Posted by
December 2008
Tuesday, December 30, 2008
Light Blogging Ahead
Posted by Richard Davis on 12/30/2008 4:19:00 PM
I'm going to take a little break. Be back Monday. Happy New Year.
PermaLink
Tuesday, December 30, 2008
Two Important Competitiveness Articles
Posted by Richard Davis on 12/30/2008 2:16:00 PM
Friday's Puget Sound Business Journal ran an excellent editorial by George Erb (subscription required). Erb concisely sets out a smart competitiveness agenda for the state, hitting themes similar to those of WashACE. Specifically, he commends the governor for shunning tax increases, encourages investment in the future (public works and higher education), and urges the state to nurture entrepreneurial activity. I encourage you to find a copy or read it on line. I particularly like Erb's close, which reminds us to look beyond the recession. The coming state and local budget cuts are unavoidable. They will be painful. But they don?t have to be debilitating, and we cannot let today?s harsh climate diminish our hopes for tomorrow.
Erb rightly cautions lawmakers not to fall into the trap of thinking their problems could be solved by closing "tax loopholes."
Too often, ?loophole is just a rhetorical term for an incentive that someone disagrees with. It?s better to judge incentives on how effectively they meet government policy objectives.
And on that score, Don Brunell's column in today's Columbian provides good support for one possible target, the manufacturing machinery and equipment sales tax exemption.
Research by John Urbanchuk, the nation?s foremost expert on tax incentives, projects that, between now and 2016, the M&E exemption will create 54,100 new jobs in Washington, expand our state?s economy by $49.3 billion, put $22 billion in the pockets of Washington families, increase tax revenues for state and local governments by $2 billion, prompt $4.4 billion in new investment, and spark $1.3 billion in construction spending and equipment purchases. Pretty good deal.
PermaLink
Tuesday, December 30, 2008
SEIU Sues Governor Over Pay Hikes
Posted by Richard Davis on 12/30/2008 11:01:00 AM
Yesterday, the Service Employees International Union filed a lawsuit demanding that the governor withdraw her budget and submit a proposal that includes the negotiated pay raises for home care workers. (Stories in the PI, The News Tribune blog, the Olympian, the Columbian, and the Everett Herald.) In The News Tribune post, Joe Turner points out that the SEIU may have a better case than the state employees' union that filed a similar lawsuit last week.
The SEIU seems to be on more solid footing than the Federation. The collective bargaining law for them flatly says any contract approved by an arbitrator must be sent to the Legislature.
In its editorial today, the Everett Herald makes the critical point. Noting that the WFSE lawsuit seeks to allow the legislature to act independently on the contracts. The editorial says: Even if that happens, the only responsible course for the Legislature would be to freeze state workers' pay, sparing some cuts in other, more critical areas for now.
This economic downturn, and the budget problem, are the most serious the state has faced in many years. Everyone is taking their lumps. State workers shouldn't be exempt from that reality. Does anyone disagree?
PermaLink
Monday, December 29, 2008
Not Much Support for Union Lawsuit Over Bargaining Agreement
Posted by Richard Davis on 12/29/2008 11:03:00 AM
Last week the largest state workers' union filed a lawsuit, protesting the governor's decision not to fund the collective bargaining agreement her office reached with state unions last fall. If the governor declines funding, the Legislature cannot on its own authorize the pay hikes. The unions and the state go back to the bargaining table. Although the governor's office initially signed off on the agreement, there was an important condition: the state budget office had to certify that the deal was financially feasible. With the sharp decline in revenues in recent months, budget director Victor Moore concluded that the agreement did not pass that essential test. The unions are not happy. (I wrote about it last week on The News Tribune's editorial page blog, but forgot to comment here.) Over the last several days, some of the state's major editorial pages have weighed in, showing remarkable unanimity. This morning's TNT calls foul on the union strategy in their editorial, Collective bargaining, meet economic reality. The federation is asking a judge to strike down the part of the law that prohibits the Legislature from unilaterally considering employee contracts. The union that helped bench lawmakers now wants them back in the game. No court can compel state lawmakers to play. Democrats in the Legislature should not kid themselves that state worker raises are an option given the historic proportions of the state?s budget deficit. Earlier, the Seattle PI wrote that unforgiving math makes the bargaining agreement untenable. The Seattle Times says the union is "acting badly." The Vancouver Columbian calls the union's action "ill-timed greed." The union is looking for kinder treatment from legislators than they?re receiving from Gregoire. She promised not to raise taxes, and she kept that promise, by proposing tough cuts in programs, salaries and virtually all other aspects of state government.
When union officials squawk about pay during the worst economic crisis in memory, it only fuels the suspicion that all they care about is the union. Gregoire called her budget ugly. And while few relish the choices she had to make, here's the view from a couple more editorial pages. The Walla Walla Union Bulletin says the budget "provides a solid foundation for the difficult task ahead" and wisely avoids tax hikes. The Olympian calls it "tough, responsible." Budgeting in hard times requires hard choices. The governor did what she had to do: balanced among competing interests, set her priorities, and determined a collective bargaining agreement negotiated in better times was no longer feasible. Right.
PermaLink
Monday, December 22, 2008
More Thoughts On Governor's Budget Proposal
Posted by Richard Davis on 12/22/2008 12:52:00 PM
As the only game in town for those who care about such things, the governor's budget continues to draw a crowd. Much of the stuff is a rehash of entrenched positions taken long before Gov. Gregoire put a plan on the table. Long before last week's announcement, everyone knew the two overriding conditions governing the budget: the structural deficit for the next biennium exceeded $5 billion and the governor opposed tax hikes. So, not much room for surprise. The no-new-tax pledge, however, does not extend far beyond the governor's office, as Rachel La Corte's AP story makes clear. "We don't agree with this, that from square one, we cannot raise a dime of new revenue," said Cassie Sauer, spokeswoman for the state Hospital Association. ...The Sierra Club, for example, quickly pitched closing tax exemptions for old-line energy industries in favor of "green" initiatives and spending on state parks. The Washington Federation of State Employees, whose members would suffer layoffs and flat pay under Gregoire's budget, also called for shrinking tax loopholes. So far, it looks like most groups are resigned to the idea that tax increases will be put to a public vote. In The News Tribune, Joe Turner underscores one of the arguments working against new taxes: Despite all the cuts, state spending would be $1.2 billion higher. The $3 billion in "cuts" that Gregoire referred to in her budget release remarks are cuts from a "maintenance level." That is, first you inflate your spending to account for all the increases in inflation (salaries) and caseloads (more kids in school), THEN you cut. So that's how you can cut $3 billion and still end up spending $1.2 billion more.
Yesterday's Seattle Times budget editorial says Gregoire balanced interests well. And Peter Callaghan in The News Tribune says that, unless we learn from this crisis, we can count on it happening again.
...to say now that budget decisions didn?t contribute to the current red-ink menace means we learned nothing ? again. It means we?ll act the same way the next time we?re flush with tax revenue. It means we?ll go through yet another episode of deep budget cuts after the next crash.
Senate Majority Leader Lisa Brown shares her lecture notes to give us an idea of how she'll approach budget writing next month. She does not rule out a tax hike.
And on his much-improved blog (referring to look, feel and function - content's always good), Rich Roesler notes that the state workers' union promises a fight to resist cuts. It's going to be a long session.
PermaLink
Thursday, December 18, 2008
Early Reactions to Governor's Budget
Posted by Richard Davis on 12/18/2008 2:09:00 PM
As she predicted, reactions to the governor's budget have been swift. While the scramble to understand the details will take us all a while, the broad brush strokes are enough to frame the likely debate. As we posted earlier today, Sen. Joe Zarelli likes the approach Gregoire has taken, saying it puts the process on the proper course. Zarelli is ranking Republican on the Senate Ways and Means Committee. His counterpart in the House, Rep. Gary Alexander, also likes the direction. I commend the governor for putting forth a balanced budget that does not raise taxes or fees. House Republicans have long believed that increasing taxes or fees is not the right approach while families are struggling with everyday expenses and workers are losing jobs. While there are certainly some details of her plan that we might do differently, the governor has offered a good first step in correcting the past four years of overspending.
Alexander and Zarelli both emphasize the importance of building early savings into the 2009 supplemental budget.
AWB president Don Brunell issued a brief statement.Noting that AWB continues to review the budget proposal, Brunell emphasizes the groups support for her decision not to raise taxes on families and employers. He adds: It is critical that Washington state look beyond the current budget woes and prepare for what happens after we emerge from this recession. Part of that discussion must include creating the conditions for a healthy business environment so that when we do emerge from the recession, Washington is positioned as a good place to create those jobs. As devastating as the economic conditions may be, the recession is an opportunity to reshape the way government operates and position our state to attract and retain businesses.
The largest union representing state workers call Gregoire's plan dead on arrival. They say that approvingly, looking for legislative support for tax hikes.
?Our biggest concern is that everything should be on the table and that includes tax loopholes and revenue enhancements, Federation Executive Director Greg Devereux said. ?If the economic parts of our negotiated contracts that were ratified two months ago can be suspended, why can?t a campaign pledge on no revenue increases be retracted?
Senate Majority Leader Lisa Brown has reservations as well. She calls reliance on $1 billion in federal assistance a "glaring flaw" and, pointedly, does not pledge to resist tax hikes. Brad Shannon notes her concern in his Olympian story, which includes Alexander's assessment that the estimated federal money is a "reasonable assumption." Today's Wall Street Journal story on the Obama stimulus plan adds weight to the Gregoire/Alexander position.
The broad parameters of the package are known already. It will include a tax cut designed to pump $50 billion to $100 billion into the economy almost immediately; about $100 billion in aid to state governments, primarily to temporarily assume more of the cost of Medicaid, in hopes of staving off benefit cuts or tax increases; and funding in five main areas: traditional infrastructure, school construction, energy efficiency, broadband access and health-information technology.
Finally, both the Evergreen Freedom Foundation and the Washington Policy Center have posted first impression comments on the new budget.
Update University of Washington president Mark Emmert says the proposed budget would "seriously harm" the UW.
PermaLink
Thursday, December 18, 2008
Governor Releases Austere Budget Plan
Posted by Richard Davis on 12/18/2008 12:15:00 PM
The first shoe dropped this morning as Gov. Gregoire released her proposed 2009-2011 budget. In addition to coverage on TVW, she has a nice video release laying out her policy priorities and guidelines. In the video, press conference and this press release, she restates her pledge not to solve the problem with tax increases. The governor?s proposed budget will close the projected shortfall without raising taxes.
?Now is not the time to be raising taxes on our residents and businesses, Gregoire said. ?Our families are tightening their belts, and that?s what government needs to do. The state must squeeze every ounce of value from each taxpayer dollar while maintaining our priorities of protecting families and children the best we can.
I didn't hear the word "ugly" in her description of the budget, but she says she expects that everyone will find something not to like in a budget that closes - her estimate - a $5.7 billion budget gap. As expected, she rejects salary increases for state workers, teachers, and care workers.
Acknowledging that this is the beginning of an extended budget discussion, she invites public participation through something called "an interactive budget calculator" that will be on the governor's web site in early January. Instant budget analysis is always dangerous. Details matter. That said, it's encouraging to see that the governor recognizes the importance of balancing the budget within existing revenues and has appeared to take a long-term perspective to the budget. State senator Joe Zarelli (R- had this to say about it: The governor has put the budget process on the proper course with her proposal for the 2009-11 biennium... she did what she promised by balancing that budget without tax increases. Those are positive steps. There is some room for discussion about whether the priorities reflected in her budget are the real, core priorities of government. But overall it?s a move in the right direction.
... The governor has done her part and made a solid case for her choices. Now the ball moves into the Legislature?s court.
Andrew Garber at the Seattle Times has a good overview, including this rhetorical Q&A.
...Gregoire's proposed spending plan for the next two years represents an increase of less than 1 percent over the current budget. Which raises a question: What's being cut if state spending is essentially flat? The answer: Mostly proposed increases in state spending. At the PI, Chris McGann runs down some budget highlights. Joe Turner's Political Buzz blog also provides good insight. And for an excellent national overview of the state-local budget dynamic, check out this story in the Wall Street Journal. WashACE will be looking more deeply into the budget, with a Competitiveness Brief scheduled in a few weeks. It's critical that the budget adjustments close the structural deficit and put the state on a course for long-term fiscal sustainability. More later.
PermaLink
Wednesday, December 17, 2008
New WashACE Brief Examines Growth in State Spending
Posted by Richard Davis on 12/17/2008 5:43:00 PM
Just in time to put tomorrow's budget story in perspective, we've published a competitiveness brief looking at state spending trends since the mid-1990s. The brief, drafted by the Washington Research Council, examines the near general fund accounts. It looks at the major areas of state spending -- education, health care, and so on - as well as employment trends. The brief provides a lot of useful information, a must-read for those who want to understand the current state budget crisis.
PermaLink
Wednesday, December 17, 2008
Ugly Budget Coming Tomorrow
Posted by Richard Davis on 12/17/2008 4:31:00 PM
Gov. Gregoire will release her budget plan tomorrow. She's not hesitated to call it an "ugly" budget, reflecting the challenges associated with trimming a $5.2 - $6.0 billion shortfall for the 2009-2011 biennium. The announcement will be carried live on TVW at 9:30 a.m. At 2:30, the Seattle Times will provide streaming video of the governor's appearance with the Times' editorial board. This morning, in the Herald of Everett, I wrote about the budget challenge as a leadership test. Plenty of other folks also wrote about the budget. In The News Tribune, Rep. Gary Alexander has a good op-ed on the importance of swift budget action. If the Legislature and the governor pass a supplemental budget that shaves an easier-to-swallow $500 million off the current budget, we will remove $2 billion from our projected $5 billion deficit. This is not a misprint: If we save $500 million now, immediately, we save $2 billion down the road. Of course, it depends on the quality of the cuts, but he makes a persuasive argument. Also in The News Tribune, Peter Callaghan notes that Washington has plenty of company in the budget quagmire. Here's the Stateline story he references. For the first time in 25 years, states expect to see a decrease in spending in the current fiscal 2009 budget cycle, NGA and the National Association of State Budget Officers said in their latest "Fiscal Survey of States" released Dec. 15. Thirty-one states will have to close nearly $30 billion in deficits from their current budgets before they even begin drafting new fiscal plans for the coming year, Five additional states also reported shortfalls, but didn?t include figures. ?As bad as the situation is for states right now, all indications are that the fiscal conditions for states will continue to deteriorate, NASBO Executive Director Scott Pattison said.
The recession continues to plague us. Unemployment is up again. Paul Nyhan in the Seattle PI has a comprehensive report. He quotes Seattle economist Dick Conway.
...the Puget Sound-area economy is finally succumbing to a recession, according to regional economist Dick Conway. It threatens to last until the end of next year and maybe longer, he added.
That means a tougher job market for the growing ranks of the unemployed. Here's something that ought to concern us. "Our economy held up well because of continued employment growth at Boeing and Microsoft," Conway said.
As we know, Boeing hiring as slowed down and layoffs are possible in 2009. And Microsoft is adding jobs faster outside Washington than it is here. Ugly or not, the state budget will doubtless reflect current economic realities. The governor has rightly said that tax increases would impose greater hardships on families and employers. The legislature must now focus on streamlining, setting smart priorities, and positioning the state for a strong, sustainable recovery.
MORE I just read Kim Bradford's TNT editorial page blog. Seems the governor's interview with their ed board will be carried live at 11:30 a.m. tomorrow.
PermaLink
Tuesday, December 09, 2008
Support for Business Incentives Increases as Economy Worsens
Posted by Richard Davis on 12/9/2008 9:10:00 AM
With jobs and the economy uppermost on people's minds, public support for business incentives has increased substantially, according to a survey of 1,200 Floridians. Faced with more and more job losses, Floridians now are more likely to support incentives for businesses to expand or relocate here, the survey found. Support for incentives rose to 63 percent, up 8 points since last year. Opposition to business incentives dropped to 21 percent from 32 percent last year. "People say do not bring people here, but now Floridians are more interested in economic development," said USF professor Susan MacManus, the survey's academic adviser. "It's a shot in the arm for business." I've not seen similar results here, though I imagine Washingtonians are as savvy as their counterparts in the Sunshine State. It's easy to assume incentives don't matter when the economy is strong and growth seems inevitable. When times get tougher, intuitively we know that jobs and investment grow where the return on that investment is greatest. Costs matter and tax incentives work.
PermaLink
Monday, December 08, 2008
Framing the Debate over the Budget Shortfall
Posted by Richard Davis on 12/8/2008 1:45:00 PM
Just days before the governor must present her budget proposal, the debate over how to plug a $5 billion shortfall (projected to grow) continues to intensify. Not really much to talk about that hasn't been said before - cut spending, raise taxes, do a bit of both - but the magnitude of the problem amplifies the voices. On King5 Up Front yesterday, Gov. Gregoire points out the problem with tax hikes (quote at 8:14). ?I don?t know what you tax. You can?t tax individuals. They?re struggling. They?re struggling to put food on the table. Our food banks are overwhelmed, overwhelmed. You can?t tax business. Some of them are hanging on by their fingernails. You can?t tax folks at their property tax. So I don?t know what you tax in these kinds of dramatically difficult times.
She's right. The whole Up Front show is worth watching. Host Dennis Bounds leads with the budget challenges facing higher education and follows the Gregoire quote with a give-and-take between Washington Policy Center president Dann Mead Smith on the right and Washington Budget and Policy Center executive director Remy Trupin on the left. Andrew Garber reports in the Seattle Times that lawmakers don't have to produce a balanced budget. Legally true, sure, but they should and they will. And, as Rachel LaCorte writes, the effort may provide the opportunity for bipartisan cooperation. When the choices are as difficult as these will be, it's always a good idea to get as many fingerprints as possible on the final document. Jerry Cornfield's story in the Everett Herald is a good example of the kind of press budget writers will be facing. In the Columbian, John Laird takes a similarly dim view of the spending cuts that may be required, while highlighting two good ideas from a local Republican. State Sen. Joe Zarelli, R-Ridgefield, issued a written statement Thursday with two excellent proposals. ?The Legislature?s first action of 2009 should be to pass a supplemental budget within the first week of the session. ...
Also: ?If a program is proposed to be cut for 2009-11, every effort should be made to examine whether the change should be accelerated for implementation in the 2009 supplemental.
Important as balancing the budget is, lawmakers must focus on laying the foundation now for sustained economic recovery. They may want to borrow some ideas from some competitor states. In the Detroit Free Press, columnist Ron Dzwonkowski outlines steps Michigan can take to improve that state's beleagured economy. He cites the work of Detroit Renaissance, whose efforts underscore the intense interstate competition for economic development. Suburban Chicago's Daily Herald suggests that while it's good to ask tough questions of companies seeking bailouts, government officials should also question themselves.
Government has every right to demand that businesses asking for bailout bucks first make drastic changes in dreadful management. But government also has to be asking itself how it might be getting in the way of efforts by well-run businesses to survive this recession on their own.
In time, the economy will recover. And when it does, some states and regions will be better positioned to take advantage of new growth opportunities than others. The policy choices lawmakers make in 2009 will determine whether Washington will be numbered among the winners.
PermaLink
Friday, December 05, 2008
Budget and the Economy: Have We Touched Bottom Yet?
Posted by Richard Davis on 12/5/2008 2:23:00 PM
Probably not. The National Conference of State Legislatures, which tracks these things closely, yesterday released another in the bleak series of budget breakdowns.
States, which already have closed $40 billion in fiscal year (FY) 2009 budget gaps, face at least an additional $97 billion they must close over the next 18 to 24 months...
They provide links to a map that shows a pattern of states in the red (not to be confused with red states). Washington, for the first time, joins the list after dropping into a current year deficit with the November revenue forecast.
The State Policy Blog points out that not all states have fallen into budget holes, with a nice contrast between California and Texas. The SPN release pegs off this Texas Public Policy Foundation observation. Texas? watershed year was 2003, with a $10 billion budget shortfall for the biennium, but we were not alone. California faced a whopping $38 billion shortfall that same year. The way the two states responded then, set the stage for what is happening today. Texas reduced spending to cover the deficit that represented about 15 percent of its general revenue. The commitment was made, and kept, that the shortfall would not be resolved by increasing taxes. Today, Texas has become the nation?s top job producer, hosts more Fortune 500 companies than any other state, and was cited by the Financial Times as the state best able to weather the financial storm. Although the economic downturn will cause short-term problems, especially in retirement system investments, the state will enter the next budget cycle in the black, just as it did in 2005 and 2007. The foundation makes this important point. At the very time when families will need the safety net of Medicaid and [children's health care] the most, states that have not exercised fiscal responsibility, particularly those that have expanded their health care programs beyond sustainability, will not be in a position to help. That is not compassion. Careless spending hurts those it purports to help. As the recession deepens, policymakers would be well advised to consider the alternatives ... and emulate Texas. Sen. Joe Zarelli is back with his fiscally-prudent Budget Tidbits. In his latest release, he looks at how lawmakers should respond to the current shortfall. Noting that early savings reduce ongoing costs, he urges swift action. Good advice. The week's dreadful economic news provides little relief for lawmakers looking for the turnaround. Vast job losses in November, deteriorating retail sales, and plummeting consumer confidence ground projections of a sustained recession. The incoming Superintendent of Public Instruction, Randy Dorn, is quick out of the box with a call for higher taxes. As the Texas-California comparison demonstrates, raising costs on struggling families and consumers doesn't work. Worse, it drives jobs and investment out of state, leaving a big hole to fill for the folks remaining. Light blogging note: The blog has been inactive this week. I've been out meeting with groups to discuss competitiveness issues and making brief presentations. My apologies to those of you who have missed it. Over the next few weeks, expect intermittent posts as we implement plans for a new, more robust WashACE website to launch next month. Please let me know if you have suggestions for how we can better serve you. Thanks.
PermaLink
|
