Gary Crooks: Governments fall into the gap

The latest conservative to discover the impossible nature of initiative-imposed revenue restrictions is Chris Vance, the former chairman of the Washington state Republican Party. In a column for the online publication Crosscut, Vance writes that King County will soon run out of budget items to cut and is suffering through an honest-to-goodness revenue crisis.

King County’s general fund shrank in 2009 and is poised to do the same next year. It is projected to rise somewhat after that, but the 2012 total would still be less than 2008’s. Meanwhile, general inflation, particularly in health care, keeps rising. The county has had to lay off prosecutors and police officers and has postponed a decision on jail expansion. It is closing 39 parks, among other cuts. And yet it is facing another $54 million in cuts for 2011 and $88 million for 2012.

Spokane County’s situation isn’t that dire, but painful cuts appear to be inevitable. It’s easy to pin the blame on the economic recession and expect a rebound to bring relief, but Vance isn’t optimistic unless there are changes:

“You could eliminate the county executive and his entire staff, including the budget office and the planning office, and toss out the whole county council and their staffers, and still only save $26.5 million, roughly half of what you need in 2011. In fact, you could eliminate the entire area of general government – get rid of all the bureaucrats – and ‘only’ save $100 million. Not enough to plug the hole in 2011 and 2012.”

The gap is structural. As costs rise 6 percent to 8 percent a year, the voters – via a Tim Eyman initiative – chose to cap property tax collections at 1 percent a year. Eyman’s newest plan, Initiative 1033, would cap overall budget growth for governments at inflation plus population growth, which means that once the economy rebounds, tax revenues could never catch up because the “excess” must be returned to property owners.

If a small-government conservative like Vance can see the problem, surely the lawmakers in Olympia can.

Can’t compete. On Oct. 24, 1995, Speaker of the House Newt Gingrich said the following to a Blue Cross/Blue Shield gathering:

“Now let me talk a little bit about Medicare. Let me start at the vision level so you understand how radically different we are and why it’s so hard for the press corps to cover us. … We’re designing a free-market plan. Now, they’re very different models. You know, we tell Boris Yeltsin, ‘Get rid of centralized command bureaucracies. Go to the marketplace.’

“OK, what do you think the Health Care Financing Administration is? It’s a centralized command bureaucracy. It’s everything we’re telling Boris Yeltsin to get rid of. Now, we don’t get rid of it in round one because we don’t think that that’s politically smart, and we don’t think that’s the right way to go through a transition. But we believe it’s going to wither on the vine because we think people are voluntarily going to leave it.”

Well, it does make it difficult to cover what Republicans want when 14 years later so many of them are scaring seniors with “Democrats are going to cut your Medicare.”

First, there still is a program to cut because Gingrich was wrong. Second, a privatized system called Medicare Advantage has failed to drive down costs. Introduced in 2003, this “modernized” system originally paid 95 percent of the projected costs of enrollees, with the idea that competition between insurers for these new customers would lower costs. As it turned out, insurers said they couldn’t compete with regular Medicare and make the kind of profits they expected, so lawmakers bailed them out. The upshot is that the government reimburses the average Medicare Advantage plan 14 percent more than old-fashioned Medicare. Insurers then use some of that extra money to provide more benefits, such as gym memberships and coverage for dental and vision services.

So a plan hatched to lower costs has morphed into one that has raised them while increasing benefits.

Now, the Obama administration wants these private plans to live within the budget limitations of regular Medicare, which would save $100 billion over 10 years. If that happens, it’s the private plans that could wither on the vine.