WEBVTT

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We're only going to do 20 minutes today. 35 minutes.

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20 minutes today. We're going to talk about the

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budget negotiations. Keep it tight, buddy. Keep

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it tight. It's a negotiation, isn't it? Not with

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me, it's not, because lately I'm not into negotiating

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anymore. Welcome to County Connection. the official

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podcast of the Washington State Association of

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Counties, where we dive into the legislative

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issues shaping the future of our communities.

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From budgets to public safety, infrastructure

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to elections, we'll break down what's happening

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in Olympia and how it impacts counties from across

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the Evergreen State. Stay informed, stay engaged,

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and join us as we amplify the voice of Washington's

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39 counties. Welcome back, everybody, to the

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County Connection Podcast. I'm Paul Jewell, the

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Government Relations Director with the Washington

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State Association of Counties. We're, geez, 70

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-some days into the legislative session, actually

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a few more than that, I think. And today is April

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1st, April Fool's Day, sort of, not really. You

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actually are really listening to a podcast. But

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we've got Brian Inslow here. Brian, welcome back.

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It's good to see you. It's nice to be here. The

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scheduling of today and having me on is not lost

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on me. I appreciate that. Yeah, that's what I

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was kind of going with, a little bit of irony

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at the beginning. Yes. Well, I'm glad that you're

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here. Brian, we're going to talk about the budget

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today. And the timing on this is really interesting.

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I think it's actually probably a perfect time

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to record this podcast because the budgets came

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out last week. Both budgets have now been voted

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off their respective floors. The Senate debated

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and voted out the budget on Saturday. Last night,

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the House did the same thing with their version

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of the budget. We've got... Transportation budgets

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in front of us also. The capital budgets were

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released yesterday. They're being heard today.

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So there's a lot going on with the state financial

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picture right now. But I want to focus mostly

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on the operations budget since both of those

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are now out of their respective chambers and

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into what we call conference. Why don't you kind

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of explain so far what's happened with the budget

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process and what stage we're at now that I just

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mentioned? Well, you've done a great job of setting

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it up, right? Every year. You kind of have to

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wait until the revenue forecast comes out, which

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happened on the 18th of last month. And what

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is a revenue forecast exactly? And I should say

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it's the revenue and caseload forecast. In Washington

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State, we have a separately appointed position

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that is independent that provides a revenue forecast

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for the state for this biennium and the ensuing

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biennium. And when you say independent, you mean

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it's independent of the legislature? It's political.

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Politically independent. So independent of the

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legislature and independent of the governor of

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the executive as well. Okay. So this is a standalone

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position that essentially is responsible for

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making these projections. Yes. Okay. That is

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the financial projections, revenue projections

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that the legislature then has to craft their

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budget to. There's also a separate body that.

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does caseloads which is the entitlement program

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so think k -12 think medicaid things like that

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where they provide an official estimate to the

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legislature about how many students Right. And

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how much each student costs or how many individuals

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are going to be on Apple Health and roughly how

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much those cost. So they take those numbers.

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How many kids are we going to have in school?

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And they can figure out what it's actually going

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to cost to educate them for the next two years.

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Same thing with, say, Medicaid recipients or

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people who might be receiving other entitlements.

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Maybe they're, I don't know, the foster program

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or maybe they're in juvenile rehabilitation or

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other programs like that. actual numbers of people

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kind of dictate or are a really good indicator

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of what your costs will be over a period of time.

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Correct. Okay. And you know, what's really, what's,

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what's interesting is there's a lot in the budget

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that we don't see. We don't, we don't do what

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you would call like zero based budgeting. We

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don't start at zero. We started like the maintenance

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level. And really what folks like you and I see

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when we're talking about these program ads or

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program additions, that's actually what's called

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the policy level. So that's even beyond kind

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of those mandatory adjustments based on caseloads

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and the cost of those caseloads. So that's a

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really interesting point that you bring up, too,

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because really famously, several years ago, when

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Governor Gary Locke was in office, he specifically

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did implement a zero -based budgeting process.

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That was probably before your time. I know it

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was before my time. you look at government budgeting

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processes, zero -based is one of the opportunities

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that you have in front of you, right? It's zero

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-based or growth -based or what you call maintenance

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level, which is what we're typically doing here

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in Washington State now. But in the past, it's

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been done in different ways, and there are these

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other ways that you can do it, correct? Yeah,

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you're not going to believe this, but I was...

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I'm old. That actually you probably believe.

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You're like, no, I'm looking at you. I can tell.

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And I've been around a while and you've been

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around a while. So both of us are a little older

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than we were when we first started. That's for

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sure. My first job in Olympia. My first real

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job was serving pizzas in Glacier National Park.

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Oh, really? Yeah, yeah. Well, I had a paper route.

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So my first job, not to digress, but you know

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the Dairy Queen in Tumwater? Oh, yeah. Right

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there across from Peter G. Schmidt Elementary

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School. So that was my first job, my first real

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job away from my family and whatnot. Place was

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built. I was the drive -thru guy. Oh, love it.

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Yeah. That was 1991, as a matter of fact. There

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we go. So I started answering phones in the Locke

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administration in 99. Oh, okay. And then... So

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you were around for Gary Locke. I was. And then

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I moved in the communication shop. And so I was

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part of the team that spun the messaging on zero

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-based budgeting. And not to push... It still

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was mostly incremental. Which is what we have

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now. It really, it wasn't, I mean, we really

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didn't start from zero. Well, there are different

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ways to do it, but it was quite, it was quite

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famously kind of. Re -examining all of the things

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that are otherwise unquestioned. It was one of

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Governor Locke's trademarks at the time, right?

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Yes. Around his fiscal responsibility policies,

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implementing this zero -based budgeting system.

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But you're saying it wasn't truly zero -based

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like maybe a county would do. Correct. Okay.

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Yeah. Interesting. Yeah. And I don't know where

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you want to go or how it's flown. I don't want

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to take over. So there's $4 billion being added

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to these budgets at the maintenance level that

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is, at this point, agreed upon between the House

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and Senate, which we aren't even talking about.

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Well, let's just explain to folks, since we brought

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up the fact that the process starts with the

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forecast, right? And we have the caseload forecast

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and we have the revenue forecast. Now, budget

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writers essentially... get that information,

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right? And you mentioned maintenance level. So

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that's kind of where they start, right? And then

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they use those numbers from there. So explain

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how that starts first, and then we'll get into

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the others. So you have that information that

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then tells you... Kind of like, what does it

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cost to do this year what you did last year?

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So that's really what the maintenance level is.

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And so is that really the starting point for

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the next budget? Yes. Okay. Yeah. And then how

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does the caseload forecast factor into that?

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So let's separate. let me just like, let me separate

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just like, is that part of maintenance? Believe

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it or not. There's like maintenance level one

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and maintenance level two. And I don't know how

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wonky you want to go, but, but, but, but maybe

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not too wonky, but let's go into it for just

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a second. Level one is just the pure. It's caseload

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adjustments for entitlement programs. So it is

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a population forecast for population dependent

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services. Like, as I mentioned, K -12 is the

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biggest one. Medicates the second, and then you

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go into corrections and things like that. Right.

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Okay. And so it's just an adjustment. How many

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people? And then depending on, and then for K

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-12, you have a team. that works with the forecast

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council to identify like a cost per student,

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which is a massive model that includes, you know,

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the cost of like gasoline for a school bus and

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things like that and incorporates all those things.

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And there's members that sit on those work groups

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that include members of the legislature, a member

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of the executive and like OSPI and things like

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that. And you have a similar thing for Medicaid.

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And then you, so then you have just the head

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count and then you have what I would refer to

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as like a, In the healthcare sphere, it's per

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member per month, but you just have a dollar

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amount that you then calculate per headcount.

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Okay. So that's your case load maintenance level

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adjustment. And is that maintenance level one?

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And that's maintenance level one. Okay. So the

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difference between maintenance level one and

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maintenance level two is? Whether it's an entitlement

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program or not, quite frankly. Okay. Then you

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start moving on to say the... cost of employee

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health benefit. Right. The cost of rents for

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DNR or... or any other state agency in the buildings,

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the cost of utility bills, things like that that

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are more subjective, right? Do you have to rent

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a building? Do you have to? There's things that

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are slightly more subjective, but what you're

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still trying to do is establish a shared understanding

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of what is the cost of doing business this year

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versus last year. But the difference is whether

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it's an entitlement program or whether it's another...

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agency or like state function that's current

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law, but is not necessarily a mandatory program.

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So it sounds like my maintenance level funding

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goes up every year. For the most part. It usually

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tracks with inflation to some extent. So when

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you say maintenance level, I'm doing the same

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things that I did last year, but I might be doing

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them for more people and I might be doing them

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at a higher cost because those conditions might

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change as far as employee salaries or benefits,

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utility costs, plant costs, the number of people

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that I'm serving, right? Things like that. 100%.

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Okay. And the state budget is not... It's different

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than a county budget. I don't want to oversimplify

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it. But at the end of the day, your largest expenditures

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are in objects A and B, which for non -accountants

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and non -budget folks, that's salaries and benefits.

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And when you, you know, if you're at home and

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you're looking at the cost of your healthcare

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premiums, which went up. 10 % roughly kind of

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statewide nationwide. Right. Then that's a big

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cost driver. Right. And that's reflected in that

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maintenance level too. Okay. So all of those

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things go into maintenance level. So that's where

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we start at is we look at what our caseloads

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are and what our costs are to accomplish all

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of those things. And that's. Kind of that starting

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point. That's what goes on each of those line

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items for each of those budget items. And that's

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why we never see a budget proposal before the

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final revenue forecast and final caseload forecast,

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because it would be wasted effort almost. Okay.

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Yeah. So once we establish our maintenance level

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budget, then what happens? Then we started getting

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into the policy conversation. Okay. And so, and

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just for some context, I think you were just

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looking at it, but we're, for this four -year

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outlook, we're looking at budgets that are in

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the mid... mid 70 billion to four years out landing

00:11:46.419 --> 00:11:49.460
into the eighties. So for those who are listening,

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who maybe are new to the budgeting process at

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the state level, you just mentioned something

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that I think is, is really interesting. So here

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in Washington, we have a biennial legislative

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session and we pass a biennial budget meeting.

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It's a two year spending budget, but we have

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a four year budget outlook. Yes. Explain to us

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why that's in place and why it's important. Sure.

00:12:09.940 --> 00:12:14.799
Well, you know, We have a biannual budget because,

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you know, it's a legacy of states not being that

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sophisticated. Sure. And some of our counties

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do a biannual budget, too. They're all very sophisticated,

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Paul. I didn't mean to say that they weren't

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sophisticated. I was just drawing some similarities

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between the two -year budget cycle at the state

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level versus a two -year budget cycle at the

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county level. So throughout. recent history throughout

00:12:35.840 --> 00:12:39.799
my history um there's been various tools within

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our either statutory environment or um no statutory

00:12:45.080 --> 00:12:48.879
or that have been intended to kind of limit how

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much spending can occur right some of you might

00:12:51.759 --> 00:12:54.139
remember the 601 spending limit and that's a

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reference to initiative 601 right which was um

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how many years ago was that oh dear a lot yeah

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i remember it though I'm sorry to say. Boy, why

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do we keep coming back to these references about

00:13:06.889 --> 00:13:11.230
how old we are? It would have been pre -2010.

00:13:11.629 --> 00:13:15.129
Yeah, definitely. And so it would have been in

00:13:15.129 --> 00:13:17.289
the aughts. You know what's great about a podcast

00:13:17.289 --> 00:13:19.820
is I can have a... computer right in front of

00:13:19.820 --> 00:13:21.700
me and I could just Google this. Click it up.

00:13:21.759 --> 00:13:25.240
Yeah. Yeah. And so, and what that was, was it

00:13:25.240 --> 00:13:27.679
was, it essentially said based on how much you

00:13:27.679 --> 00:13:29.559
spend out of your general fund, which is equivalent

00:13:29.559 --> 00:13:32.559
to the county current expense. So, so if I use

00:13:32.559 --> 00:13:35.820
those terms interchangeably. 1993. Oh yeah. Long

00:13:35.820 --> 00:13:37.720
time ago. Okay. And we were still operating under

00:13:37.720 --> 00:13:41.259
it for a while then. And basically you could,

00:13:41.259 --> 00:13:43.720
it had a fiscal growth factor based on how much

00:13:43.720 --> 00:13:45.539
you spent. That's right. And there was always

00:13:45.539 --> 00:13:48.070
ways to work around it. Because it was predicated

00:13:48.070 --> 00:13:51.769
on how much you spent out of your, again, current

00:13:51.769 --> 00:13:55.250
expense or general fund. But you could artificially

00:13:55.250 --> 00:13:57.830
increase your general fund by rolling other funds

00:13:57.830 --> 00:13:59.409
into your general fund. Or you could do fund

00:13:59.409 --> 00:14:01.149
transfers. And there was all sorts of things.

00:14:01.850 --> 00:14:04.169
For those of you out there that are really interested,

00:14:04.330 --> 00:14:07.350
go look up like Magic Money Machine, which was

00:14:07.350 --> 00:14:10.690
a staff email that got leaked the last time they

00:14:10.690 --> 00:14:12.509
used it. I think it was the Education Legacy

00:14:12.509 --> 00:14:16.460
Trust account. Put in place. Anyhow, that ended

00:14:16.460 --> 00:14:18.379
up going away. I think people call those accounting

00:14:18.379 --> 00:14:21.879
gimmicks, actually. Tricks, gimmages. Gimmages?

00:14:22.179 --> 00:14:25.100
Gimmicks. I feel certain gimmages is not a word.

00:14:25.200 --> 00:14:26.740
I'm going to look that up, actually, while you're

00:14:26.740 --> 00:14:31.460
talking. It's right under ginormous and irregardless.

00:14:31.460 --> 00:14:37.659
How do you spell gimmages? So anyhow, the latest

00:14:37.659 --> 00:14:40.360
evolution has been the four -year outlook. which

00:14:40.360 --> 00:14:42.960
is a statutory requirement. It was passed by

00:14:42.960 --> 00:14:44.519
the legislature. It was not passed by initiative,

00:14:44.820 --> 00:14:48.440
which is something that sort of comes into play

00:14:48.440 --> 00:14:53.399
this year, I think. And it requires the legislature

00:14:53.399 --> 00:14:59.399
to have a final budget product that balances

00:14:59.399 --> 00:15:04.059
or is sustainable over four years. And so it

00:15:04.059 --> 00:15:08.360
does in many cases have a forcing function of

00:15:08.360 --> 00:15:12.320
creating some restrictor or governor of how much

00:15:12.320 --> 00:15:15.860
you can spend in the current biennium or the

00:15:15.860 --> 00:15:18.259
ensuing biennium. So when they're building their

00:15:18.259 --> 00:15:21.679
maintenance level budget for this year and for

00:15:21.679 --> 00:15:23.960
next year, because it's a two -year cycle, they're

00:15:23.960 --> 00:15:26.929
looking out at the next two years as well. at

00:15:26.929 --> 00:15:29.610
both revenue projections and are they looking

00:15:29.610 --> 00:15:32.389
at caseload projections also? Oh, 100%. Okay.

00:15:32.470 --> 00:15:34.750
Which would make sense, right? Because they want

00:15:34.750 --> 00:15:36.389
to make sure that what we're putting in the budget

00:15:36.389 --> 00:15:38.529
now is at least sustainable for that two -year

00:15:38.529 --> 00:15:41.350
period. It would seem that it would be even smarter

00:15:41.350 --> 00:15:43.690
to try to look even further out, right? If you're

00:15:43.690 --> 00:15:45.590
thinking about sustainability, but I have to

00:15:45.590 --> 00:15:48.309
imagine that the further out you go, the less

00:15:48.309 --> 00:15:50.740
reliable those... projections are going to be

00:15:50.740 --> 00:15:53.419
because things change so much. Yeah. I think,

00:15:53.500 --> 00:15:56.360
you know, any economic forecast over 18 months,

00:15:56.480 --> 00:15:59.360
you could start arguing, but, and then you go

00:15:59.360 --> 00:16:02.080
beyond that. I think so. You try to push the

00:16:02.080 --> 00:16:04.700
five or six years and you start. really wondering

00:16:04.700 --> 00:16:08.059
about how realistic it is. Yes. Yeah. I mean,

00:16:08.100 --> 00:16:10.259
I'm, yeah, I'm, I'm wondering what like interest

00:16:10.259 --> 00:16:12.279
rates on a home are going to be in five years.

00:16:12.299 --> 00:16:17.519
Right. Yeah. So, so, but to your point, so there's

00:16:17.519 --> 00:16:19.899
been a number socialized about the revenue problem

00:16:19.899 --> 00:16:23.539
and it's been identified as 13 billion, give

00:16:23.539 --> 00:16:24.899
or take, and I don't want to, I don't want to

00:16:24.899 --> 00:16:26.879
spend too much time arguing or haggling one way

00:16:26.879 --> 00:16:28.740
or another, but that that's a four year number.

00:16:29.149 --> 00:16:31.909
And if you think about that as like imagine you're

00:16:31.909 --> 00:16:34.090
like a kid playing with blocks and you're like

00:16:34.090 --> 00:16:36.250
stacking blocks and you have like 10 blocks.

00:16:36.789 --> 00:16:39.970
And in year one, you put one block. And in year

00:16:39.970 --> 00:16:42.730
two, you put two. And year three, three. And

00:16:42.730 --> 00:16:45.889
then year four. And that is a visual representation

00:16:45.889 --> 00:16:51.190
of that $13 billion problem that is growing over

00:16:51.190 --> 00:16:56.940
time. And is a creation of those inflation factors

00:16:56.940 --> 00:17:00.720
stacking on each other. So really the problem

00:17:00.720 --> 00:17:04.779
that we're trying to solve in year one and two

00:17:04.779 --> 00:17:08.980
is around $5 billion, $6 billion, $5 billion,

00:17:09.119 --> 00:17:12.460
like five. And then the problems in three and

00:17:12.460 --> 00:17:15.069
four is more like nine. yeah and so that's when

00:17:15.069 --> 00:17:17.069
you so that's where some of that tension when

00:17:17.069 --> 00:17:19.930
you have to solve for four years comes in and

00:17:19.930 --> 00:17:21.849
that's why you see some of these revenue packages

00:17:21.849 --> 00:17:24.839
that have been introduced at the scale that they've

00:17:24.839 --> 00:17:27.539
been introduced at. It's an interesting visual

00:17:27.539 --> 00:17:32.000
that you bring. It brings to mind some of the

00:17:32.000 --> 00:17:35.299
ideas or arguments around investing for retirement

00:17:35.299 --> 00:17:38.000
and doing it at an early age because of compounding

00:17:38.000 --> 00:17:40.900
interest. It builds up over time. But what you're

00:17:40.900 --> 00:17:43.279
describing is exactly the opposite and it working

00:17:43.279 --> 00:17:46.759
against you in this sort of budget outlook where

00:17:46.759 --> 00:17:49.640
if you don't start addressing these issues now,

00:17:49.859 --> 00:17:53.500
they become worse over time because they start

00:17:53.500 --> 00:17:56.160
to pile on to one another almost the same or

00:17:56.160 --> 00:17:59.019
really in the same fashion as, say, compounding

00:17:59.019 --> 00:18:00.619
interest would. But maybe we could call this

00:18:00.619 --> 00:18:05.220
compounding inflation, compounding caseload increases,

00:18:06.160 --> 00:18:09.000
et cetera, et cetera. So that's where that four

00:18:09.000 --> 00:18:11.000
-year outlook really becomes valuable in a process

00:18:11.000 --> 00:18:14.359
like this. Yeah. I mean, when's the best time

00:18:14.359 --> 00:18:17.160
to plant a tree, Paul? Yesterday. Yeah. Yeah.

00:18:17.259 --> 00:18:20.180
But outside of yesterday, today. Yeah. Right.

00:18:20.220 --> 00:18:21.779
Yeah. Sorry, Scamania. Shouldn't have mentioned

00:18:21.779 --> 00:18:25.160
that. I think they appreciate it, actually. Okay.

00:18:25.200 --> 00:18:30.839
Good. Good. Good. So that's kind of – I don't

00:18:30.839 --> 00:18:33.440
know where we kind of want to go from there.

00:18:33.539 --> 00:18:38.119
But, I mean, so those are the – that's the atmosphere

00:18:38.119 --> 00:18:43.619
in which we're – like tackling this budget and

00:18:43.619 --> 00:18:47.779
this budget challenge as it stands today is you

00:18:47.779 --> 00:18:54.859
have what's really not a recession yet. No. But

00:18:54.859 --> 00:18:57.599
an inflationary tension on the operating budget.

00:18:59.920 --> 00:19:04.359
And you will see this play out in the media and

00:19:04.359 --> 00:19:09.890
in the back rooms. you know, when you dig into

00:19:09.890 --> 00:19:12.829
the numbers, the revenue forecast is giving you

00:19:12.829 --> 00:19:17.049
4 % annually. And you'll hear a lot of talking

00:19:17.049 --> 00:19:19.210
points about that and whether that ought to be

00:19:19.210 --> 00:19:22.769
enough as we start having the tough votes around

00:19:22.769 --> 00:19:24.690
whether you support revenue or not, or whether

00:19:24.690 --> 00:19:26.690
you support the revenue proposals that are being

00:19:26.690 --> 00:19:28.690
put forward. Well, yeah, I mean, I think that's

00:19:28.690 --> 00:19:31.829
really an interesting point and one that we kind

00:19:31.829 --> 00:19:33.509
of gloss over a lot because there's a difference

00:19:33.509 --> 00:19:36.829
between, you know, cutting the budget and cutting

00:19:36.829 --> 00:19:40.009
the budget from different perspectives, right?

00:19:40.529 --> 00:19:44.869
We're talking about a state budget outlook that's

00:19:44.869 --> 00:19:48.289
got a four -year outlook of $13 billion as far

00:19:48.289 --> 00:19:50.509
as the deficit goes, but we're actually seeing

00:19:50.509 --> 00:19:52.990
revenue still increase over that period of time.

00:19:53.049 --> 00:19:56.109
Yes. Right? What we're seeing is that the revenue

00:19:56.109 --> 00:19:58.950
is not increasing at the same level as the costs

00:19:58.950 --> 00:20:01.549
are projected to increase, which is oftentimes...

00:20:02.039 --> 00:20:04.839
what we feel at the local level as well but we're

00:20:04.839 --> 00:20:07.500
much much much more constrained than the state

00:20:07.500 --> 00:20:09.619
is right if if our counties were seeing year

00:20:09.619 --> 00:20:11.680
-over -year revenue growth of four or five percent

00:20:11.680 --> 00:20:14.640
i think they'd be very excited about that but

00:20:14.640 --> 00:20:16.740
of course they're not for the most part because

00:20:16.740 --> 00:20:19.160
we're dependent on different types of taxes and

00:20:19.160 --> 00:20:21.180
we have growth limit factors that are much more

00:20:21.180 --> 00:20:25.240
stringent on those on those revenue sources that

00:20:25.519 --> 00:20:29.420
make up the majority of our revenue or our resources,

00:20:29.539 --> 00:20:31.440
which of course is property tax. I don't want

00:20:31.440 --> 00:20:33.559
to get into that today because we want to focus

00:20:33.559 --> 00:20:36.160
on these budgets, but that is kind of the setting

00:20:36.160 --> 00:20:38.559
that we're in, right? We are actually seeing

00:20:38.559 --> 00:20:41.279
revenues still go up. We're not in a recession.

00:20:41.460 --> 00:20:43.660
We're seeing growth in the economy. It's just,

00:20:43.700 --> 00:20:47.359
it's not growing as fast as the projected expenses

00:20:47.359 --> 00:20:50.839
are growing, right? In testimony in front of

00:20:50.839 --> 00:20:54.089
the Ways and Means Committee this year, I actually

00:20:54.089 --> 00:20:57.930
said, welcome to being a County. Yeah. Cause

00:20:57.930 --> 00:20:59.569
it's a lot tighter than it has. I'm not sure

00:20:59.569 --> 00:21:03.109
how well it hit, but, but, but no conceptually

00:21:03.109 --> 00:21:05.670
you're spot on. And again, the numbers are different.

00:21:05.769 --> 00:21:08.650
The obligations are different, but you're right.

00:21:08.970 --> 00:21:12.440
You know, we're looking at a. In the last 25

00:21:12.440 --> 00:21:19.700
years, roughly, since the 1 % cap on property

00:21:19.700 --> 00:21:23.240
tax was put in place by the legislature in a

00:21:23.240 --> 00:21:26.519
special session after the initiative was thrown

00:21:26.519 --> 00:21:29.019
out. That's right. Just to be clear. Initiative

00:21:29.019 --> 00:21:35.140
747. We've been at 1%, and don't quote me on

00:21:35.140 --> 00:21:37.650
this, but inflation's been about 3%. Plus or

00:21:37.650 --> 00:21:39.769
minus over the 25 year history. There were times

00:21:39.769 --> 00:21:41.829
when it was actually negative, but there were

00:21:41.829 --> 00:21:44.029
times when it was as high as eight or 9%. So

00:21:44.029 --> 00:21:46.750
a little bit more. Yeah. So, so well, recent

00:21:46.750 --> 00:21:49.150
history, but, but, you know, and so that's kind

00:21:49.150 --> 00:21:51.049
of that gap and tension we've been operating

00:21:51.049 --> 00:21:54.289
on. Right. Yeah. So the other part of this, of

00:21:54.289 --> 00:21:57.390
course, is the state really hasn't seen this

00:21:57.390 --> 00:22:00.049
type of budget forecast for your outlook for

00:22:00.049 --> 00:22:02.750
many years, not really even since the great recession,

00:22:02.849 --> 00:22:05.869
there was a little blip, you know, during. COVID,

00:22:05.950 --> 00:22:08.849
but that was just a perceived or anticipated

00:22:08.849 --> 00:22:12.329
blip. It actually never manifested, right? In

00:22:12.329 --> 00:22:15.490
fact, revenues continued to grow at much faster

00:22:15.490 --> 00:22:17.549
rates than they thought they would during that

00:22:17.549 --> 00:22:19.789
period of time. So the last time the state has

00:22:19.789 --> 00:22:22.269
really been in this situation where they've really

00:22:22.269 --> 00:22:26.250
faced anything as daunting as a four -year budget

00:22:26.250 --> 00:22:28.769
outlook as the one that they're facing now was

00:22:28.769 --> 00:22:31.109
really during the Great Recession. 2009. I was

00:22:31.109 --> 00:22:34.279
here. You were here. I had just transitioned.

00:22:34.440 --> 00:22:40.900
I was part of the budget team. At then -Governor

00:22:40.900 --> 00:22:43.920
Gregoire's office, I was doing corrections and

00:22:43.920 --> 00:22:48.980
Department of Health, substance abuse, things

00:22:48.980 --> 00:22:50.500
like that, part of the human service portfolio.

00:22:50.859 --> 00:22:53.779
And we were sitting around a room with the governor,

00:22:53.980 --> 00:22:56.940
and the governor was like, you know, you would

00:22:56.940 --> 00:22:59.880
put a cut forward and say, well, here's a cut

00:22:59.880 --> 00:23:01.400
we could do. And the governor was like, who are

00:23:01.400 --> 00:23:04.640
you? Because the governor wanted to know. And

00:23:04.640 --> 00:23:06.980
you'd be like, well, I am a person here in the

00:23:06.980 --> 00:23:10.019
country legally who needs kidney dialysis on

00:23:10.019 --> 00:23:12.539
a regular basis to function. And if we do this

00:23:12.539 --> 00:23:14.380
cut, I'll only be able to get it in the emergency

00:23:14.380 --> 00:23:18.240
room. And that was kind of the level of detail

00:23:18.240 --> 00:23:23.299
and, you know, the level of reductions we were

00:23:23.299 --> 00:23:26.160
looking at. And so that was specific to, like,

00:23:26.240 --> 00:23:28.400
what were some of the state -only programs that

00:23:28.400 --> 00:23:30.740
we were – oh, I don't want to get – I don't want

00:23:30.740 --> 00:23:32.779
to get us too far, but this is part of me trying

00:23:32.779 --> 00:23:34.619
to trick Paul into going for, like, 45 minutes.

00:23:34.839 --> 00:23:38.319
I love it. It's not going to happen. But every

00:23:38.319 --> 00:23:40.880
state operates a Medicaid plan. OK. Yes. And

00:23:40.880 --> 00:23:42.299
for the most part, there are things that are

00:23:42.299 --> 00:23:45.319
and just at a high level, there are things that

00:23:45.319 --> 00:23:46.880
the federal government will match what you do.

00:23:47.119 --> 00:23:50.619
And then some states like Washington also provide

00:23:50.619 --> 00:23:52.900
additional benefits above and beyond, which are

00:23:52.900 --> 00:23:55.700
called state only. So so we provide more service

00:23:55.700 --> 00:23:58.000
and we only use state dollars to support those.

00:23:58.059 --> 00:23:59.880
So so when you're starting to make cuts, those

00:23:59.880 --> 00:24:03.000
are the things you look at first, because if

00:24:03.000 --> 00:24:05.740
you because really this is a general fund problem.

00:24:05.859 --> 00:24:08.119
So if you cut a state only problem, you're going

00:24:08.119 --> 00:24:11.359
to save. $50 million in general fund, and you're

00:24:11.359 --> 00:24:14.380
going to cut $50 million of service. If you cut

00:24:14.380 --> 00:24:18.099
something that's got a match dollar, you're going

00:24:18.099 --> 00:24:21.079
to save $50 million in general fund, and you're

00:24:21.079 --> 00:24:23.319
going to cut $100 million in service, roughly.

00:24:23.680 --> 00:24:24.980
Because you're going to lose that federal support

00:24:24.980 --> 00:24:28.200
as well. Correct. Yeah, those are the dollars

00:24:28.200 --> 00:24:29.819
that you always want to try to protect. Yeah.

00:24:29.900 --> 00:24:34.599
So you were still in Governor Gregoire's office,

00:24:34.799 --> 00:24:38.019
but then you quickly, at some point, During the

00:24:38.019 --> 00:24:40.460
Great Recession. January 1st, 2009, I started

00:24:40.460 --> 00:24:44.140
at WASAC. Okay. And January 1st, 2009, I also

00:24:44.140 --> 00:24:47.099
started at WASAC as a member. So we actually

00:24:47.099 --> 00:24:49.000
came together at the same time. I don't think

00:24:49.000 --> 00:24:52.200
we realized that, which is neither here nor there.

00:24:52.519 --> 00:24:56.079
But we both remember what it was like then. Yes.

00:24:56.380 --> 00:24:59.940
And how difficult it was for counties and how

00:24:59.940 --> 00:25:03.740
difficult it was for the state. And I just want

00:25:03.740 --> 00:25:05.890
to bring this up because... What we're facing

00:25:05.890 --> 00:25:08.609
now is dramatically different, at least in the

00:25:08.609 --> 00:25:11.829
initial budget proposals, because back then counties

00:25:11.829 --> 00:25:15.470
were a target. All local governments were a target.

00:25:15.630 --> 00:25:19.089
The state was cutting left and right state shared

00:25:19.089 --> 00:25:21.730
revenue all the way down the line for all kinds

00:25:21.730 --> 00:25:23.750
of programs. Public health, for instance, was.

00:25:24.140 --> 00:25:27.299
gutted, both at the state and the federal level.

00:25:27.460 --> 00:25:32.519
A lot of our other shared revenues, you could

00:25:32.519 --> 00:25:36.119
name them, PILT funding, transportation funding,

00:25:36.400 --> 00:25:40.140
any of those planning dollars that we were getting

00:25:40.140 --> 00:25:44.700
for meeting obligations on a statewide level

00:25:44.700 --> 00:25:47.269
or on a local level. excuse me, on a local level,

00:25:47.349 --> 00:25:49.430
all of those were on the chopping block and many

00:25:49.430 --> 00:25:51.789
of them were cut. And it seemed like year after

00:25:51.789 --> 00:25:53.710
year after year, we were just fighting more and

00:25:53.710 --> 00:25:57.150
deeper cuts. This year with these budget proposals

00:25:57.150 --> 00:26:00.809
and this financial outlook, there's a lot of

00:26:00.809 --> 00:26:02.609
support in these budgets for counties, a lot

00:26:02.609 --> 00:26:06.869
more than what we saw. 20 years ago during the

00:26:06.869 --> 00:26:09.309
great recession, not quite 20 years ago, 16,

00:26:09.509 --> 00:26:11.970
15 years ago. It's okay. During the great, during

00:26:11.970 --> 00:26:15.109
the great recession. It's like the it's as if

00:26:15.109 --> 00:26:17.309
this legislature is taking a completely different

00:26:17.309 --> 00:26:21.069
view. And honestly, these budget proposals from

00:26:21.069 --> 00:26:22.910
my point of view have, after having reviewed

00:26:22.910 --> 00:26:25.509
them and lived through, you know, the previous

00:26:25.509 --> 00:26:27.890
great recession, these are actually really good

00:26:27.890 --> 00:26:32.170
for local governments. Yeah. So for the listener

00:26:32.170 --> 00:26:36.000
out there, Maybe plural listeners. There's only

00:26:36.000 --> 00:26:39.819
two or three. Don't worry about it. I don't believe

00:26:39.819 --> 00:26:43.220
this desk is made out of wood, but I am desperately

00:26:43.220 --> 00:26:46.339
going to ask Paul to find some wood and knock

00:26:46.339 --> 00:26:48.759
on wood. Well, because we're still a long ways

00:26:48.759 --> 00:26:52.119
away. Because this is a hundred percent certain

00:26:52.119 --> 00:26:56.539
the high water mark. Yeah. For everyone. I agree.

00:26:56.740 --> 00:27:00.150
And okay. But it's a great place to start. compared

00:27:00.150 --> 00:27:03.289
to where we found ourselves in the past when

00:27:03.289 --> 00:27:07.730
facing similar financial outlooks. Yes. To the

00:27:07.730 --> 00:27:09.769
legislature out there, if you're listening, we're

00:27:09.769 --> 00:27:12.529
grateful. We're incredibly grateful. We really

00:27:12.529 --> 00:27:14.970
are. I'm not joking when I say that. I mean,

00:27:15.049 --> 00:27:17.470
it really, and I've said this in my testimony,

00:27:17.569 --> 00:27:19.650
the support that they've shown local governments

00:27:19.650 --> 00:27:23.930
in their initial budget proposals is very...

00:27:24.910 --> 00:27:28.049
Um, welcome. It's very, uh, we're very grateful.

00:27:28.130 --> 00:27:30.210
Like I said, for it, we're thankful, uh, for

00:27:30.210 --> 00:27:32.069
it. We, we appreciate the trust that they placed

00:27:32.069 --> 00:27:34.069
in us and I want to go over some of the details,

00:27:34.109 --> 00:27:35.650
but then I want to talk about, you know, what

00:27:35.650 --> 00:27:37.890
else we need to be worried about and what's to

00:27:37.890 --> 00:27:39.970
come. Can we start there? Yeah, let's do it.

00:27:40.029 --> 00:27:41.890
I might not know any of the details, but I mean,

00:27:41.910 --> 00:27:45.869
so, so, so, um, we're kind of getting into this

00:27:45.869 --> 00:27:50.059
rhythm and, and so, um, Just to go back, the

00:27:50.059 --> 00:27:52.359
revenue proposals came out before the budgets.

00:27:52.559 --> 00:27:56.819
Yeah. And the initial Senate revenue proposal

00:27:56.819 --> 00:27:59.940
was roughly around $17 billion. Now, for the

00:27:59.940 --> 00:28:02.019
listener, let's make sure they understand what

00:28:02.019 --> 00:28:03.500
we're talking about here. So you get budgets.

00:28:04.180 --> 00:28:07.039
Budgets are bills just like any other bill. Budgets

00:28:07.039 --> 00:28:09.710
are probably the single greatest policy. bill

00:28:09.710 --> 00:28:11.869
out there, right? Because where you spend your

00:28:11.869 --> 00:28:14.329
money, where you put your resources is what you

00:28:14.329 --> 00:28:17.670
really feel is important, right? I believe the

00:28:17.670 --> 00:28:19.630
expression is you put your money where your mouth

00:28:19.630 --> 00:28:23.210
is. Yes, exactly. And the budget is the single

00:28:23.210 --> 00:28:25.289
largest policy bill. I thought you were going

00:28:25.289 --> 00:28:28.309
to say it's the biggest mouth going. Well, it

00:28:28.309 --> 00:28:32.349
speaks volumes. It does speak volumes. But what

00:28:32.349 --> 00:28:34.650
you just mentioned are the revenue bills or the

00:28:34.650 --> 00:28:36.670
revenue proposals. Now, these are different.

00:28:37.200 --> 00:28:39.759
then the budgets, right? These are policy bills

00:28:39.759 --> 00:28:43.680
that actually provide potentially new revenue

00:28:43.680 --> 00:28:47.960
that then are considered as part of the budget

00:28:47.960 --> 00:28:52.000
development process and are assumed in these

00:28:52.000 --> 00:28:55.259
budget bills. Is that right? Yes. So the spending

00:28:55.259 --> 00:28:57.420
level that is assumed in these operating budget

00:28:57.420 --> 00:29:02.079
proposals is predicated on their corresponding

00:29:02.079 --> 00:29:05.170
revenue packages. passing okay and this is this

00:29:05.170 --> 00:29:07.710
is a key point that i think you're about to make

00:29:07.710 --> 00:29:13.089
so listeners tune in on this one well i the senate

00:29:13.089 --> 00:29:16.430
assumes 17 billion dollars of new revenue okay

00:29:16.430 --> 00:29:18.630
over the next four years and where does that

00:29:18.630 --> 00:29:22.509
come from um it uh it it comes from and when

00:29:22.509 --> 00:29:24.710
you just the house is is roughly the same it's

00:29:24.710 --> 00:29:27.089
a little bit smaller right okay it's around 15

00:29:27.089 --> 00:29:32.730
they they both assume um that there is a new

00:29:32.730 --> 00:29:37.710
tax on intangible financial assets. That's right.

00:29:37.789 --> 00:29:39.650
What's an intangible financial asset? Do you

00:29:39.650 --> 00:29:43.170
know? Yes. Financial intangible assets or the

00:29:43.170 --> 00:29:46.789
financial intangibles tax, things like stocks,

00:29:46.789 --> 00:29:51.309
bonds, et cetera. And you have to, according

00:29:51.309 --> 00:29:53.769
to the budget proposal or the. Bill proposals,

00:29:54.069 --> 00:29:56.650
you have to own a certain amount of those before

00:29:56.650 --> 00:29:58.789
you actually qualify. Over $50 million. Oh, well,

00:29:58.910 --> 00:30:01.329
I don't have to worry about it. For those of

00:30:01.329 --> 00:30:03.349
you who don't know, Paul's wife is extremely

00:30:03.349 --> 00:30:07.750
successful. She is very successful. I'm super

00:30:07.750 --> 00:30:10.619
proud of her. There's no way we have $50 million

00:30:10.619 --> 00:30:13.480
worth of bonds. He's close. He's close. No. He's

00:30:13.480 --> 00:30:17.839
got two homes. We're not even close. He's close.

00:30:18.099 --> 00:30:21.019
He's very close. Oh, I wish I were very close.

00:30:21.039 --> 00:30:23.960
Very close. From the humble beginnings of serving

00:30:23.960 --> 00:30:26.680
ice cream out of the Dairy Queen window to where

00:30:26.680 --> 00:30:28.420
he is now because he married well. Right here

00:30:28.420 --> 00:30:30.519
behind the microphone with you, Brian Inslow,

00:30:30.579 --> 00:30:33.900
yes. Yeah, I am not close. So they both have

00:30:33.900 --> 00:30:38.460
this tax on stocks and bonds. Yeah. And then

00:30:38.460 --> 00:30:42.099
they both have another business tax. They do

00:30:42.099 --> 00:30:45.200
it a little bit differently. The Senate has a

00:30:45.200 --> 00:30:50.180
payroll tax, which is on earners over 100. It's

00:30:50.180 --> 00:30:55.920
like the Social Security maximum. It's $176 ,100.

00:30:56.619 --> 00:31:01.839
Yeah. Yeah. And so which is think. It's a 5 %

00:31:01.839 --> 00:31:03.779
tax. Now, is that paid by the employer or by

00:31:03.779 --> 00:31:06.380
the employee? Well, compensation is a negotiation.

00:31:06.680 --> 00:31:11.079
That's true. But it's paid by the employer. Now,

00:31:11.099 --> 00:31:13.339
the company also has to have a certain amount

00:31:13.339 --> 00:31:16.660
of payroll. cumulative, right? I think it's a

00:31:16.660 --> 00:31:19.099
$7 million payroll before they qualify. Yeah.

00:31:19.259 --> 00:31:22.619
I think some counties have payroll. I think they

00:31:22.619 --> 00:31:24.619
do. Yeah. And I think especially when you factor

00:31:24.619 --> 00:31:26.859
in overtime for certain uniformed personnel.

00:31:26.980 --> 00:31:30.619
Yeah. There's probably a pretty good chance that

00:31:30.619 --> 00:31:35.000
those personnel and some of your higher paid

00:31:35.000 --> 00:31:37.960
directors in certain departments are likely,

00:31:38.160 --> 00:31:41.099
especially in our larger counties, to meet or

00:31:41.099 --> 00:31:44.079
exceed that payroll level. So they potentially

00:31:44.079 --> 00:31:46.420
could fall under. this tax as well. They could

00:31:46.420 --> 00:31:50.579
and would. Yeah. Yeah. And, you know, not the

00:31:50.579 --> 00:31:53.039
greatest optics for us to bring up how much.

00:31:53.549 --> 00:31:56.390
public sector employees are being paid. Well,

00:31:56.529 --> 00:32:00.970
I mean, in today's world, relative to everyone

00:32:00.970 --> 00:32:03.529
else, that's actually not that large of a salary.

00:32:03.750 --> 00:32:07.829
And I can't believe I'm saying that, right? But

00:32:07.829 --> 00:32:11.269
when you think about the tech industry that's

00:32:11.269 --> 00:32:13.089
out there and some of the other things that exist

00:32:13.089 --> 00:32:16.009
here in Washington State, that's not that large

00:32:16.009 --> 00:32:18.869
of a salary. Now, that's a great salary, right?

00:32:18.950 --> 00:32:20.910
That's definitely an upper middle class salary.

00:32:21.009 --> 00:32:23.319
That's probably a top 10 or top five. percent

00:32:23.319 --> 00:32:26.779
salary in many communities if not even higher

00:32:26.779 --> 00:32:29.460
um but when you talk about you know some of the

00:32:29.460 --> 00:32:33.019
more uh urban areas seattle the greater you know

00:32:33.019 --> 00:32:35.480
puget town metro area there's probably a lot

00:32:35.480 --> 00:32:37.400
of people that are making that type of salary

00:32:37.400 --> 00:32:40.480
i would think so yeah and to further the the

00:32:40.480 --> 00:32:44.349
public like um uh University of Washington? Yeah.

00:32:44.869 --> 00:32:46.789
WSU? Sure. I mean, University of Washington also

00:32:46.789 --> 00:32:49.029
runs the hospital. Right. But there's a lot of

00:32:49.029 --> 00:32:50.769
public institutions at the state level that would

00:32:50.769 --> 00:32:55.630
actually have to pay this as well. It's not going

00:32:55.630 --> 00:32:59.700
to hit teachers, even if you got... you've got

00:32:59.700 --> 00:33:01.980
a master's degree, even if you've got 15 years,

00:33:02.160 --> 00:33:03.960
even if you're coaching, you're probably still

00:33:03.960 --> 00:33:06.859
not at 177. It would hit superintendents. I think

00:33:06.859 --> 00:33:09.180
some of the top tier teachers are. I think they

00:33:09.180 --> 00:33:11.940
top out around 180 or so. And the only reason

00:33:11.940 --> 00:33:15.079
I know that is because my wife is very successful

00:33:15.079 --> 00:33:18.220
in the education industry. Taller, better looking.

00:33:18.359 --> 00:33:20.619
Well, all those things are true. Not taller,

00:33:20.779 --> 00:33:22.779
thankfully, but definitely better looking. Are

00:33:22.779 --> 00:33:25.720
you sure? Yes, I'm sure. Next time, LawSec members,

00:33:25.900 --> 00:33:28.099
next time you see them, make them stand back

00:33:28.099 --> 00:33:30.890
to back. With Paul's shoes off. I wear heels

00:33:30.890 --> 00:33:33.569
when I'm around her. That's for sure. Yeah. I

00:33:33.569 --> 00:33:35.849
can't believe I just said that on the podcast.

00:33:36.109 --> 00:33:39.230
It isn't true. Why are we talking? They're called

00:33:39.230 --> 00:33:41.309
lifts. Moving on. They're called lifts, not heels.

00:33:41.650 --> 00:33:46.750
Moving on. Moving on. Anyways, so there's a payroll

00:33:46.750 --> 00:33:48.869
tax on the Senate side. You said there's a different

00:33:48.869 --> 00:33:51.480
business tax on the House side? B &O. Okay. On

00:33:51.480 --> 00:33:53.140
businesses that make a certain amount. So we

00:33:53.140 --> 00:33:54.940
already have a B &O tax. Is this an increase?

00:33:55.200 --> 00:33:57.279
It's an additional percentage. Okay. All right.

00:33:57.559 --> 00:34:00.819
And then... And then both chambers address property

00:34:00.819 --> 00:34:04.380
tax. Okay. The House replaces the existing 1

00:34:04.380 --> 00:34:08.139
% cap with a new 3 % cap. And then the Senate

00:34:08.139 --> 00:34:13.670
has... replaces the existing cap with something

00:34:13.670 --> 00:34:16.690
that's based on population growth and inflation.

00:34:16.909 --> 00:34:20.070
Right. Okay. So, and you know, it's interesting

00:34:20.070 --> 00:34:25.190
from a total revenue package, the property tax

00:34:25.190 --> 00:34:27.949
in the first couple of years, just, it isn't,

00:34:27.949 --> 00:34:32.780
it's in the billion dollar range. It's a smaller

00:34:32.780 --> 00:34:34.760
part of their solution than one would think.

00:34:34.860 --> 00:34:38.300
As we all know, the magic behind that is the

00:34:38.300 --> 00:34:42.940
compounding of it. And so over time, it's very

00:34:42.940 --> 00:34:45.820
important. But in the short range, it's a smaller

00:34:45.820 --> 00:34:47.920
piece of their solution than I would have thought.

00:34:48.059 --> 00:34:50.119
Well, and it's only a billion over the first

00:34:50.119 --> 00:34:53.260
four years on the Senate side. It's actually

00:34:53.260 --> 00:34:55.579
quite a bit less on the House side. And I think

00:34:55.579 --> 00:34:57.559
that's because of the difference in the cap.

00:34:58.000 --> 00:35:00.739
that the House has versus the Senate, right?

00:35:00.800 --> 00:35:03.639
The Senate is just population growth plus inflation.

00:35:03.920 --> 00:35:07.260
So I assume they probably assume the max potential,

00:35:07.500 --> 00:35:10.719
I would think, versus the House that, of course,

00:35:10.739 --> 00:35:12.599
they assume the max, but it was capped at 3 %

00:35:12.599 --> 00:35:16.440
maximum growth. So for the House, it's only $50

00:35:16.440 --> 00:35:21.219
million in 2026 and $150 in 2027 versus almost

00:35:21.219 --> 00:35:24.599
$780 million over four years on the Senate side,

00:35:24.699 --> 00:35:26.320
as far as their projection. Still very important

00:35:26.320 --> 00:35:28.699
to us. Well, very important to us. Absolutely.

00:35:28.880 --> 00:35:31.679
Yeah. No, without a doubt, that property tax

00:35:31.679 --> 00:35:33.440
change is one that we've been supporting for

00:35:33.440 --> 00:35:36.119
many years. Yes. And by the way, we're really

00:35:36.119 --> 00:35:38.579
glad to see that in the revenue package as far

00:35:38.579 --> 00:35:40.900
as a proposal. Incredibly grateful to the legislature.

00:35:41.179 --> 00:35:42.880
Yeah. I hope they can continue to support it.

00:35:43.119 --> 00:35:46.219
We hope so, too. And as long as we've been working

00:35:46.219 --> 00:35:48.380
on it, it's the first time we've seen it introduced

00:35:48.380 --> 00:35:51.659
in both chambers, I believe. I don't want to

00:35:51.659 --> 00:35:56.630
say anything. Holy grail. Of some local governments.

00:35:57.489 --> 00:36:01.090
Well, we're desperately trying to find a piece

00:36:01.090 --> 00:36:02.949
of real wood in this office to knock on, but

00:36:02.949 --> 00:36:07.409
absolutely. So how much of that is real and how

00:36:07.409 --> 00:36:10.769
much of that is actually something that is practicable

00:36:10.769 --> 00:36:13.849
and can be passed on? Because again, these budgets

00:36:13.849 --> 00:36:18.190
spend money. The Senate has a billion and a half

00:36:18.190 --> 00:36:23.440
new. for special ed right uh in in just in this

00:36:23.440 --> 00:36:26.880
in in in the in one in the buy it's like it's

00:36:26.880 --> 00:36:29.599
around three for the four year but yeah there's

00:36:29.599 --> 00:36:32.860
definitely some some substantial increases um

00:36:32.860 --> 00:36:36.760
education is is one area uh there's a big increase

00:36:36.760 --> 00:36:41.500
in uh even more um housing dollars in different

00:36:41.500 --> 00:36:44.559
programs um you know one of the programs i was

00:36:44.559 --> 00:36:46.440
looking at on the house side they doubled the

00:36:46.440 --> 00:36:48.360
investment in one of the housing programs went

00:36:48.360 --> 00:36:51.219
from like 50 million to 100 million uh that's

00:36:51.219 --> 00:36:54.039
not a small thing to do so there are some substantial

00:36:54.039 --> 00:36:57.340
investments here that spend above that maintenance

00:36:57.340 --> 00:37:00.519
level uh that we were talking about before so

00:37:00.519 --> 00:37:03.920
i think you know i think the from a and i want

00:37:03.920 --> 00:37:07.099
to be very clear how i say this from a like house

00:37:07.099 --> 00:37:11.980
and senate Democratic caucus perspective, their

00:37:11.980 --> 00:37:15.219
revenue packages poll well and have polled well,

00:37:15.360 --> 00:37:18.059
and there's Elway polls and there's other things.

00:37:18.139 --> 00:37:19.699
So I don't think I'm saying anything controversial,

00:37:19.880 --> 00:37:27.679
but from that perspective, those votes poll well

00:37:27.679 --> 00:37:31.719
with general polls or have historic, like as

00:37:31.719 --> 00:37:34.119
the lead -in into this session, there was a lot

00:37:34.119 --> 00:37:35.659
of reports when they were looking at this, there

00:37:35.659 --> 00:37:37.480
was an Elway poll and some other things. And

00:37:37.480 --> 00:37:42.079
so, But when you think about the practicality

00:37:42.079 --> 00:37:45.760
of this version versus that version, there are

00:37:45.760 --> 00:37:49.039
some challenges. The intangible assets one is,

00:37:49.059 --> 00:37:56.280
I think, difficult to properly... factor in what

00:37:56.280 --> 00:37:58.559
leakage. So for instance, we've talked about

00:37:58.559 --> 00:38:01.760
this. Paul's a very wealthy man. Stop saying

00:38:01.760 --> 00:38:04.380
that. He's got multiple residences. He would

00:38:04.380 --> 00:38:07.800
simply just move his accounts to his - Offshore.

00:38:08.000 --> 00:38:12.079
To his Austin house. Right. Right? This is a

00:38:12.079 --> 00:38:13.780
facetious Paul they're talking about. He would

00:38:13.780 --> 00:38:15.840
just hop in. I don't even, I think he has his

00:38:15.840 --> 00:38:17.500
own. I don't even think he has net jets. I think

00:38:17.500 --> 00:38:20.739
he has his own. But when you have those type

00:38:20.739 --> 00:38:23.750
of resources available to you, Right, because

00:38:23.750 --> 00:38:26.469
what you're talking about here is folks who have

00:38:26.469 --> 00:38:29.250
those sorts of resources also are by far the

00:38:29.250 --> 00:38:32.369
most mobile, right? They have the least impediments

00:38:32.369 --> 00:38:35.500
in front of them should they want to. move those

00:38:35.500 --> 00:38:37.380
assets somewhere else, or actually physically

00:38:37.380 --> 00:38:41.260
up and move somewhere else. That is a theory.

00:38:41.860 --> 00:38:44.400
There was interesting testimony about that. I

00:38:44.400 --> 00:38:45.800
don't know if you watched the hearings on the

00:38:45.800 --> 00:38:48.880
revenue bills yesterday. Yes. There's going to

00:38:48.880 --> 00:38:52.699
be more on Thursday in the House. Interesting

00:38:52.699 --> 00:38:55.719
that you say they poll well, because you wouldn't

00:38:55.719 --> 00:38:58.460
know that by looking at the people who've signed

00:38:58.460 --> 00:39:01.780
up. And the backlash you've seen from the business

00:39:01.780 --> 00:39:03.719
community, which has been really vocal. Right,

00:39:03.739 --> 00:39:06.900
and very... Not just vocal, but very public.

00:39:07.139 --> 00:39:11.380
Yes. Ads on television, ads on social media,

00:39:11.579 --> 00:39:14.639
ads in the newspaper, right? Yeah. And I suspect

00:39:14.639 --> 00:39:17.099
if new polling would indicate that there's been

00:39:17.099 --> 00:39:20.000
shifts in opinions based on the work that they've

00:39:20.000 --> 00:39:22.000
done. Sure. Yeah. Those things are influential

00:39:22.000 --> 00:39:25.179
or they wouldn't do them, right? It would just

00:39:25.179 --> 00:39:28.159
be a waste of money on their part. But they know

00:39:28.159 --> 00:39:30.559
what everybody else knows, which is that sort

00:39:30.559 --> 00:39:35.269
of information. Definitely. um can move the needle

00:39:35.269 --> 00:39:38.829
on these on these issues for sure um but those

00:39:38.829 --> 00:39:41.269
hearings you know were pretty contentious and

00:39:41.269 --> 00:39:45.670
that that issue of mobility or you know the financial

00:39:45.670 --> 00:39:48.550
or fiscal flight was actually addressed by quite

00:39:48.550 --> 00:39:50.969
a few voters who said you know that's a myth

00:39:50.969 --> 00:39:54.389
it just doesn't happen uh it you know etc etc

00:39:54.389 --> 00:39:57.389
there were some who put themselves in the category

00:39:57.389 --> 00:40:00.170
which again for the record i am not one of them

00:40:00.170 --> 00:40:04.900
uh who would have to pay um that financial intangibles

00:40:04.900 --> 00:40:08.260
tax and strangely talked about how they were

00:40:08.260 --> 00:40:11.599
not only more than willing to do it, but were

00:40:11.599 --> 00:40:13.739
looking forward to it. I don't know if I would

00:40:13.739 --> 00:40:16.400
take that position if I were in that role, but

00:40:16.400 --> 00:40:20.079
it was interesting the comments that some people

00:40:20.079 --> 00:40:23.400
had to say about that. I mean, whenever we're

00:40:23.400 --> 00:40:26.619
instituting a new... policy um whether it was

00:40:26.619 --> 00:40:29.219
the capital gains tax whether it was uh whether

00:40:29.219 --> 00:40:32.360
it was legalization of of cannabis there's always

00:40:32.360 --> 00:40:34.619
projection and some uncertainty right i think

00:40:34.619 --> 00:40:36.840
in this one and controversy and controversy i

00:40:36.840 --> 00:40:39.900
think in this case this one feels perhaps maybe

00:40:39.900 --> 00:40:43.920
more uncertain than than other things um well

00:40:43.920 --> 00:40:46.219
every time that there's a revenue package that's

00:40:46.219 --> 00:40:49.920
proposed yes The final one kind of shrinks, right?

00:40:50.079 --> 00:40:52.480
There's always some retraction to what was actually

00:40:52.480 --> 00:40:54.940
put out there. Here are all the options we're

00:40:54.940 --> 00:40:57.400
considering. I think a lot of that is to test

00:40:57.400 --> 00:40:59.780
the waters to see what sort of reaction they

00:40:59.780 --> 00:41:01.780
get. And then they'll kind of take that feedback

00:41:01.780 --> 00:41:03.460
and decide what to actually do. It's going to

00:41:03.460 --> 00:41:05.539
be a negotiation. And there's where we get to

00:41:05.539 --> 00:41:10.880
the rub of how will we fare? Yeah. as those revenue

00:41:10.880 --> 00:41:13.460
packages get tightened up. Right. And the amount

00:41:13.460 --> 00:41:16.420
of resources that are available become less and

00:41:16.420 --> 00:41:19.519
less. Yes. I believe the expression is, you start

00:41:19.519 --> 00:41:21.619
looking at the other animals a little differently

00:41:21.619 --> 00:41:25.460
when the watering hole starts to dry up. Yeah.

00:41:26.619 --> 00:41:30.699
That's a very brutal way to look at it, I think,

00:41:30.860 --> 00:41:33.460
Brian. But I mean, the point is well taken, right?

00:41:33.539 --> 00:41:37.409
At some point... You know, there are some decisions

00:41:37.409 --> 00:41:38.989
that have been made in these budgets that are

00:41:38.989 --> 00:41:42.230
difficult, right? But there are also new investments

00:41:42.230 --> 00:41:44.530
and additional spending based on the priorities

00:41:44.530 --> 00:41:46.849
of the budget writers and the legislators that

00:41:46.849 --> 00:41:48.610
are, you know, that are making these decisions.

00:41:48.809 --> 00:41:52.369
At some point, there's likely to be less revenue

00:41:52.369 --> 00:41:55.769
than is being projected in these proposals. And

00:41:55.769 --> 00:41:57.710
so what are the decisions that they're going

00:41:57.710 --> 00:42:00.369
to make then? You know, it's the proverbial.

00:42:00.619 --> 00:42:03.480
next shoe that's going to drop. Yes. And sometime

00:42:03.480 --> 00:42:05.300
in the next few weeks, they're going to have

00:42:05.300 --> 00:42:07.460
to come together and make those decisions. And

00:42:07.460 --> 00:42:09.780
it will be interesting to see if local governments

00:42:09.780 --> 00:42:12.179
are still in the, in the position that they find

00:42:12.179 --> 00:42:14.559
themselves today. And specifically, obviously

00:42:14.559 --> 00:42:17.820
from our point of view counties, right. Or if

00:42:17.820 --> 00:42:20.179
there are additional sacrifices that we will

00:42:20.179 --> 00:42:23.039
have to also deal with moving forward. Yeah.

00:42:23.780 --> 00:42:26.199
So that's really the next step, right. Is yes.

00:42:26.280 --> 00:42:29.880
That process. And, and, and to, And to give the

00:42:29.880 --> 00:42:33.500
legislature credit where credit is due, when

00:42:33.500 --> 00:42:35.820
you look at these balance sheets, there's a reason

00:42:35.820 --> 00:42:40.219
why there's a lot of money left in reserve. Yeah,

00:42:40.260 --> 00:42:44.440
billions, actually. Billions. And I think that

00:42:44.440 --> 00:42:49.440
was by design. And I think a lot of that is based

00:42:49.440 --> 00:42:51.960
on the fact that they knew that there's going

00:42:51.960 --> 00:42:53.760
to be a negotiation moving forward. Well, how

00:42:53.760 --> 00:42:56.239
much of that is based on that versus also some

00:42:56.239 --> 00:42:58.380
of the uncertainty associated with what's happening

00:42:58.380 --> 00:43:01.139
on the federal level and some of the cuts that

00:43:01.139 --> 00:43:05.900
we're experiencing from... the federal government

00:43:05.900 --> 00:43:08.119
and how those trickle down into the States. Right.

00:43:08.159 --> 00:43:10.019
There, there was a big announcement just last

00:43:10.019 --> 00:43:14.739
week about public health, public health services

00:43:14.739 --> 00:43:20.260
and clawbacks of some of the grants and some

00:43:20.260 --> 00:43:22.980
of the revenue that was given out during COVID.

00:43:23.940 --> 00:43:26.079
Some of our public health departments are already

00:43:26.079 --> 00:43:28.159
sending out notices of layoff to some of their

00:43:28.159 --> 00:43:29.960
employees because they no longer have the funding

00:43:29.960 --> 00:43:31.920
to support them. And that's not just happening

00:43:31.920 --> 00:43:34.059
in Washington state, but nationwide nationwide.

00:43:34.440 --> 00:43:38.260
There's discussion about removing the tax -free

00:43:38.260 --> 00:43:40.380
status of municipal bonds on a federal level,

00:43:40.480 --> 00:43:44.400
which would be massively impactful. There's discussion

00:43:44.400 --> 00:43:47.300
about Medicare and Medicaid cuts as well. In

00:43:47.300 --> 00:43:48.800
fact, I shouldn't say Medicare. I think it's

00:43:48.800 --> 00:43:51.480
mostly focused on Medicaid, which, of course,

00:43:51.500 --> 00:43:54.250
is how we fund. Apple Health here in Washington

00:43:54.250 --> 00:43:58.610
state. And you start looking at those numbers

00:43:58.610 --> 00:44:01.130
and what that could mean. Those can be pretty

00:44:01.130 --> 00:44:03.670
substantial as well. So how much do you think

00:44:03.670 --> 00:44:09.969
that kind of hold back in reserve of a couple

00:44:09.969 --> 00:44:12.389
of billion dollars was looking at forward thinking

00:44:12.389 --> 00:44:16.289
to these negotiations versus impacts from other

00:44:16.289 --> 00:44:20.590
sources like the federal government? Yeah. Yes.

00:44:20.610 --> 00:44:22.429
Like all the above to what you said. I mean,

00:44:22.469 --> 00:44:25.389
I am so worried for like our rural hospitals.

00:44:25.630 --> 00:44:30.389
One of the big cuts is to what's sometimes referred

00:44:30.389 --> 00:44:33.329
to as the safety net assessment program, which

00:44:33.329 --> 00:44:38.780
is a program where we... create like a drawdown

00:44:38.780 --> 00:44:43.019
for for federal to to compensate hospitals for

00:44:43.019 --> 00:44:45.099
the care that they do to the Medicaid population,

00:44:45.360 --> 00:44:48.059
both outpatient and inpatient. And it was there

00:44:48.059 --> 00:44:50.500
was a pretty significant reform under the Biden

00:44:50.500 --> 00:44:53.920
administration that was keeping hospitals afloat.

00:44:53.920 --> 00:44:56.039
And that was one of the things that was announced,

00:44:56.239 --> 00:45:00.579
I think, last week as being pulled back. We already

00:45:00.579 --> 00:45:04.780
saw some layoffs and like it was a valley. In

00:45:04.780 --> 00:45:07.480
like the Kent area, like they let go of 100 people.

00:45:07.699 --> 00:45:11.739
So to your point. And so I think that uncertainty

00:45:11.739 --> 00:45:17.860
is built into these fund reserves. I think the

00:45:17.860 --> 00:45:21.039
forecast even built in some uncertainty because

00:45:21.039 --> 00:45:24.539
it took 500 million from kind of the. the first

00:45:24.539 --> 00:45:26.880
two years and then 500 million from the next

00:45:26.880 --> 00:45:29.019
two years. And I think some of that was front

00:45:29.019 --> 00:45:31.079
loading uncertainty just to get ahead of it.

00:45:31.800 --> 00:45:34.940
Interesting. Because otherwise jobs are okay.

00:45:35.119 --> 00:45:37.760
Housing starts to okay. Revenue collection has

00:45:37.760 --> 00:45:40.360
been okay. Right. There wasn't, I mean, I'm not

00:45:40.360 --> 00:45:41.860
saying there wasn't a reason to take money out,

00:45:41.920 --> 00:45:43.420
but it did seem like getting, trying to get in

00:45:43.420 --> 00:45:44.780
front of it. Well, and I don't want to further

00:45:44.780 --> 00:45:47.920
complicate this more, Brian, but there's another

00:45:47.920 --> 00:45:49.800
piece of this that you didn't mention that was

00:45:49.800 --> 00:45:51.699
part of the revenue bills. And that's on the

00:45:51.699 --> 00:45:55.039
Senate side. They actually, pull back the sales

00:45:55.039 --> 00:45:58.400
tax. State sales tax is 6 .5%. They pull back

00:45:58.400 --> 00:46:02.079
a half a percent to reduce the impact on the

00:46:02.079 --> 00:46:06.099
average household at the retail store, whether

00:46:06.099 --> 00:46:08.840
it's clothing or sporting goods or whatever it

00:46:08.840 --> 00:46:12.599
may be. So that half a percent is actually booked

00:46:12.599 --> 00:46:15.159
at, I think, a billion and a half dollars in

00:46:15.159 --> 00:46:17.619
potential reductions in revenue. Now, that's

00:46:17.619 --> 00:46:20.000
an interesting kind of trade -off, I think, is

00:46:20.000 --> 00:46:21.400
what the Senate was trying to do, right? They

00:46:21.400 --> 00:46:24.000
were trying to trade more... progressive i .e

00:46:24.000 --> 00:46:28.340
tax the rich types of sources for you know reductions

00:46:28.340 --> 00:46:33.760
in you know the average or or um uh you know

00:46:33.760 --> 00:46:36.380
taxes on say you know that that are more aggressive

00:46:36.380 --> 00:46:41.119
a little harder that sales taxes is a is is disproportionately

00:46:41.119 --> 00:46:44.539
felt right right lower income household absolutely

00:46:44.539 --> 00:46:47.619
so they were trading kind of back and forth how

00:46:47.619 --> 00:46:49.909
long does that stay on the table How long is

00:46:49.909 --> 00:46:52.650
that still realistically considered part of the

00:46:52.650 --> 00:46:55.429
package if they start having to pull back on

00:46:55.429 --> 00:46:58.650
some of these revenues and making deeper and

00:46:58.650 --> 00:47:01.849
deeper cuts? So you're going to hate this answer.

00:47:02.289 --> 00:47:05.309
Depends. Well, I mean, it's not surprising. So

00:47:05.309 --> 00:47:09.090
here's why I say that. So in the Senate proposal

00:47:09.090 --> 00:47:12.110
around property tax, there's some language around

00:47:12.110 --> 00:47:15.170
requiring the local government to make a finding

00:47:15.170 --> 00:47:18.190
of having inadequate. resources for public safety.

00:47:18.250 --> 00:47:20.570
And why do we think they did that? Well, because

00:47:20.570 --> 00:47:22.570
there's an emphasis on public safety this year.

00:47:22.670 --> 00:47:25.389
There's a lot of pressure, I think, on the legislature

00:47:25.389 --> 00:47:28.210
to make new investments in public safety and

00:47:28.210 --> 00:47:30.670
law enforcement. I think that some of the previous

00:47:30.670 --> 00:47:33.070
reductions that they've done in the last few

00:47:33.070 --> 00:47:35.510
years have had kind of a negative impact, at

00:47:35.510 --> 00:47:37.469
least on people's perceived public safety. And

00:47:37.469 --> 00:47:39.929
so they want to see the legislature do something

00:47:39.929 --> 00:47:41.570
differently there. Every single one of those

00:47:41.570 --> 00:47:44.409
answers is wrong. Oh, it is. Okay. No, I'm kidding.

00:47:44.530 --> 00:47:47.550
I love it when people come on the podcast and

00:47:47.550 --> 00:47:49.590
say, Paul, everything you just said is wrong.

00:47:49.710 --> 00:47:52.969
That sounded great. No, no. I actually think

00:47:52.969 --> 00:47:55.840
those are all true. I am going to speculate.

00:47:56.159 --> 00:47:58.539
Okay. I don't know if we have any, like if Mitch

00:47:58.539 --> 00:48:00.940
can put any like graphics or like if we have

00:48:00.940 --> 00:48:02.699
like sound effects for - You can't do graphics

00:48:02.699 --> 00:48:07.480
on a podcast. Blatant. This isn't a YouTube feed

00:48:07.480 --> 00:48:10.000
too? No. No YouTube feed. Some blatant sound

00:48:10.000 --> 00:48:12.000
effects around when one of your guests is just

00:48:12.000 --> 00:48:15.599
going to like delve into idle speculation. Idle

00:48:15.599 --> 00:48:20.730
speculation. But I believe... Pure and complete

00:48:20.730 --> 00:48:26.289
unsupported statements. I believe... No evidence

00:48:26.289 --> 00:48:32.630
whatsoever. That I am going to engage in professional

00:48:32.630 --> 00:48:35.389
malfeasance and suggest that it's about a ballot

00:48:35.389 --> 00:48:38.329
strategy as well. Oh, okay. So that you ballot,

00:48:38.510 --> 00:48:42.590
quote unquote, ballot proof your revenue proposal.

00:48:42.989 --> 00:48:48.019
So then... If someone were to put a repeal of

00:48:48.019 --> 00:48:52.599
the replacement of the 1 % cap with, say, some

00:48:52.599 --> 00:48:57.380
other like a 3%, and it was then tied to public

00:48:57.380 --> 00:49:00.340
safety, when you write on the ballot title, you

00:49:00.340 --> 00:49:02.260
say, if you take this money away, you take money

00:49:02.260 --> 00:49:05.119
away from public safety. That's my speculation.

00:49:05.639 --> 00:49:08.820
And so... So kind of a... I mean, you say it's

00:49:08.820 --> 00:49:11.059
a... ballot strategy but it's more of a marketing

00:49:11.059 --> 00:49:13.699
strategy around a ballot issue i'm gonna just

00:49:13.699 --> 00:49:15.860
say yes because of the same thing you're making

00:49:15.860 --> 00:49:25.000
folks at home google pedantic so so so i think

00:49:25.000 --> 00:49:27.360
i think it's conceivable that's sad that i don't

00:49:27.360 --> 00:49:30.980
have to google pedantic no you deal with people

00:49:30.980 --> 00:49:34.880
like me and josh and brad like every day i know

00:49:34.880 --> 00:49:39.659
exactly your life you're like these guys So I

00:49:39.659 --> 00:49:42.280
think it's conceivable that you, I'm going to

00:49:42.280 --> 00:49:44.460
idly speculate that you might do something like

00:49:44.460 --> 00:49:46.780
that with one of your business taxes. Yeah. Yeah.

00:49:46.880 --> 00:49:49.059
And you have them, you have them in the same

00:49:49.059 --> 00:49:51.900
piece of legislation, you have them tied together.

00:49:51.980 --> 00:49:55.519
And if you repeal the, say hypothetically a payroll

00:49:55.519 --> 00:49:57.639
tax passes, you repeal the payroll. And then

00:49:57.639 --> 00:50:01.659
again, that's idle speculation, but I can see

00:50:01.659 --> 00:50:08.750
that as part of a strategy of, of creating. sustainability

00:50:08.750 --> 00:50:13.750
from a legal standpoint of your revenue. proposal.

00:50:13.869 --> 00:50:17.329
Yeah. Well, it wouldn't surprise me if some of

00:50:17.329 --> 00:50:19.829
the brighter minds in the legislature were thinking

00:50:19.829 --> 00:50:24.210
the next step ahead. And I don't think we should

00:50:24.210 --> 00:50:26.349
be surprised if some of these revenues do pass

00:50:26.349 --> 00:50:28.670
if there aren't efforts to try to repeal them

00:50:28.670 --> 00:50:32.590
as well. Well, Brian, I said that we were going

00:50:32.590 --> 00:50:34.909
to be here for 20 minutes, and we've been here

00:50:34.909 --> 00:50:38.179
for more than twice that amount of time. Every

00:50:38.179 --> 00:50:40.900
time this happens with you with a podcast, it's

00:50:40.900 --> 00:50:43.239
just so fascinating. And we get into the conversation.

00:50:43.300 --> 00:50:45.579
And before you know it, we've lost. We lost.

00:50:46.019 --> 00:50:48.019
We're down to one and a half listeners. We had

00:50:48.019 --> 00:50:51.340
three. The other one and a half fell asleep halfway

00:50:51.340 --> 00:50:56.019
through. I feel so bad. There's just a lot to

00:50:56.019 --> 00:50:58.619
talk about here. And we could go on probably

00:50:58.619 --> 00:51:01.380
easily for another hour or so, but I'm not going

00:51:01.380 --> 00:51:02.780
to put the listener through that. I don't think

00:51:02.780 --> 00:51:05.780
anybody loves their job as much as we love our

00:51:05.780 --> 00:51:10.719
jobs. Oh, well. I hope others love their jobs

00:51:10.719 --> 00:51:13.849
too. especially, especially our members. Sure.

00:51:14.829 --> 00:51:18.670
But I mean, it's just, I mean, it's just, there's

00:51:18.670 --> 00:51:21.610
just, it's, um, it's, you know, we get, we are

00:51:21.610 --> 00:51:23.989
so plus that we get to represent who we get to

00:51:23.989 --> 00:51:26.289
represent. Every day. To like interact on these

00:51:26.289 --> 00:51:29.190
issues in a meaningful way. And it's, you know,

00:51:29.210 --> 00:51:32.030
and it's. All right. Before things get too sappy.

00:51:32.190 --> 00:51:35.349
All right. I get phone calls about how, well,

00:51:35.369 --> 00:51:38.130
you know, whatever, Paul. Brian, thanks for being

00:51:38.130 --> 00:51:40.389
here. I think there's a lot. There's a long road

00:51:40.389 --> 00:51:44.809
to go yet on these budgets. I am excited for

00:51:44.809 --> 00:51:47.250
the process. Kind of like, you know, I'm excited

00:51:47.250 --> 00:51:50.550
to, I don't know, do something I don't really

00:51:50.550 --> 00:51:52.469
want to do, but I want to see how it ends up

00:51:52.469 --> 00:51:56.469
at the end of the day. Sure. but let's make sure

00:51:56.469 --> 00:51:58.969
you come back after we get the final proposals

00:51:58.969 --> 00:52:01.349
and let's do a little bit of a debrief on what

00:52:01.349 --> 00:52:03.170
happened. Sure. Sounds great. Okay. I'd love

00:52:03.170 --> 00:52:04.630
to. All right. Take care till then. All right.

00:52:04.650 --> 00:52:09.909
Bye. Thanks for tuning in to County Connection.

00:52:10.030 --> 00:52:12.130
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00:52:12.130 --> 00:52:14.429
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