Thursday Q&A: Tim Eyman on I-1033

For this week’s Thursday Q&A, I sat down with Tim Eyman, supporter of Initiative 1033. Below is the entire interview, unedited.

Want to hear what the other side has to say? Tune in next Thursday, when we’ll post what Mike Ragan of the Washington Education Association has to say…

Q: Tell me what I-1033 does in your own words.
Eyman: 1033 addresses two very big concerns that we’ve heard from our supporters over the years. One is the out of control property tax problem in our state and the fiscal roller coaster of state, counties and cities. What 1033 does is it says that the government can grow and it can grow at the same rate as the private sector grows at and if they want to get more tax revenue for that, then they have to go to voters and ask their permission. So that gets us off the fiscal roller coaster. When it comes to property taxes, the initiative says that if the government collects more money than is the cap that 1033 institutes that that excess money, first a fixed percentage goes into a rainy day fund, but above that has to be refunded to taxpayers via lower property tax.

What that does is addresses those two very real concerns – it lowers property tax burden not by reducing the size of government, but by controlling the growth.

The state, the counties and the cities are bigger now than they’ve ever been. They’re not as big as they had planned on being but they are still bigger than they were before and that’s because they got on the fiscal roller coaster. When Gregoire first got into office, one of the first bills they passed in 2005 was the elimination of 601 — inflation plus population growth limit on government. They replaced it with a limit that really wasn’t a limit at all. It was the 10-year average of income growth. Effectively no limit at all. What ended up happening is revenue surged, they overextended, created unsustainable budgets. When economy turned around, they had to slash and burn. But government still started in 2003; The Locke-Rossi budget was I want to say $23 billion or something. Now the state government is like $30 billion. So it’s still bigger than it was before she started, but what she did is she ended up going up here, then down here (gesturing). So way up, then way down. But still, if she had just stuck with the 601 fiscal discipline, there wouldn’t have been these valleys. There would have been reasonable growth of government, but it would have been sustainable.

That’s that 601 was all about.

601 was passed by voters in 1993. It worked for many years controlling the growth of government. It started with Republicans – they were the first to put in a loophole, gave sanction to more. That led to, in 2005, Gregoire and the Democrats getting rid of the growth limit. 601 worked, it could work again. Going to bring back that limit and allow the government to grow but include a safety valve that says – if government decides the automatic increase isn’t big enough, they can go to the voters. It gives flexibility.

I think the first term of Gregoire is the definition of how not to do budget. She will acknowledge that she didn’t do it the right way. The problem is that they’re not actually doing anything about it. What they’re saying they want to do and what they do are two different things.

It’s blatantly obvious even to Gregoire and Democrats now that they didn’t do it right. What they should have done is stuck with 601 – they would have avoided roller coaster.

1033 is about saying, OK, we went from the Dino Rossi/Gary Locke budget, went through this huge peak and now a deep valley. Now we’re starting here at 2009, do we want to do that again? We say no. if we don’t want to have that happen again, reinstitute these policies of 601 that allowed government to grow, but at a more sustainable rate.

We’ve just seen how not to do it.

It seems like for whatever reason elected officials just can’t seem to control themselves. It’s like taking a kid into Toys ‘R’ Us – they walk in there and just want it all. Voters need to take on almost a parenting role to say, You need to realize that we can’t afford everything. There needs to be some limit on what we can charge taxpayers.

Given natural tendencies, they want it all. Go hog wild during good times, which leads to bad times. We need to bring back transparency and fiscal discipline to the Legislature and counties and cities to make sure that government grows at a sustainable rate.

Q: Counties and cities have said 1033 would devastate their budgets. Can you comment on that?
Eyman: Our response would be that there’s no doubt that counties and cities will benefit from the fiscal discipline that 601 provided to the state. Counties and cities often make the same mistake that the state does – overspending in good times, followed by tough budget times when the economy turns around. Government is going to continue to grow under 1033. It’s not going to grow as much as they would like, but as much as they would like is another fiscal roller coaster. Counties and cities will always have more access to money by going to the voters.

If you go to voters and explain: We got an automatic increase in 1033, we want a larger increase, then voters will naturally ask, Why? What is it that you will not be able to provide?

It’s that fiscal discipline that they desperately need. Too often, they seem to say, you just need to trust us. You’re going to take the money and you just need to trust us. There has to be a little bit more trust but verify. There’s got to be a level where you’re automatically going to be able to grow, but if you decide that’s not enough, you can always go to the voters. The goal is you can realize there’s a finite amount of money you can work with. You’ve got to prioritize, you can’t count on taxpayers with bottomless wallets to bail them out.

Another aspect of 1033 that will be particularly helpful to counties and cities is to that too often, governments only view the tough economic times through the government’s perspective and they don’t realize that right now is the worst possible time for taxpayers to handle higher taxes.

Taxpayers now are really struggling. Too often, governments and elected officials forget that for every dollar they spend, they took it from somebody. There has to be some balance between what the government says they want and what the taxpayers can afford. We think we’ve struck a very reasonable balance with 1033 – you’ll always get an automatic increase.

My last point is, we did an initiative in 2001 — 747 — that said a certain revenue source could only grow at 1 percent per year and if they wanted higher, they could go to the voters and ask for more.

Throughout that campaign, counties and cities and the state said, We can’t possibly do it. We’re never going to be able to survive because can’t even keep up with rate of inflation. For the last 7 years, the Legislature and counties and cities have lived under 1 percent cap. When the court struck it down in 2007, the Legislature immediately readopted it. What they found was that they found a way to make it work. They didn’t want the restriction, but once voters said this is a limit we want, they had to find a way to make it work.

In drafting 1033, counties and cities said, Can’t you at least give us the rate of inflation?

During the 2007 special session, Gregoire and the Democrats adopted 1 percent cap – should we do 1 percent cap or rate of inflation? So when we first filed our initiative, we said, OK, it’s a limit on General Fund revenue growth, but at rate of inflation. Our opponents have said 1 percent isn’t enough, so now we’re putting it at the inflation rate.

When we filed initiative, they said, Inflation only? Counties and cities said, My God, inflation isn’t enough. We need population change. We refiled and said, OK, inflation plus population. Well, that’s not enough. Ok, now we added that they can increase revenue with voter approval.

My point is that we started at 1 percent, and they’ve learned to live by it. We’ve accommodated by giving them an even higher revenue limit, and we’ve allowed the option to exceed that automatic increase every year by going to the voters. The fact that they’re still complaining tells me that it’s not 1033 – it’s that they’re against any limit in any way.

We think we’ve struck a reasonable balance: For every politician who complains that we were too restrictive, I can count 10 of our supporters who say we’re being too generous. They think government should be shrinking. They’d rather us be taking government in opposite direction.

So you’re trying to strike this balance between what politicians say they need and what taxpayers can afford. We think by controlling how fast government grows, that’s a reasonable compromise and one that I think will stand the test of time and that governments will learn to adapt to.

Q: So why peg the increase to inflation? What happens if there isn’t inflation?
Eyman: The theory behind them wanting inflation was that well, if things cost more money, we need more money. If things aren’t costing more money, you don’t need more money.

OFM (Office of Financial Management) did a fiscal analysis of our initiative and they said that they project that inflation will be .5 percent in 2010 and 1.2 percent in 2011. They project that it’s always going to be going up in that time. They show population growth is going to be up all the time. So even Gregoire’s budget office, which I’m certain is not a huge fan of 1033, is just simply showing that government is going to grow under our initiative. It’s not going to grow as fast as they would have liked, but if you allow them to grow as fast as they’d like, you end up with roller coaster.

I must emphasize that throughout every single initiative we’ve ever done, we’ve always said we’re going to include a safety valve. If it isn’t enough, ask the voters. You need a simple majority. If a simple majority of people within a city, county or people of the state of Washington vote for an increase because they’ve decided that the automatic increase wasn’t big enough, and they get the voters to vote for that, that money is exempt not just for that year but for all time.

Let’s say you put it to voters to raise sales tax by $1 billion a year and use that for education. If voters vote for that, the billion a year would be exempt for all time from the formula for determining growth.

The goal is that we know we can go to voters, but can we make this increase work? Can we find a way to spend money more effectively?

Some ways to do that are: Performance audits, negotiate better deal with unions, use existing revenues more effectively. Realize there’s a finite amount of money to work with. Too often, they feel the sky’s the limit. This way, the budget’s based on revenue collected rather than what we thought we were going to end up collecting this year.

That’s where they seem to get into trouble. It’s a more sustainable budget to say, how much do we actually have to work with? Again, from taxpayers perspective, the huge number 1 fringe benefit of this initiative to voters is that it lowers property taxes, gets government off the fiscal roller coaster, and it totally deters counties, cites and the state form unilaterally jacking up taxes. Only way to get extra money is to get voters to sign off.

Tags: 1033, Eyman, Thursday Q&A