299 Days: The Preparation

Chapter 31 Budget Crisis

The State of Washington was technically bankrupt. Of course, a state can’t really declare bankruptcy, although California was considering it.

The official Washington State deficit for the year was $5.7 billion. It was widely rumored to be even bigger. Washington State’s budget for the previous year was about $30 billion, but half of that was the state portion of federal programs like Medicaid that the state couldn’t cut. That meant the state had about $15 billion it could control, and it was short by $5.7 billion. The local schools got almost all of their money from the state, which was close to $5 billion. The state was required by the state constitution to pay for education, so that meant that $5 billion could not be touched. That left Washington State with $10 billion to pave roads, operate prisons, provide social services, have a state police force, and more.

Of course, a big chunk of paying for those things was paying the salaries, and especially the pensions of the state employees. But, with $10 billion of spending and a $5.7 billion deficit, the state had only half of the money it needed to do those things. Half.

It never should have gotten to this crisis point, Grant thought. The policy wonks at WAB told Grant that if the state would have just spent at historically normal levels for the past six years, there wouldn’t be a deficit. But, during the boom years, the state was raking in the tax money — and spending even more than the record-setting amounts it was taking in. Spending kept growing faster than revenue, and when revenue stopped coming in, the spending actually went up. A lot. Besides the increases in “safety net” spending, the other reason that spending kept going up was that, unlike the private sector, government spending was not a one-time thing. Once a program was created, it had to continue being funded, and each year the budget for it went up. It was called “baseline budgeting” which meant that one year’s spending was the “baseline,” and an increase for the next year was required. To reduce the increase was a “cut.” And voters hated “cuts” even if the cut was just slower growth in spending, not an actual cut. This stupidity was only possible with masses of brainwashed people.

The biggest reason spending went up so fast was that the state kept saying “yes” to every state employee union it could. More pension money? Sure. State employees had the most generous pensions of anyone in the state. Want to get out of paying for any real portion of your health insurance? Sure.

In return, state employee unions would take millions of dollars from their members and donate the funds to the politicians who ran the state, and “negotiate” things like pensions and health insurance. It was theft.

But no one cared. Grant could not comprehend why people didn’t care that they were being taxed so much, under the threat of going to jail, just so politicians could buy votes and keep their little politician jobs? How was this not obvious? He thought of it this way: If someone came to a person’s house and said they needed to pay thousands of dollars a month — and if they didn’t they’d be hauled off— so their neighbor can have plenty while they struggled, and they could simply end the monthly knock on the door by voting at the next election, why wouldn’t everyone do that?

Because they were brainwashed. They seemed to chant like zombies, “Must fully fund education. Is for the children. State employees are underpaid. Must increase funding….” It was like mass hypnosis. It started in the public schools. Manda would come home and tell Grant what they “learned” in school and Grant would come unglued.

“So, Manda, what did you do at school today?” he asked her one time.

“In History we learned about the Depression,” she said. “What did they say about it?” he asked.

“That some FDR guy saved the country with new government programs,” she said. “You need to spend money to get out of a depression. All those people getting the money spend it and that’s good for the economy.”

Grant gave her a quick overview of why that wasn’t true. He found himself quoting Ludwig von Mises to her. It was going over her head.

“Sorry to go off, dear,” Grant said, “it’s just so frustrating that they’re teaching this crap.”

“That’s OK,” Manda said. “I just listen to what I need to know for the test. They’ve been wrong about just about everything in History and especially Social Studies. Remember when they said gun owners were dangerous? You own guns,” she said pointing to Grant, “and you’re not dangerous. I’m just trying to get a good grade. Don’t worry Daddy. I’m not a little socialist.” She smiled when she said that.

Manda got it. Grant remembered how appalled she was when he told her that her share of national debt was $150,000. She said, “That’s payments I have to make on a house, except I don’t get to live in it.” Smart girl. She knew more about politics and fiscal matters than 95% of adults in government-loving Washington State.

Grant thought about the federal “stimulus” money that the feds had just stopped handing out to the state. For the bailout of Washington State alone, the feds created several billion dollars of debt just so the Governor and legislators wouldn’t have to be uncomfortable around their union friends. What a great trade. An awkward moment at a cocktail party is such a horrible thing. Better to put another couple hundred bucks on Manda’s $150,000 tab that she’d be paying for the rest of her life, with interest. That actually made sense to these people. And, once again, the majority of voters in the state applauded the politicians doing this for their “leadership.” It was surreal. How could this be happening?

Grant wondered if this was really happening with the state, or if he was just getting bad information. He called Jeanie. She was still nice to him. She felt bad that she wasn’t being principled but was, instead, keeping her government job. She had been dying to tell someone what was happening and was happy to fill him in.

When he called, he made sure she was in a place where she could talk without her co-workers overhearing. Jeanie described how the Governor called a big meeting of all the agency heads. That included Menlow, even though he was the separately elected State Auditor and a Republican (at least on paper). The state budget flowed through the Governor’s Office, so they had control over the money. Jeanie went to the meeting with Menlow.

“It was crazy, Grant,” she told him. “These people are absolutely terrified of what’s coming. One of them, Montoya at Corrections, started crying. She said prisoners would have to be released. Lots of them. Some pretty bad ones, too.” Jeanie was scared. She knew what it would mean for these animals to be in neighborhoods like hers.

Grant felt terrible. Not because of all the cuts; they were inevitable and spending never should have gotten so large that devastating cuts like this were necessary. No, Grant felt terrible that he was enjoying this so much.

What kind of asshole takes pleasure in this? Him. That’s who. He couldn’t control the warm joyous feeling he was having that this beast of government was wounded. It was wounded and couldn’t hurt people as much, anymore. No more ruining Ed Oleos, Big Sams, or Joe Tantoris. The collapse was beginning. It was about damned time.

Then he felt guilty. How could he enjoy this? Seriously, prisoners released to terrorize communities. How was this good news? It wasn’t. This was why Grant and a few others had been yelling at the top of their lungs for years that the state can’t keep spending more and more money. When the federal stimulus money came in, everyone else cheered. Not Grant. He knew that postponing the necessary cuts would only make the day of reckoning harder. Much harder. Which it was.

The warm joyous feeling wouldn’t go away. Grant needed to try to be sympathetic.

“What about state employees?” Grant asked. “What kind of cuts will there be?” He was trying to keep the topic on things that affected her.

“No raises this year,” she said. “No increases for the pensions. Furloughs for five days a year.”

“How much will that save?” Grant asked.

“The Governor’s Office thinks $98 million over two years,” Jeanie said.

“That’s a drop in the bucket when you’re looking at $5.7 billion,” Grant said.

“That’s all they think the unions will tolerate,” Jeanie said.

Taxes would go up — way, way up — but there was a limit to what people could pay.

Jeanie added, “The state can’t borrow any more money.” Grant, who had become an expert on the state constitution from all the cases he worked on, knew why. The constitution limited state borrowing to 9% of tax revenue. Revenue was down, way down, and 9% of it wouldn’t come close to the $5.7 billion.

Grant said, “The State of Washington has maxed out its credit card.” That was quite an astounding statement.

It got worse. The $5.7 billion deficit and maxing out of the state’s credit card was just the present problem. The problem for the next few years was the pensions as a huge wave of state employees would start retiring and collecting their pensions. The amount of the actual shortage in the state pension system was a closely guarded secret, but the rumor was that the deficit was about $20 billion, which was about two years of the state’s entire discretionary spending. In just a few years, the pension checks would start bouncing, unless taxes were raised to levels so high that no one in their right minds would get up and go to work. There was no way to avoid this. Unless, of course, pension benefits were drastically reduced. Everyone knew that wouldn’t happen. Retired union state employees were a huge voting block. The politicians would never do it willingly.

But, future events would force their hand. It was inevitable. Those greedy politician bastards created this system, knowing it would fail. They knew it, but they’d be out of office by the time it all fell apart.

After a long contemplative pause, Jeanie said, “Just about everyone I know is a state employee. Jim is. I am. Just about everyone in my neighborhood is.”

“Same in my neighborhood,” Grant said. He started mentally going up and down the houses on his street. He didn’t know most of his neighbors’ names, but, strangely, knew what agencies they worked for. The people on his cul-de-sac were the director of the Office of Women and Minority Business, the assistant state treasurer, a recently retired assistant director of the state education department, a biologist with the state game department, the soon-to-retire budget head of the Department of Ecology, and an administrative appeals judge. The only two private-sector families on the cul-de-sac were his family and the Spencers. That was it. Obviously, Olympia was different than other places because it was the state capitol. But still.

Grant started to think what would happen if the state had to lay off a third or half of them or if paychecks started to bounce. What would the people on his street do?

They would freak out. Big time. They would be stunned at first, and then they would get angry at the taxpayers who hadn’t allowed taxes to keep going up to fund their jobs. Grant remembered Sean, the Governor’s legislative director’s statement, “That’s our money. We need it.”

The people in Grant’s neighborhood would get desperate, because all they knew how to do was government work, and if they were unemployed then several hundred thousand others would be too, and the tiny number of private-sector jobs left would have long lines of applicants. If the state checks stopped coming, these people were totally screwed. They would assume that there would be government programs for them like mortgage assistance and utility bill reductions. But that wasn’t likely. If there wasn’t enough money to pay state employees, there wouldn’t be enough to give everyone handouts. This was real. The State of Washington could collapse.

There was that joyous warmth again. Collapse is what is needed. Not wanted, but needed. Grant thought about the years of work he and people at WAB had done to predict that spending was out of control and that something needed to be done or the sudden and drastic cuts would be devastating. No one listened. In fact, they mocked people like him sounding the alarm.

A collapse would be awful, but there was no political way to trim spending and get the government back into the role it was supposed to have: doing a few things well, like police protection, but not becoming bigger than the private sector. However, the system was dysfunctional. It was out of control. Some furloughs and no raises was all the system could do to plug a hole of half the money it could spend. It couldn’t borrow any more money.

Grant whispered, “It’s finally happening.”

Jeanie was still silent on the other end of the phone.

He felt like he was watching a car crash, but smiling at the same time because he told the driver a thousand times not to drive on the wrong side of the road. He was feeling horror and “I told you so” at the same time. Like the impending car crash, Grant couldn’t do anything about it; not a thing. All he could do was be sure that he wasn’t in the car when it crashed. He couldn’t save the people who had decided to do really stupid things over and over again. He had tried.

All he could do was watch. Then it would be up to him to render first aid and clean up the wreckage. He would clean up after the mess because he had to, but the whole time he would be shaking his head and muttering, “Dumb asses.”

Grant started thinking about the part about him not being in the car when it crashed. He had taken steps, at the risk of his wife finding out and being furious, to take care of his family and shield them from the coming collapse. He thought about the food, the cabin, the guns, and the network of people with vital skills. His family was taken care of because he got off his ass and did it. He was a man. He took care of his family. That made him smile.