Executive's Proposed Budget 2015-2016
King County Executive Dow Constantine
Sept. 22, 2014
King County Council
Eleven years ago the voters authorized King County to move into the 21st century with a more efficient system of biennial budgeting. Today, I present to you my first full biennial budget. It is $8.9 billion dollars over the next two years, with a General Fund of $1.5 billion.
I can see the headline now: "Constantine doubles County budget."
I have previously described the process of writing a budget as a matter of arithmetic, and this budget still obeys the rules of math.
Over the past four budgets we have preserved crucial public services through combined efficiencies of $111 million in the General Fund alone. This budget creates $35 million in new efficiencies and cost reductions.
But let's be honest: the numbers are challenging. And so in places, this is an austere budget, with unavoidable cuts in the General Fund, roads, public health, and public transit.
And while I would love to brag to my counterparts in the other Washington for proposing my fifth straight balanced budget—the truth is, as County Executive, I'm prohibited from proposing any other kind. County expenses cannot exceed county receipts. Thanks to the magic of Excel, even a political scientist can balance a budget.
It is balancing it responsibly that requires skill.
For a budget is more than just another spreadsheet—its numbers impact the lives of real people, and reflect both the values we embrace and the choices we make at the federal, state, and county levels. As such, this budget doesn't just balance; it tells a story about who we are, and about who we aspire to be.
And so, despite the difficult choices to be made, this is at its heart an aspirational budget befitting one of the most diverse, prosperous, and forward-looking counties in America.
We aspire to lead the nation in delivering good government at a competitive cost. We aspire to lead the state toward a more rational, modern, fair, and sustainable revenue system. And we aspire to look beyond the short-term and make the investments necessary to guarantee every baby born in our community, and every child raised here, the start he or she needs to live a healthy and successful adult life.
Our immodest goal is to be the best-run government in the nation. And why not? Governments nationwide already look to King County as a model of efficiency, accountability, and fiscal stability.
Our Triple-A credit rating is higher than both the state and federal governments, saving taxpayers millions of dollars each year through lower borrowing costs.
Our financial practices recently earned a “no finding” from the state auditor, which is a good thing—the equivalent of a perfect score.
Governments and businesses nationwide are emulating our Healthy Incentives Program, which continues to save the public and our employees millions of dollars a year in the cost of employee health care. It was recognized this year with the nation's highest award for public service innovation, from Harvard's Kennedy School of Government.
Likewise, our Lean practices are becoming a model for businesses and governments throughout the state, lowering costs while boosting employee productivity and morale.
And the good news is, we're only just getting started. This budget reflects substantial new savings.
After years of steady work, our safety and claims office has substantially reduced long-term disability and the cost of workers' compensation.
Improved safety training for operators and crews of all kinds has reduced accidents and liability claims.
And King County is now leading all self-insured employers in Washington State in securing Workers Compensation fraud rulings, saving millions in undeserved payouts.
These are important savings. So for those of you who believe that all our budget problems can be solved simply by rooting out waste, fraud, and abuse … well, that one is for you.
All institutions, public and private, accumulate inefficiencies over time. That is the nature of large complex organizations. And so regardless of our fiscal constraints, the task of reforming government must be a relentless and never-ending process; we call it “continuous improvement.”
Those of us who believe that government is an essential tool for improving the lives of our people and the prospects of our businesses—we have a particular obligation to assure that our government is spending every taxpayer dollar as wisely as possible.
Sometimes these savings come from changing the way we do business. And sometimes they come from making new investments up front that more than pay for themselves over time.
For example, in this budget I propose creation of a Fund to Reduce Energy Demand—or FRED, appropriately the name of our Deputy Executive and efficiency maven. The fund would invest $2.2 million into eight energy and water efficiency projects at our transfer stations, wastewater plants, and jails. Combined, these projects will reduce the County's carbon footprint by nearly 1,000 metric tons of CO2 a year, while paying for themselves through lower utility bills.
This is the sort of smart investment that we should expect from a county that aspires to be the best-run government in the nation.
Thousands of County employees have contributed to our success, and together, we have achieved a remarkable goal.
Five years ago, when budgets were still growing at 5 to 6 percent a year, I promised to contain growth in General Fund costs to the rate of population plus inflation.
The rate of population growth plus inflation is about 3.5 percent.
In this budget, we have done better than that: in partnership with employees and their labor unions, we have contained cost growth in the General Fund to just 3.3 percent.
But revenue growth lags behind both measures. County revenue is constrained to just 2.5 percent.
Think about that. Over the long run, population plus inflation is the least that the cost of government can reasonably be expected to grow, while still delivering services at a constant level.
And yet, County revenue lags behind that, and all our remarkable work to create efficiencies and savings. That is a textbook illustration of a structural deficit.
Over 10 years, the cumulative loss to the General Fund is $393 million dollars. That represents services the people of King County need but won't receive, now and in the future, because of the state tax system.
This ever-widening gap is not the result of profligate spending. It is the result of an antiquated and profoundly broken tax system that is mathematically incapable of generating the minimum revenue necessary to sustain public services.
Every government in Washington State is burdened with a 1930's tax system that was designed for an economy that no longer exists. We are the most sales-tax-dependent state in the nation, and yet the sale of goods as a percentage of our overall economy has been shrinking for more than 60 years.
Just 20 years ago in King County, about 50 percent of every dollar of personal income was spent on items subject to the sales tax; today, that number hovers at only 37 percent. As our population and our incomes grow, our sales tax revenue lags further and further behind.
That is math. It's indisputable. And that math has been made worse through two disastrously flawed tax measures that King County voters did not approve.
The state Motor Vehicle Excise Tax, or MVET, once provided an adequate and reliable revenue stream for both King County Metro Transit and Public Health. It was also by far the most progressive tax on our books.
And yet the MVET was repealed by Initiative 695 in 1999, and then by the legislature in 2000.
It was the subsequent replacement of the MVET with a volatile, regressive, and unsustainable sales tax, that is the direct cause of Metro's ongoing fiscal woes. And the state has never fully replaced Public Health funds lost to the repeal of the state MVET.
Again, that is math.
As for the rest of County operations—especially courts, cops, prosecutors, defenders, and jails—we rely on the property tax for 43 percent of General Fund revenue, more than double any other source. And yet, since 2002, Initiative 747 has capped base property tax revenue growth at just one percent per year.
Not inflation plus one percent. Not population plus one percent. But an entirely arbitrary and unsustainable one percent. Period.
Assessed property values in King County are projected to grow a robust 11.7 percent next year. Over the next decade, population plus inflation growth will be 3.5 percent per year. But state law caps growth in property tax revenue at only one percent.
Do the math.
There is a legitimate debate to be had over the proper size and scope of government, and I welcome that conversation. But we are not having that debate. Instead, thanks to our structural revenue deficit, we are getting a smaller government by default.
And not just smaller in the sense of doing more with less – we are proudly doing that. Year after year, we are simply doing less. Less infrastructure maintenance. Less public health. Less public transit.
In transit, Metro lost $1.2 billion from the collapse of sales tax revenues during the recession, money that is never coming back. Through innovation, and a now-expired temporary charge, we have managed to keep most service on the road until now.
Last week, I was able to announce that our half-decade of continuous improvement is yielding new efficiencies across the government and in Metro. Most of these cost-savings, by the way, and our labor agreement, were in the works well before the public vote last spring.
But we cannot maintain the bus system indefinitely without permanent funding. Even with savings and efficiencies, deep cuts are unavoidable, this month and next year.
Remember, this comes at a time when we should be adding more than 500,000 hours of bus service, just to meet current demand. Combined with 400,000 hours of cuts, that's a 900,000-hour gap—more than one-fourth of our entire system—between where we are going to be, and where we need to be to support our economy.
In criminal justice, we should not provide less, but we can be smart about how we provide it. Despite the General Fund shortfall, the budget for the jail maintains the same level of capacity, and the same level of staffing, as before. But inmate population has been on the rise. To manage the population, I will convene criminal justice experts to examine the trends and determine the safest, most effective strategies.
Likewise, in our work-release program, this budget provides capacity for housing only those offenders who actually work at a job during the day and require detention at night.
In Public Health, despite the loss of state and federal funding, last week I was able to unveil an innovative partnership with Planned Parenthood and the City of Seattle to keep our Public Health clinic in White Center open.
Today, I am pleased to announce that—thanks to the hard work and cooperation of Federal Way Mayor Jim Ferrell, the Federal Way City Council, and all our staff, including those represented by PTE Local 17 and the Washington State Nurses Association—we are keeping our Federal Way clinic open as well.
Mayor Ferrell and our dedicated service providers, please accept our thanks.
I will keep working after today with cities, such as Auburn, and community stakeholders elsewhere in the region to develop similar partnerships. But at this time, we have no alternative to closing two of our 10 Public Health clinics on Jan. 1, while reducing service at several others.
These cuts are explainable, but they're not excusable. It does not have to be this way.
The Great Recession hit King County hard, but our economy is once again booming. Our population is growing, our housing prices have recovered, and our unemployment rate has fallen to a relatively enviable 4.7 percent.
And yet, five years into our economic recovery, this budget will eliminate more than 500 full-time positions, perhaps the largest reduction in County history.
Five years into this economic recovery, we still lack the revenue necessary to adequately maintain the county roads on which one million trips per day are taken, let alone fully fund the ever-growing demand for transit.
As a government, we must live within our means. But we are a prosperous county that can well afford to make the public investments necessary to maintain our growth and prosperity. Indeed, as a percentage of income, Washington residents now pay 20 percent less in state and local taxes than we did two decades ago.
We have the means. What we lack is a rational system capable of fairly raising revenue commensurate with the needs of the people.
When I first came into office—when budgets were still growing at 5 to 6 percent per year—it was fair to demand that this government control costs. I ran on that. We have done that. Now, it is Olympia's turn to provide us the revenue authority necessary to fund the things the people created government to provide.
We need our legislators to end the gridlock and pass a state transportation package that allows the County to fully fund Metro, and to maintain our roads.
And we need our legislators to gather the courage and the common sense to repeal I-747's arbitrary one-percent limit and replace it with something more rational. Population plus inflation might be a start.
I am one county executive. I can't force legislators to act. But this office can serve as a bully pulpit to force the conversation. And I take this opportunity to urge the mayors of all of our cities to raise their voices with me.
We are not asking the state for a handout—quite the opposite.
King County exports more than $2 billion in net tax revenue every year to the rest of the state. So the message to Olympia must be clear: the Central Puget Sound region is the engine that drives the state economy and fills the state coffers.
Just allow us to take care of the needs of our residents, and the resulting prosperity will take care of yours.
While many of the fiscal challenges we've addressed in the past or will face in the future are beyond our control, few of them have been unforeseen. Our current crises in funding for Public Health and for Metro have come to a head only after years of aggressive cost reductions and one-time fixes-but these crises have been looming for a long time.
Impending crises stemming from unfunded mandates in mental health, and in state-imposed pension contributions are just as predictable. And while we continue to defer maintenance on our deteriorating roads and this aging courthouse, those bills also will one day come due.
We have responded to these crises with more than just cuts; we have embraced innovation. We are on sounder financial footing for it. But perpetual crisis prevents us from pursuing the sort of smart investments we need to make now, to fend off future crises years and decades down the road.
For example, 73 percent of General Fund spending goes to Justice and Safety, so if we are to truly rein in costs over the long run, then the bulk of the savings must obviously come from our Sheriff, from our courtrooms and attorneys, and from our jails. And the most efficient and morally defensible method of shaving costs from criminal justice and other services is ultimately to reduce demand.
How do we reduce demand for adult and juvenile detention, for mental health, for diabetes care, and other expensive services?
The science is overwhelming: the most accurate predictors of educational attainment, income, health, and incarceration come from developmental milestones during the first 1,000 days of life. Thus the most efficient means of investing in King County's future is to invest in our county's youngest residents.
That is why I ask you to join me in the process of developing a levy to build a more prosperous and equitable King County by assuring that every baby born in our community, and every child raised here, has a strong start in life. Call it: Best Starts for Kids.
Prevention is the key.
Prevention is at the core of our Health and Human Services Transformation Plan, developed with a broad array of community stakeholders. The Youth Action Plan, with the unanimous support of the County Council, is building on that foundation.
Over the next several months, I will work with our Transformation Plan partners, Youth Action Plan Task Force, and other community leaders to forward a funding proposal to the Council in 2015. It will focus on three areas.
First, the latest advances in the science of brain development prove that the crucial years of pregnancy through early childhood are where investment can yield the greatest return. Healthier moms deliver healthier babies, while toddlers raised in an environment that fosters strong brain development enjoy a stronger pathway toward success.
Second, recognizing that brains continue to develop, and lifelong habits are formed throughout one's youth, the levy should target investments in the critical school-age years, to quickly intervene at the first sign of physical or behavioral issues. Early intervention is the most effective form of intervention, and the least costly.
Third, for children to be healthy and succeed, the communities in which they are raised must also be healthy.
The place-based strategy in our Transformation Plan has garnered support from leading local and national foundations to improve health, social, economic, and racial equity in King County.
Multi-year investments focused on communities that rank among the lowest on a range of social and health indicators will help produce better outcomes for these Communities of Opportunity, and the children who grow up in them.
Last year, I proposed and the Council approved a Catalyst Fund to initiate public-private partnerships and make progress on cutting the cycle of poverty and ill health.
$350,000 of that investment has leveraged a partnership with The Seattle Foundation and others of 10 times that amount—$3.7 million we will invest over five years. And next week, the Foundation and I will be announcing winners for the first round of investment in the Communities of Opportunity Initiative. Seattle Foundation vice-president Michael Brown is here with us this morning. Thank you.
These three areas of healthy child investment—prenatal and early childhood prevention, school-age intervention, and Communities of Opportunity—won't come free. But the payoff is huge. For while the moral argument for investing in our children is easy, the fiscal argument is just as compelling.
The vast majority of King County's investment in health and human services is currently focused on costly adult interventions—providing treatment, support, and rehabilitation long after health and behavior have hardened. Jail is the costliest and least effective intervention of all.
Over time, these investments will rebalance our portfolio away from costly adult intervention and toward far-less-expensive prevention of problems that first arise in childhood—creating the Best Starts for Kids.
This is how we save lives, and balance our budgets in the future.
Our promise has always been to transform King County into the best-run government in America. But merely running government well isn't good enough, if we are not providing the government services people need.
I believe we can do both.
The same boundless energy and determination with which we are transforming the way we operate our government can be harnessed to transform the way we fund it. And the same remarkable success we've had at tackling our short-term problems is all the proof I need that we are willing and able to wisely invest in our future.
Balancing a budget is simple arithmetic. The challenge is to look beyond numbers on a spreadsheet to envision the innovative, inclusive, and prosperous King County we all want.
I look forward to working together with you to meet that challenge.