Thursday, December 10, 2009

Governor's Cutting Everywhere

From the Governor's proposed budget, the education cuts (chart from Publicola):


•Eliminate state funding for the Career and Wage Ladder, a pilot program that provides wage
incentives for child care providers to advance their professional development. ($1.5 million)

•Eliminate state funding for the Child Care Resource and Referral Network, which will continue toreceive federal funding to operate local referral hot lines and provide training. ($425,000)

•Eliminate the kindergarten through 4th grade staffing enhancement, a statewide program that
reduces class size in the early grades. ($110.6 million)

•Suspend levy equalization assistance, a program that provides extra support to districts with a lower
than average property tax base. ($142.9 million)

•Suspend the student achievement program, which provides smaller class sizes for students and
professional development for teachers. ($78.5 million)

•Suspend the state program for gifted education, which affects nearly 23,000 students. ($7.4 million)

It's always class size that takes the biggest hit and yet I'm not sure we saw any class reduction size in Seattle.

Wonder what the suspension of the program for gifted education means to APP?


SE Mom said...

Gregoire’s budget, the theory goes, is a piece of dramatic propaganda in a larger campaign to raise taxes."

According to the Times, Gregoire has "disowned" these budget cuts. The plan is for the publicized cuts to scare folks into accepting the tax hike.

TechyMom said...

Right, but if you click through to Publicola, this list is a list of the things that would NOT be put back by her tax-increase budget.

Cutting gifted ed? I can't imagine anything more short-sighted. Where are we going to get the next generation of leaders if we don't provide appropriate educational opportunties for our brightest young citizens?

Melissa Westbrook said...

SE Mom, I think it might be something in the middle. But we are in terrible times and I doubt that she is exaggerating much.

SE Mom said...

Yes, I know. I work in community mental health - not at the top ever of any budgetary list. I'd rather be overly optimistic, it's the only way I can cope.

Anonymous said...

It's amazing to me that we do live in such "terrible times" but our superintendent and CFO don't seem to think so.

Part One:

Notes from the Field

I sat in on the Audit and Finance Committee meeting today.

I was looking forward to hearing our CFO’s ideas on how the budget deficit could be rectified as he had suggested would happen in the school board meeting the night before. I was expecting some creative ideas that could be implemented, fat that could be cut, just about anything to get us back on our feet and boy was I amazed. Not impressed, just amazed.

Let me start at the beginning.

The people in attendance in the meeting were Maier, Sundquist, Carr, DeBell, Kennedy, our CFO, and a host of other folks from the district side who for the most part didn’t say a word but were there because….they needed to be there I suppose. Our tax dollars at work. There were eight of them at one point. The one person who was not in attendance was our superintendent and “CEO” as many liken her to be.

First the monthly reports were presented for September and October. I guess we’ll see November’s report sometime in the spring. There were a lot of numbers.

Something got picked up by DeBell about the 111 coaches that were part of the central administration costs. He asked how many were paid for by grants and maybe we could so something there to “help the debt”.

OK. A decent call. The district would get back to him on that by the end of the meeting. I didn’t stay until the end so I don’t know if that happened or not.

Another really hard question from DeBell, was the hiring freeze still in effect? Don Kennedy said that they would get into that later motioning to another person who later made a “presentation” to the board members. To make a long story short, that question never got answered. A simple yes or no would have been sufficient. Did Mr. Kennedy really not know? Hmmm.

Then DeBell asked about a $3M reconciliation that he had requested and had not received. Well, Mr. Kennedy would have to get back to him on that too.

I’m starting to wonder what this guy does all day. He certainly doesn’t prepare for his meetings, his big moments in front of the board. Or maybe they aren’t such big moments for him. Maybe he thinks that the board members will forget and move on just like with those rif numbers that DeBell asked for in two different meetings that were to substantiate the superintendent’s decision to fire teachers and staff. Another, hmmm.

Well, finally to the big anticipated moment that we had all been waiting for since the board meeting the night before, Mr. Kennedy’s ideas on how to rectify the deficit.

What we were handed was a copy of the PowerPoint that we had seen the night before. Everything was in really big letters, using an entire page for just a few words and not double sided. Boy, they sure do know how to save a buck downtown.

There was no new information, no breakdowns, just those numbers again in a really big font.

It was interesting that no one asked the obvious question. Why, when we are in a deficit, did the superintendent think that it was worth increasing the deficit by $9,284,000 (A number that you could see on the other side of the room on that piece of paper) in such a financially difficult time? Couldn’t the SAP have waited a bit? But that elephant in the room was never questioned about its’ presence.

The number for “Academic Assurances” was questioned by DeBell. How much would be on-going? Kennedy said that he would provide a breakdown…at another time.

I was thinking that one of the board members would have requested a breakdown for the SAP cost of $3,596,000 but no one did. Was I on another planet or was I the only one wondering where $3.5M goes to pay for the SAP for one year? I’m sorry, but in my profession, if a contractor comes to me with an invoice for $3M, I want a detailed explanation. Pronto.

Anonymous said...

Part 2

So on page six in the largest font possible were five lines;

“Projected GAP” (shown just like that) $35,026,000

“New Student Assignment Plan” $9,284,000

“Budget Enhancements” (don’t you like that phrase?) 4,826,080

“TOTAL SHORTFALL” $49,136,080

By the way, on the bottom of every page were the words “Every student achieving, everyone accountable”. Hmmm

And now to the “Proposed Solutions” in huge letters on the next page.

“Delayering/Central Reductions” $6M (I kid you not)

And what is “delayering”? Well, first of all, it’s a pretty cool word don’t you think?

It is something that the Department of Finance learned about in a seminar, that hopefully was in town and not really in Texas, and it describes how many layers there are between the superintendent and the students.

Well, fortunately in Texas there are only seven layers, which apparently is a good thing, and it also is in Seattle. Of course they will need to work further into that analysis but hey, doesn’t look like we need to cut any costs down here (meaning downtown). The layers would be superintendent, CAO, directors, principals, assistant principals, teachers, students. I was wondering about all of the other people that surround each of these levels, like assistants for the superintendent and the staff for the CAO, but I guess that doesn’t matter. It’s a layering thing.

There was nothing about four day work weeks, a week off without pay each year or just plain layoffs, something that the rest of us have had to live through, just “delayering”. Fortunately DeBell and Carr did mention “furloughs”, which was a very nice way of putting it. Someone said that they would look into that. Who’s wants to put money on that actually happening?

Another term used by the presenter was “span of control” yet another pretty cool term you can use at your next family gathering. It means that some managers might have two people who report to them and another manager might have 17 people who report to them. The number of mangers could be consolidated. OK. This is not rocket science. Just start culling through staff like the rest of us have had to and start the layoff’s.
Then came “WSS Cuts (Core staffing, Class Size, Weighting)” $6M

This meant free and reduced lunches, wouldn’t that be better than losing some of that bureaucracy(?) and discretionary funds. This would be up to each principal to figure out where they could, and would have to, cut their budgets. Don’t worry, we are all going to get to feel this pain.

“Freeze on Purchases and Contracts” $3M

“Shifts to Grant Funding” $1M

“Translation Efficiencies” $1M

(That means having interpreters at all SPS meeting with the public. The proposal was to have them as requested.)

For some reason at this point someone from the district brought up the fact that they would look at summer school. No additional explanation was given.

“Reduced Extra-time/Overtime” $2M

“Non-essential Hiring Freeze” $2M

“Increased Revenue” $1M

Pay for play came up here, meal costs, rental of buildings and rental of instruments.
“Other Cost Savings” $4M
Mr. Kennedy would provide more detail about this (blah, blah, blah).

“Total Solutions=” $26M

Yeah right.

DeBell did bring up that in other countries there is a greater percentage of teachers as compared to school bureaucracy. He also suggested eliminating elementary school counselors and eliminating some security and replacing them with police officers.

Anybody ready to propose a state income tax?

Anonymous said...

Part 3:

But the best part was saved for last. I was curious as to what the “Southeast Education Initiative” meant so I decided to stay for that presentation. The handouts were distributed with great fanfare ( The Emperor’s New Clothes came to mind) and someone commented that it must have been written using invisible ink because there was nothing in the columns. No, Don Kennedy said, the columns would be “populated” tomorrow. So basically, that presentation was not quite ready yet. Oh well, maybe we’ll get that information when Don Kennedy finally gives us the analysis on the rif’s. The worst part, could it get any worse (?), is that DeBell said that the matrix didn’t include information that he had requested.

This entire presentation was sad.

In the real world, Mr. Kennedy would have been on the short list for folks to be laid off in the first round. But, he is the superintendent’s CFO who she brought with her from Charleston and her right hand man. He is apparently very influential and someone to be feared. What a sad state of affairs.

The board is working with one hand tied behind their backs with this guy. I just hope that they can free themselves of this and demand a real and professional accounting of our finances.

Melissa Westbrook said...

Thanks Dora. It's useful to have those numbers and that data. Sad, but useful. It makes my worries about the STEM program all the more real.

Anonymous said...


The STEM program was incorporated into the "New Assignment Plan Costs" and was for this year only, $1,668,000.

During the school board presentation the night before there was a discussion on how STEM would be funded in the future. There were some vague references made to a "philanthropic piece" by our superintendent but nothing was clearly described or shown in the PowerPoint. I guess they will just fund it in whatever way suits them and tell us all about it next year when they come back with empty pockets again.

anonymous said...

Nathan Hale families received this Q&A yesterday in regard to the budget cut:

How does this effect Seattle Public Schools?: The Seattle School District is estimated to lose between 30 to 50 million dollars -- a devastating blow for every student's educational goals.

What could happen at Nathan Hale?: Dr. Hudson estimates that our school could lose five to six teachers, counselors, and administrative aides.

How can you help?: The only flexible tool that Dr. Hudson can use to fill the horrendous gaps in the budget are your pledges to the Annual Campaign.

What can I say? This is huge. And, once again schools are asking families to fill in the funding gaps with donations. It's just to much.

Anonymous said...

Yes adhoc, in our PTSA meeting last night we have decided to get busy with grant writing. Bake sales aren't going to do it this time around.

Chris S. said...

Thanks Dora. Glad I didn't go! And I thought committee meetings were where the real action is!

I'm also encouraged that DeBell asks hard questions even when the press aren't present. Or were they?

Anonymous said...


There was one person there who I didn't know but I don't think that he was associated with the press.

Yes, DeBell did pose some thoughtful questions.


dan dempsey said...

Dora great work.

I just do NOT get it. I just watched the CFO's presentation on the huge darn near $50 million budget gap.

It seems that "Cutting" fantastic new spending plans is NOT considered; we will RIF our way out of this.

This could as well have been a talk on the dark side of the moon. There seems to a ZERO connection with deficits and spending on new programs.

It seems that the financially prudent plan would have been to fix crumbling infrastructure and delay the SAP and STEM.

All I can think is Ahearne had best win that "NEWS" lawsuit.

The reduction of reserves to fund deficits is NOT sustainable. So what are the priorities?

So how are we dealing with the $49 million budget gap? Get back to us on that after several more iterations..... I can hardly wait for the early spring reduction in force.

Fund new programs and RIF employees.
My question is ..... are these folks sane.

Did this board actually believe the financial news would be much different? They appeared to be "Blind sided" by the bad news.

I guess these folks need a levy failure to get in touch with reality because they are nowhere near reality now.

I just fail to see how SAP and STEM are integral to improving academic performance of this district.

STEM would be great if we could do it correctly and afford it.

In regard to SAP, without adequate funding there is no way that "Every School will be a quality school". Say hello for the Seattle plan for separate and unequal schools.

Get ready for the RIFing.

mkd said...


i was just informed that Robert H Smith, a counselor at Rainier Beach high school, was indicted for drugs. The phone call I received reassured me that no students appeared to be involved . . . yet. Oh well, one less counselor to pay at RBHS. Cutting any attempts at education, gifted or otherwise, should be the last place we should look for cuts. I am not trying to start any arguments about special programs, as TechyMom points out, "Where are we going to get the next generation of leaders if we don't provide appropriate educational opportunties for our brightest young citizens?" I'd just like to point out that some of our brightest young people are stuck in south end substandard schools. What about them? What about every student that deserves a decent (at least adequate) education so their first two years in college, if they get there, are not wasted learning things that they should have mastered in high school.

dj said...

Can I ask a truly basic and stupid question?

Are there figures somewhere that show the cost of doing the SAP vs. the cost of not doing the SAP?

dan dempsey said...


Great question ...
initially like many proposals the SAP was going to be a money saver.
Well if only transportation costs were initially examined.

There was apparently no cost associated with making every school a quality school.

It would be great to know what year one of SAP is costing ... complete with planning costs etc.

Think about how the JSCEE purchase (The Raj Mahal) was going to be a money saver because of departments consolidated in one location ... but it turned into a money-pit, where we annually toss large sums.

Melissa Westbrook said...

DJ, that's a Meg Diaz question. In short, you could probably just look at transportation and school costs as they exist today (meaning no new SAP). Trying to figure out the new SAP costs are very difficult simply because the district has no idea what families will do. It's a totally new ballgame.

Plus, as Meg pointed out to me, 50% of the kids in the south end are in schools under NCLB sanctions and many may have the option to ask for a different school. What will their parents do and how many of them might make this request?

Not a dumb question, just a hard one. I personally think waiting a year because of all the budget difficulties might not be a bad idea.

mkd said...

Melissa, do they track how many students have to take remedial classes in college? It just seems that remedial (or catch-up) classes that college students have to pay for but receive no transferable credit may be a huge waste of money.

According to a recent article, recent report from Jobs for the Future found that that nearly 60 percent of students enrolling in the nation’s community colleges must take remedial classes to build their basic academic skills. For low-income students and students of color, the figure topped 90 percent at some colleges. Remedial classes cost taxpayers more than $2 billion a year, money that is mostly wasted as few students even complete the classes, let alone continue on to graduate."

Many I know are not fond of Gates' approach to education. However, I think the figure is too low. Based on Gates' criteria, alignment with college classes makes sense, saves money and does a whole lot to close the budget gap.

dj said...
This comment has been removed by the author.
dj said...

"Trying to figure out the new SAP costs are very difficult simply because the district has no idea what families will do."

OK, I honestly was not expecting the answer to my question to be, "the district doesn't have that figure, or a range of such figures."

I have never in my entire life (and I went to public policy school and worked as a government budget analyst) heard of implementing a major change in government programming without cost projections. Sure, you understand when you make such projections what the potential weaknesses might be -- and you have a nice, detailed report that explains what assumptions you have made, what those assumptions are premised on, and what your cost ranges might be. I.e., this is how much the program will cost if 50% of students at schools "failing" under NCLB decide to transfer, and we've used that number because it reflects the percentage of such students who have transferred over the past three years.

I'm skeptical that those figures don't actually exist somewhere. Surely they must, or we really do have a district run by carnival staff. I simply can't imagine that the district would have pushed through a fundamental change in school assignment without figuring out the price tag, or a range of probable price tags.

SP said...

mkd said...
Melissa, do they track how many students have to take remedial classes in college?

MKD- Yes, there are reports. Dan D. has referred many times (during the math adoption era) to the alarming remedial rates from SPS kids at the Community Colleges.

Also, I have a hard copy report (unfortunately with no source noted) with the Seattle HS classes of 2003- 2005 (broken down by individual HS's) attending WA 4-year colleges, and the total # of Remedial English (State & non-State funded), Remedial Math, total Remedial & rate of total enrolled.

The Seattle HS ave. remedial rate was 6.11% which seems quite low compared to Dan D's figures for the Community Colleges. Seven Seattle HS were above the 6% ave. with some as high as 26.47%, and as low as 3.29%.

I would guess that the report came from OSPI, because near the top it lists "District: Seattle", and at the bottom it also has statewide figures for all public HS (6.31%), private (5.61%) & state (6.26) total.

I've always wanted to get the time to track down a current version of this report. Does anyone have this?

Anonymous said...

dj, I have been asking myself that same question. Did the board know how much the SAP would cost in the first year? Did they approve it based on those numbers?

Someone knew how much the cost would be, obviously our superintendent and the CFO knew. Then why in Jupiter's name did they decide to go forward with it knowing that they would be just putting us deeper into debt? They had closed schools for a whopping savings of $3M, all pain with very little gain, riffed valuable staff all in the name of balancing the budget and then went forth with the SAP and STEM knowing that there was no way to pay for it but with our children's education, safety and well being.

Watching the body language and listening to some of these people along the periphery in the meeting yesterday, it indicated to me that they truly didn't appreciate the gravity of the situation. There was a lot of joking, the guy making the presentation was leaning back in his chair reading what was on the page with no concern, no change in his voice when it came to the line items like "class size" and "free and reduced lunches". They truly don't see that there are some very serious considerations to be made. Do we let go staff downtown and keep teachers or vice versa? So far, we have kept staff in the Stanford Center. The superintendent in answering a question that I posed to her during The Conversation on KUOW a few months ago basically scoffed at the idea of decreasing hours for administrative staff downtown to save on costs but didn't miss a wink of sleep when closing schools or firing teachers.

Truly, the tables need to be turned. A lot of folks within the bureaucracy downtown seem to have forgotten that this is suppose to be about our children, about each child getting an education, not about them and their bonuses.

That leads me to another question. Since our superintendent received a bonus, who else downtown expects one as well? Who else will get a year end bonus at the Stanford Center? The CFO? The CAO? Brad Bernatek? Our superintendent's admin staff? And if they do get bonuses, will they give the money to their favored charity? I'm sure that we could all set up charity funds for our schools. We could sure use the alms.

Joan NE said...

This comment shows how the community can use a BTA-IV voters' ledge to seize appropriate control over the SAP.

Possible SAP-related demands on BTA IV levy voter's pledge:

By signing this pledge, I am signaling to the Seattle Public Schools Board of Directors that I will vote in favor of the BTA-IV levy if and only if the Board makes a formal announcement by not later than Feb 3, 2010, that it agrees to meet the following demands:

1. The Board commits to suspending the implementation of the elimination of open-enrollment until
a) the full cost of implementation the SAP is well-established, in all these senses: fiscal, family hardship, and academic disruption.
b) the requirements for an SAP survey, as set forth in this pledge, have been met
c) a majority of parent-respondents to the SAP survey in each significant demographic sub-group support the SAP.

2. The Board is free to redesign the SAP in order to address community reservations, and to increase support for elimination of open enrollment. The Board may not conclude that it has majority support in all significant demographic subgroups of SPS parents, except by means of a survey that meets all the conditions in this voters pledge.

3. The Board must commit to forming a demographically valid Advisory and Oversight Committee for the SAP (hereafter referred to as SAP-AOC).. This committee must have strong representation by parents and teachers. In developing the "charge" for the SAP-AOC, the Board must engage in meaningful community engagement, and must show that the input from the community engagement process is given reasonable consideration in the design of charge of the SAP-AOC.

4. The Board commits to conducting a survey, the purpose being to ascertain the likely impact of SAP on student enrollment, and the extent of community support for elimination of school choice.

Joan NE said...

[continued: possible demands on a voter's pledge, the intent of which is to enable community to seize control of SAP agenda]

4. The Board commits to conducting a survey, the purpose being to ascertain the likely impact of SAP on student enrollment, and the extent of community support for elimination of school choice.

4a. The Board commits to revisiting the question of whether elimination of open enrollment, by manner of the SAP as already defined, is in the best interested of students and families of SPS. In its evaluation if this question, the Board commits to giving full, appropriate consideration to the results of the survey. The Board commits to abandoning the SAP unless a majority of survey respondents in every SPS demographic group supports the SAP, or unless it can make a compelling case that the SAP is in the best interest of SPS students, families, and communities.

4b. The Board must ensure that the primary means of response shall by computer, that all responses are duly recorded, without statistically significant error, and that all responses shall become part of a single dedicated electronic database.

4c. The Board must see that a disinterested third-party design the survey instrument. The instrument must contain ALL the essential, meaningful, important, relevant questions needed in order to satisfy requirement 4a.

4d. The survey must be advertised so as to achieve high rates of participation, and to ensure that the survey will produce statistically and demographically valid results.

4e. The Board can not be considered as having met Requirements 4b-4d unless the survey instrument is certified by an ad hoc panel made up of community representatives and experts (including social scientists, statisticians)as having met these requirements.

4f. The Board must engage an independent third party to analyze the survey results. The design and analysis of the survey must be contracted to different parties. The survey design and survey analysis contractors must be approved by a majority of members of the SAP-AOC.

4g. The Board must commit to making the full database of survey results available to the public, so that interested parties can analyze the data independently, and in this way verify the validity of the third-party analysis of the survey.

4h. The Board must prohibit the District from publishing any written executive summary or formal reponse to the survey report, unless the same is co-authored with the SAP-AOC.

4i. The Board MUST COMMIT to hiring a disinterested third party to mediate between the SAP-AOC and the District, in the event that the SAP-AOC and the District cannot reach agreement on any formal written response or executive summary that the District may wish to publish, as follow-up or response to the final survey report.

Joan NE said...

[Part III: possible demands on a voter's pledge, the intent of which is to enable community to seize control of SAP agenda]

5. The Board most not allow the District, in the manner in which it spends all 2010 levy revenue, to deviate by more than 10% from budgeted amounts. The Board must not tolerate inappropriate categorizing of spending of levy funds. Expenditures of levy amounts may not be categorized as pertaining to a levy budget line, unless the expenditure genuinely relates primarily to the purpose of the Board-approved levy budget line item.

6.The Board must commit to being legally bound to these commitments.

6a. All voter-approved BTA levy funds earmarked for any purpose other than Maintenence, Safety, and Facilities Improvements at District schools will be held in escrow until such time as the SAP-AOC certifies full compliance with the terms of this voters’ pledge. To certify full compliance, the SAP-AOC must unanimously agree that the Board has fully complied with all the demands and requirements of this voters' pledge.

6b. If SAP-AOC fails to certify compliance with the terms of this voters’ pledge within 90 days of the BTA IV levy vote, then the monies held in escrow will be put into interest bearing certificates of deposit at a financial institution to be selected by the SAP-AOC. These monies will be used to cover budget items in the next school levy to be approved by the voters.

6c. If the SAP-AOC fails to certify compliance within the 90-day time frame, the Board is free to appeal to a civil court to make an independent determination of full compliance. If a court decides that the Board has fully complied, then, under the provisions of this pledge, the Board will be considered as to have fully complied, and is free to move the BTA IV levy monies out of escrow, and permit the District to use the funds specified in the Levy.

Joan NE said...

Some data:

1.This piece from Department of Revenue, State of Washington:

2008 Gross Business Revenue$625,419,257,677; 329,586 Units


I don't know what "units" means - probably number of independent business in state of washington.

I don't know how many jobs this represents.

2. This from page 11 of the Citizen's Guide to the State K-12 Budget:

K-12 Public Schools 40.9% = $12.2
Higher Education 10.9%=$3.3
Human Services 36.9%=$11.0
Natural Resources, General Government, and other: 10.4% = $4.4

These numbers represent percentages and billions of dollars of the 2007-2009 total biennial budget for our state.


I don't have the numbers for the 2009-2011 biennial budget, but probably they are quite a bit bigger: K-12 budget for the current biennium is about $16 billion, or about 33% greater than the previous biennium.

625 Trillion Dollars!!!

We have a deficit this year estimated at present to be 2.6 Billion dollars. Let's say that goes up to 10 billion dollars, or 0.01 Trillion dollars.

This shortfall is 0.0016 percent of State of Washington reported gross business revenue in the year of 2008.

Have you ever seen these numbers before? I haven't. Why do journalists and politicians never put numbers into context? Turns out, that in the context of annual state gross business revenue, a $2.6 Billion deficit is a TINY amount!!!

As I see it there are three ways to address this state budget defict.
1. The state goes into debt, borrows to cover the debt

2. The state cuts much needed services to disabled, elderly, poor, homeless, mentally-ill, uninsured, children in foster care, etc..., and cuts spending to K-20 - so that teachers have to handle larger classes (students and teachers suffer), college students who can ill-afford it have to face large tuition and fee increases; colleges and universities and school districts have to lay off employees....

3. The state imposes a short-term tax of 0.0016 percent of gross business revenue on all businesses in the State of Washington. (Better yet, make it a progressive tax, so small business are not taxed at all).

Why should the suffering of a state budget deficit fall on those who can least afford it? Business people always say that most business are small business, that any tax increase on business will surely mean lay-offs at small busineses, which we can't afford in these times.

Well, it is hard to see why a short time tax on businesses equal to 0.0016 percent of gross revenue would cause many jobs to be shed!

And even if it did cause some layoffs, at least the state budget for human services would be intact, so that newly unemployed would have a better chance of getting services.

I would argue that now is exactly the time when the general population of our state is more in need than ever of the health and human services that the state provides its citizens.

I would vote for a tax increase sufficiently large (how about 0.0032%instead of 0.0016% of gross business revenue) that allows the state budget for health and human services to be INCREASED so as to meet 105% of the demand for services, and especially in the area of the Basic Health Plan of Washington. Already the demand for this plan exceeds budgetted capacity by some 100,000 (length of enrollment waitlist).

Lori said...

Joan, are you sure about your numbers? The gross business income looks like 625 billion to me, not trillion. And a 2.6 billion dollar deficit is therefore 0.42% of gross income. Maybe I haven't had enough coffee yet today so I'm missing something here in the calculations.

I'd also like to point out that many business owners in WA, myself included, absolutely hate the B&O tax precisely because it taxes GROSS not NET income. For businesses that have a lot of expenses, taxing gross is a pretty unfair way to collect money.

Let's say I spend $1000 on a new computer for my business. I already paid 9.5% sales tax on the item, and while the Feds let me take that $1000 as a deduction so my net income is reduced by $1000, WA state does not. So I end up double-taxed on that computer because I owe the B&O tax on the $1000 that I spent to acquire it. Or, bigger picture, suppose someone grosses $200K but has $65K in expenses; the net is $135K but the person is taxed on all $200K. It's sort of like being taxes on your inflated property values instead of your income. Just because my house has more than doubled in what it's "worth" doesn't mean I have double my income or my ability to pay the inflated property tax bill.

I have nothing against taxing businesses at an appropriate amount, but our entire tax system out here is not entirely reality-based. People should be taxed by ability to pay, not gross income or inflated property values!

Stu said...

I have nothing against taxing businesses at an appropriate amount, but our entire tax system out here is not entirely reality-based. People should be taxed by ability to pay, not gross income or inflated property values!

Lori . . . didn't see this post 'til just now but I couldn't agree more. There are lots of arguments that can be made for different taxes but the "gross tax" is the most annoying tax there is, in my opinion.

I do some work for a publishing brokering firm; people who want to do brochures, pamphlets, etc., come to them for layout and printing. The company might charge $2000 for a job but the production costs might be, let's say, $1500. The company's profit is $500 but they're taxed on the $2000 they billed. It's an absolutely ridiculous way to tax a company and I personally know people who have left Washington State because of the way businesses are treated.


Joan NE said...

Lori - You are correct - I made a mistake. The gross revenue tax that would be needed to raise 2.6 billion dollars, if 2009 revenue is same as 2008, would be 0.416 percent. This is equal to a tax of $4.16 for every $1000.00 of gross business revenue.

Some data: B&O rates for major categories: Retailing $4.71 per $1000 Gross Revenue (GR); Wholesaling & Manufacturing $4.84 per $1000 GR; Service & Other Activities $15 per $1000 GR
B&O rates for special categories: The website lists many special categores. B&O rates for most business types on this list are 0.00484 or less; There are three categories for which the B&0 rate exceeds 0.015. (Source: Washington Dept. of Revenue website.)

Thus, it looks like for many businesses in the state, the budget-balancing tax would amount to about a doubling of the B&O tax.

Is a one-time tax of $4.16 per $1000 of gross business revenue a burden for any business? I would be increduluous if any business owner answered yes.

A gross business tax is, perhaps, unfair, but is this enough reason to oppose this proposal? Our state is not, in principle, opposed to such a tax (we already have a B&O tax, after all). I am proposing a tax that is exceedingly modest (not enough to induce layoffs), is a one-time emergency measure, is very easy to administer for both state and businesses, and that will avert cuts to constructive state programs.

I don't think anyone would argue that the proposed tax is more of a hardship for business and the economy than the averted state cuts would be for those who would be be directly affected by increased college tuition, teacher layoffs, and cuts in health and human services.

Cannot business owners step up, show just a tiny bit of compassion, and provide for a one-time, non-burdensome gross income tax, in order to avoid these cuts?

What do you say Stu and Lisa?