capitol Hill to Redmond, or a Mercer Island Lawyer who wants to take a train or bus to Seattle?

    For basically ever transit’s Achilles heel, compared to every other form of transit (other than bikes) is lack of convenience. As I read this blog, with a lot of intelligent voices, what is the one complaint I see over and over from posters: Metro and ST not making transit more convenient, because they are so arrogant because they (esp. ST) never thought they would have to ask the voters for another dime after ST 3. Oops. My guess is ST couldn’t sell a levy today if its life depending on it, which ironically it does.

    You want more transit riders. Forget about rezoning residential neighborhoods. Make transit more convenient, safe, clean and pleasant. Because someday self driving cars will be here. They will probably be in a form of transit, or common ownership, but that will be the end of buses and trains except for very long distances.

Comments are closed.