I wonder how this will affect the budget. After the governor scrapped the collective bargaining agreement, wisely, because it cost too much in these straitened times, the unions sued. The governor won. And now labor is back at the table.
[Senate Majority Leader Lisa] Brown told the Labor Council, Washington's largest union advocacy group, that its members will have to help lawmakers sell a tax package to the public ? a game plan that has become widely accepted in Olympia.
"We're going to need your help to put this thing forward in a productive and fair way," she said.
And in the PI story, Brown sets her sights on the state's Unemployment Insurance Trust Fund.
"Washington state has a healthy unemployment trust fund. We can utilize these funds to expand benefits and training," she said.
Nationally, the unemployment benefit provisions of the federal stimulus plan have been controversial. For a good overview of who's taking what, read this Stateline.org piece.
Time was when Ed Koch, as mayor of New York City, famously and frequently asked folks, "How am I doing?" Keeping it simpler, perhaps, legislative leaders recently let reporters know that they think they're doing just fine.
"I am feeling very good about the progress made this session," said House Speaker Frank Chopp, D-Seattle.
And Senate Majority Leader Lisa Brown, D-Spokane, shrugged off Republican criticisms that the Legislature is moving too slowly in writing a supplemental budget for the remainder of 2009.
"I feel good about the speed we've moved already with respect to the unemployment benefits and early reductions bills, and we will soon have a federal transportation stimulus bill on the governor's desk," Brown said. "We need to do more reductions. We will make those decisions after the caseload forecasts in March. ... We always wait until after the March forecast to do a supplemental budget."
The News Tribune's Joe Turner offered an unusually sharp counter. I won't summarize it here. But you should read it.
Sen. Joe Zarelli offers another way of looking at the problem. Earlier we wrote about the "yes we can" campaign. Yesterday Zarelli issued another of his useful "budget tidbits," laying out his alternative take on the problem. Download the file and read it.
Here's Zarelli's explanation of the $8 billion hole.
The deficit has been characterized as $8.3 billion. This is composed of:
A $1.3 billion deficit in the current biennium, which ends June 30th;
A $6.5 billion shortfall next biennium if we do not address the current biennium deficit, continue doing everything government currently is doing, plus do new policy enhancements;
An assumption of the need for a $500 million ending fund balance.
But keep in mind about this figure:
$1.4 billion represents proposed policy enhancements and compensation increases, including maintaining employees' health care benefits at 12% and providing COLAs and step-salary increases.
It assumes the current-biennium budget deficit remains unaddressed. Some savings have already in fact been achieved with passage of a mini-supplemental budget (ESHB 1694) last week.
It assumes no federal money is available to reduce the deficit. Likely, there will be around $3.1 billion available to the operating budget.
It assumes the constitutional rainy day fund, which will contain $700 million, is not utilized to address the problem.
The first step in solving the budget problem is a correct diagnosis. The second step is believing that the problem can be solved. Zarelli's views are helpful on both counts.
Good advice for state legislators from the Columbian this morning: Read her lips. Referring to the governor's stated opposition to raising taxes to balance the budget, the paper notes
If the governor can keep that pledge and write a budget during horrific economic times ? which she did two months ago ? then so can the Legislature.
And forget about sending a tax proposal to the voters.
Legislators should stop wasting time wondering if voters ? many of whom are joining the growing ranks of the unemployed ? would approve tax increases. Instead, budget writers, just keep cutting.
Don Brunell's column this week offers up another of what used to be called inconvenient truths, until Al Gore made it such a tired cliche we don't say it anymore. Brunell points out that coal will long be an essential element in our nation's energy supply.
..coal provides more than half of our nation?s electricity and will for at least the next 20 years. There won?t be enough alternative energy for decades ? if ever ? to replace it.
But I reckon they all would like to see "all options on the table," which has come to mean "raise taxes" in much the same way "tax reform" means "pass an income tax."
Senate Republicans Plan to Balance Budget without Tax Hikes
Posted by Richard Davis on 2/24/2009 3:52:00 PM
Although heavily outnumbered, Senate Republicans expect to be heard on the budget. And, as Brad Shannon reports in the Olympian, they're saying "yes we can."
They just had large campaign-style buttons made up with an Obama-esque color scheme ? mainly blue with white letters and a swash of red. "Yes we can!" the buttons say, with an asterisk followed by the words, "balance the budget without raising taxes."
Senate GOP caucus spokeswoman Rebecca Japhet was handing out the buttons early this afternoon, and members should start popping up with them on lapels. Click here to see the button and a 17-page explanation from Republican Sen. Joe Zarelli of Ridgefield and his colleagues about how the budget-balancing feat can be accomplished.
... is more easily found on the business pages than in Olympia. Dan Voelpel's column in The News Tribune is a must-read. He looks at the state's highest-in-the-nation-and-ever-escalating minimum wage, brought about by a labor-backed, voter-approved initiative in 1998 and concludes:
Somehow we have bought into the misconception that the minimum wage should equal a family wage.
It isn?t. The minimum wage is a work force entry wage, a wage paid for a supplemental income, a wage for someone in the job temporarily rather than a career.
It has consequences, as a restaurateur tells Voelpel.
Duke Moscrip, the owner of Duke?s Chowder House restaurants, says the latest 48-cent bump will cost his company $50,000 more a year in wages, not counting the additional taxes and benefits he must pay on the higher wage rate.
Moscrip also gets the last, painfully accurate, word in the column. I'll give it to him here, as well.
?People down in Olympia don?t seem to have any understanding of the business world. They think this money grows on trees and the employees should be getting everything. What they don?t realize is if they break the back of businesses, and especially restaurants, there won?t be any jobs.
With the state budget gap now beyond $8 billion and widening, the buzz in Olympia is all about an inevitable public vote on tax increases to help close it.
Such talk, which the Legislature's Democratic leadership is doing nothing to quell, is premature and probably unrealistic. And, we'd argue, unwise...
Besides, voter approval of tax increases in this economic environment may be a longer shot than the Huskies winning the Rose Bowl next year. People and businesses are hurting, and while many are still doing what they can to help those in worse straits, good luck convincing voters to include state government on their list of favorite charities.
There is the problem for Democrats who would send a tax package to voters. If their tax does the job, it will be an economy-killer. If it is a bearable tax, it won't do the job.
The remaining option is cuts. They are painful, but they will have to fill most of that $5 billion gap.
The state must cut, cut, cut.
Right. And sooner rather than later.
UPDATE Missed a good Union-Bulletin editorial (h/t Jason Mercier). Read the whole thing. Here's a taste.
As the revenue forecast for Washington state's government grows grimmer -- from a shortfall of $6 billion in November to $8 billion this month -- talk of raising taxes is swirling in the Capitol.
It's crazy talk.
A deep economic recession is not the time to raise taxes. Washingtonians are not in the mood to approve or accept a tax increase of any size.
Raha places the state's recesion in a national context that includes "one of the worst 'bear markets' sinc WW II," the rapid decline of household net worth (down 19 percent from its peak in 2007), tight credit markets, lousy car sales, record-low consumer confidence, sluggish housing activity, and "plummeting" exports from our state (affected heavily by the Boeing strike).
He describes the problems in housing, banking, and jobs as a "three-legged stool of misery" and says that restoring the financial markets will be critical to any recovery. There's nothing in the data that suggests a quick turnaround.
Still, as this exchange from Curt Woodward's AP story reveals, rather than cutting now, legislative leaders want to wait.
Democratic leaders said they still must wait until March, for a more firm projection of revenue and state spending growth, before writing their budgets in earnest. The governor's budget director, Victor Moore, agreed.
Minority Republicans, however, reiterated their call for even more immediate spending cuts, saying the Democratic majority isn't moving fast enough in the face of a massive budget hole.
"I think still that there's an opportunity to do some things here and save some pain by moving earlier," said Sen. Joe Zarelli, R-Ridgefield.
And, while Democrats on the forecast council yesterday called talk of a tax package "premature," Andrew Garberreports,
Democratic leaders in the state House said earlier this week they'll likely propose sending a tax package to the ballot this year to help deal with the budget shortfall. And Senate Majority Leader Lisa Brown, D-Spokane, said she expects to bring ballot proposals to her caucus to consider.
Meanwhile, the shadow legislature of unions and other stakeholders is out their holding "focus groups" in communities. They're trying to figure out how much a tax increase (just a temporary one, I'm sure) the public can stomach, which taxes they would vote to increase or which tax exemptions they would vote to remove, which wholesome programs the money should be spent on to make the taxes more palatable (pay raises for state workers probably won't cut it, but warm, fuzzy stuff for school kids and colleges might) and, of course, how much money the tax increases should raise. $1 billion? $1.5 billion? $2 billion?
It's a tough job, but somebody's gotta do it. I'd tell you more, but most of the people involved are still either hiding in the shadows, refuse to talk to me or mumble a lot of indecipherable stuff when they answer me.
Unofficially, the Budget Defict Just Got Deeper: Maybe $8 Billion Shortfall
Posted by Richard Davis on 2/19/2009 8:00:00 PM
The unofficial "early revenue guidance" meeting of the Economic and Revenue Forecast Council provided the expected bad news. Emphasizing that official March 19 forecast "may differ significantly" from today's report, Arun Raha took the forecast council and the standing room only audience through the economic changes the state/nation/globe have seen since his November forecast.
Quick bottom lines:
He expects revenues to be down $721 million in the current biennium, which ends June 30, 2009.
And he anticipates $1,587 million less for the 2009-2011.
Noting that he sliced $1.9 billion from the forecast in November, Raha said, "We were not pessimistic enough." And he acknowledged that the volatility of the economy makes forecasting unusually imprecise. "My magic crystal ball," he said, "is still cloudy."
Good handouts from the meeting haven't been posted to the website yet. I'll check tomorrow. If they're not up, I'll scan what I have and upload it.
Andrew Garber has a brief account here and TVW posts running commentary on the Capitol Record (you may need to scroll down).
A tough editorial yesterday in the Olympian newspaper. Oh, I'll say it, tough but fair. They note the different responses between the union representing the ferry workers and the state's largest public employee unions. The ferry workers volunteered to forego any salary increase. As the Olympian says, it's the right thing to do. Yet,
Rather than follow the lead of ferry workers, union leaders for the largest state employee bargaining units have taken the governor to court in hopes of forcing her to send the negotiated wage contracts to the Legislature for consideration.
By suing the governor in a time when thousands are losing their jobs, the unions look greedy and oblivious to the current economic climate in this state.
Lately, interest groups arguing for tax increases have taken to deriding Gov. Gregoire's budget as an "all cuts budget." Some of the rhetoric gets a little hot.
Gregoire kept her campaign pledge and produced a budget that did not require new taxes. Admittedly austere, her spending plan does require a number of program reductions. She said she hated it.
Even after they take those cuts, however, this will not be an "all cuts budget." Spending on many education and health care programs will likely be up from the previous biennium. Many employees will receive pay hikes, because so-called "step increases," regular pay hikes for seniority, will continue to take effect. Some jobs will be reclassified so allow promotions.
To pay for necessary increases, lower priority programs will get cut. It's a recession. That's to be expected. But there's little rhetorical flair in decrying the "some cuts budget."
The governor made the right decision, the only responsible decision under these conditions. Let the legislature debate the priorities, not the outcome: a budget that lives within our means.
Yesterday, Gov. Gregoire signed the legislation increasing unemployment insurance benefits, part of a package she introduced last month. We have objected, saying that UI trust fund may be needed in a lengthy recession.
AG Opinion on Employer Gag Rule: Preempted by Federal Law
Posted by Richard Davis on 2/17/2009 3:44:00 PM
The Attorney General's Office has just responded to Sen. Mike Hewitt's request for an opinion on the legality of S.B. 5446. the so-called Worker Privacy Ace (we call it the Employer Gag Rule). As we've said all along, it's preempted by federal law. Or, as Deputy Solicitor Jeffrey T. Even writes in the "Brief Answer" section of the response:
I conclude that the National Labor Relations Act preempts the provision of SB 5446 you ask about.
That provision is the crux of the union-backed initiative. Hewitt asked,
"Are provisions of SB 5446 propsing to prohibit an employer from communicating with employees regarding "labor and other mutual aid organizations" preempted by the Federal Labor Relations Act?
Here's the opinion. And here's Kris Tefft's post at Olympia Business Watch.
This should be the end of it. May not be. But it should be.
According to this article in Business Week, European renewables mandates have successfully launched a green economy. But, they've not been much less successful at cinbatung climate change.
...wind turbines and solar energy plants are revolutionizing Germany's mix of power sources, creating jobs and making the country more independent from imports. But they aren't helping in the fight against climate change.
In the worst case scenario, sustainable energy plants might even have a detrimental effect on the climate. As more wind turbines go online, coal plants will be able to reduce their output. This in itself is desirable ? but the problem is that the total number of available CO2 emission certificates remains the same. In other words, there will suddenly be more certificates per kilowatt of coal energy. That means the price per ton of CO2 emitted will fall.
So, if Washington, which is one of 11 participants in the Western Climate Initiative (WCI), joins California in passing a "cap and trade" bill along the lines suggested in the WCI accords and neighboring Idaho, only an observer of WCI, takes a pass, will the same thing happen here?
Friday the governor added Bill McSherry to her team as a temporary (6 month) adviser on aerospace. Here's the PI Insider's brief story:
McSherry will be looking for "innovative and practical ways to address concerns and possible hurdles that Boeing and the Washington aerospace industry now face."
McSherry is on loan for six months from the Puget Sound Regional Council, where he is director of economic development -- a subject into which Boeing's status figures prominently.
I've known Bill for a number of years, beginning back when he was with the Seattle Chamber of Commerce. He's a good selection, knows the issues well, and understands the politics and the policy.
I can't resist adding that Boeing has been clear about several issues this year, including the deceptively-labeled Worker Privacy Act (HB 1528/SB 5446). A vote is scheduled in the House Commerce and Labor Committee Wednesday. Stopping this unconstitutional and unnecessary legislation early would be a win for the aerospace industry and every other business in the state.
Meanwhile, we wish Bill good fortune. Washington cannot afford to take aerospace for granted (see here and here).
Friday, the Seattle PI carried yet another editorial urging lawmakers to pass the governor's climate change cap-and-trade legislation. There are, of course, plenty of good reasons to delay. Yet, the PI says:
Smart policymakers will choose to confront what science is telling us about how global change will hurt the state.
The absolute certainty in science expressed there made this George Will column timely. He riffs on the "global ice age" predicted thirty years ago, citing a number of examples where environmental doomsayers have been, well, off the mark. Read the whole thing.
He also cites a rule with which I was unfamiliar.
...Gregg Easterbrook's "Law of Doomsaying": Predict catastrophe no sooner than five years hence but no later than 10 years away, soon enough to terrify but distant enough that people will forget if you are wrong.
Of course, if we pass economy-killing regulations based on flawed science, people are unlikely to forget in five, ten, or twenty years. However you feel about it, there's no reason for Washington to rush ahead of national policy.
As the recession intensifies, so does the competition to win jobs and investment from less business-friendly competitors. That's one of the reasons it's vital that lawmakers get things right in the 2009 session.
In the Wall Street journal, Stephanie Simon reports that several Western states have stepped up efforts to lure business from a vulnerable competitor. In this case, it's California.
Several Western states are launching aggressive efforts to poach jobs, talent and industry from California, sensing an opportunity to capitalize on the Golden State's current political and financial woes.
She focuses on some clever marketing ploys by Colorado. But Colorado isn't alone.
Right behind Colorado are Arizona, Nevada, Oregon and Utah -- all planning to make similar runs at luring corporate executives, venture capitalists and manufacturers who might be fed up with California's political gridlock or anxious about potential tax hikes and deep cuts to schools, parks and other services.
No mention of Washington. You're either the hunter or the prey in this game. And right now, Washington looks a little too vulnerable.
Host Austin Jenkins explores business and labor issues with Sen. Jeanne Kohl-Welles, D-Seattle, and Sen. Jan??a Holmquist, R-Moses Lake on the February 12 episode of TVW's Inside Olympia.
He brings up the Washington Alliance for a Competitive Economy in the clip below. Watch the whole thing.
Mark says: ?Using data from the state?s Economic and Revenue Forecast Council, ESD forecasts include a worst-case scenario modeled after a 1980s-style recession with a sustained high unemployment rate. This scenario assumes passage of HB 1906 and the continuation of the recently-triggered extended benefits program. Under this worst-case scenario, the Washington Unemployment Trust Fund would drop to $1.6 billion, or 8.6 months of benefits, in 2011.
When the fund drops to seven months, she notes, tax rates automatically go up.
This post from Richard Florida's Creative Class blog sheds some light on the likelihood of that "worst-case scenario" of a 1980s-style recession. He includes a good chart, which you really should examine. His prediction:
It?s bad already. My guess is it will overshoot ?81 by a considerable margin, especially taking into account Carmen Reinhart and Ken Rogoff?s research which finds that unemployment rises, on average, by seven percentage points over four years in the wake of serious financial crises.
Fooling themselves into believing they have a reserve large enough to handle contingencies is one of the reasons we're facing a $6-7 billion budget deficit. Looks like they're eager to repeat the mistake with the UI fund.
And Washington businesses continue to carry one of the nation's highest tax burdens. Here's thetable, from the Council on State Taxation. Kriss Sjoblom, Research VP and Economist at the Washington Research Council provides this additional insight.
The change is not dramatic, from 13th to 12th in business tax share and from 14th to 13th in taxes as a percentage of GSP. We should be cautious interpreting this change as the new study includes this note:
Note that business tax estimates for prior years have been revised from those published in earlier editions of this study due to feedback from state tax agencies, the use of updated and more detailed information on local business taxes and refinements to the property tax estimation methodology to reflect the rapid rise in the value of residential property since 2002. The most significant change was to general sales on business inputs, which we estimated to be $132.3 million for FY2007 in the April 2008 study and have been revised in the current analysis to $129.0 million for FY2007.
For comparison, here's the corresponding table from the 2009 WashACE Redbook.
There's a reason businesses - large and small, rural, exurban, suburban and urban - continue to urge lawmakers not to increase business taxes. The burden is already high and rising.
We continue to urge the legislature to focus on these essential issues and not increase the risk of future UI tax hikes by dipping into the fund now. For background see this and this.
We noted here yesterday that the Legislature's leisurely response to the state budget crisis has begun to attract attention from the governor. Curt Woodward's AP story continues the theme. Writing about the federal stimulus package, he notes this response from Gregoire.
The aid will be welcome, Gregoire said, but it won't make a huge difference in the state's budget picture. Tax collections are expected to keep falling, and the drop-off easily could wipe out the roughly $2 billion in Medicaid help, for example.
"We need to be understanding that, as wonderful as this package is, it is not going to be the relief to the legislative budget-setting process," Gregoire said. "There is a lot of very difficult work to be done."
In The News Tribune, Les Blumenthal has more details about the federal money. (It gets hard to keep referring to this as stimulus.)
A little panic would be a healthy thing at this point, yet it seems to be missing from the mix in Olympia. The Legislature has yet to pass a single spending cut, to the frustration of a governor who had advised quick action.
Each day that lawmakers delay represents a missed opportunity to make immediate cuts that will shrink the carry-forward cost of government ? and therefore the crater that awaits Washington in the two-year budget that begins in July.
The editorial offers a sadly plausible pair of explanations for the dithering.
There are two possible explanations for why lawmakers are being slow to act: They?re in denial about the size of the problem, or they are waiting for the situation to get so desperate that tax increases will become an easier sell.
A Thurston County Superior Court Judge today ruled that Gov. Gregoire had the right to scrap the collective bargaining agreements reached with public employee unions last fall. See here, here and here.
Gregoire confused the process when she had her budget director serve as both the negotiator and the person who later declared that contracts for raises and health benefits were financially unreasonable, the judge said.
But the governor does have the power to back out of contracts after the Oct. 1 deadline to finish talks, Hirsch said, noting the law separately requires the budget office to certify them as feasible.
The union will appeal.
See also this post by Jason Mercier at the Washington Policy Center.
Update: Wilson has more. And, FWIW, returning the setting of public employee wages and benefits to the Legislature does make a lot of sense.
Governor's Impatience Grows; Senate Majority Leader Willing to Wait a Bit
Posted by Richard Davis on 2/12/2009 3:44:00 PM
Gov. Gregoire's impatience with the Legislature's dilatory approach to budget-cutting, noted previously, seems to be ratcheting up a bit. From Brad Shannon's report:
"So the pressure is on for us. I think what has happened is everybody is kind of sitting there and waiting to see what will be in the stimulus. And I think it has kind of frozen people thinking we need to wait and see what is happening " Gregoire told reporters at the Red Lion Hotel Olympia after she spoke to the Association of Washington Business on Wednesday morning.
"I think it's come clear now the stimulus is not going to bail out the budget. It simply isn't. So they are going to have to pass a supplemental budget," she said.
Rich Roesler writes that Sen. Lisa Brown wants a little more time. He includes comments from her blog, a nice vehicle for Brown to use.
Gov. Chris Gregoire and Brown?s Republican colleagues have both said that they?re frustrated by Democratic legislative leaders? slow pace enacting cuts. Brown has said that she didn?t want to cut people off of health care or aid, for example, only to find out later that federal help or changing economic news rendered those cuts unecessary.
Two key numbers will come next week, Brown writes. On Monday, President Obama?s slated to sign the final version of the stimulus bill. And on Thursday (Brown says Tuesday in the blog post), the state?s economic weather forecasters will deliver an unusual early ?preliminary forecast of state revenues.
But Brown doesn't expect good news. And she's not shy about submitting a tax hike to a public vote, Roesler reports.
Unlike Gregoire, who pledged ? and delivered ? a no-new-taxes budget proposal, Brown has for months been hinting that the solution the state?s deep budget woes is likely to include some tax increases. That, after all, is what?s happened in Olympia in every other economic downturn for the past 40 years. And Brown is convinced that voters, if shown the need, will support paying more.
My Take on the Employer Gag Rule, Union Neutrality or Worker Privacy Act
Posted by Richard Davis on 2/12/2009 3:11:00 PM
Whatever you call it, it's unnecessary, unconstitutional, but not, as I write in this column, inconsequential.
If they pass this bill, lawmakers send a resounding anti-business message to companies considering locating or expanding in Washington. Skewing public policy in favor of union organizers will not stimulate economic development.
At AWB's Legislative Day in Olympia (yesterday), Attorney General Rob McKenna said that his office has been asked for a legal opinion on the legislation (HB 1528 and its companion bill SB 5446). He didn't tip his hand. But I'd be surprised if his office reached a different conclusion than the U.S. Supreme Court did on California's similar law.
February Revenue Collection Report: 5 Percent Below Forecast
Posted by Richard Davis on 2/10/2009 4:36:00 PM
The new revenue collections report has been released.
General Fund-State (GFS) tax payments in the January 11, 2008 - February 10, 2009 collection period fell short of the November forecast. Receipts for the month were $62.6 million (5.3 percent) lower than expected. Revenue Act receipts were $53.0 million (4.7 percent) below the forecast, and non-Revenue Act payments were $9.7 million (18.1 percent) below the forecast. The cumulative shortfall since the November forecast is now $196.8 million (5.1 percent).
Sen. Joe Zarelli was quick to comment through his Budget Tidbits.
While the Legislature waits, non-entitlement caseloads grow, salary increases for union employees continue to be granted, and agencies seeking flexibility to make cuts are hamstrung.
The cost of this inaction is ultimately lost savings opportunities. And this means one of three things -- or a combination thereof -- will result:
a. Cuts will be deeper than needed if quick action had been pursued
b. More one-time money and gimmicks will be relied upon to balance budget
Gov. Gregoire thinks so. Who can blame her? Still no supplemental budget and little sense of urgency from the legislature. Jerry Cornfield wrote Sunday that Democratic leaders say their moving as quickly as they can, leading Cornfield to conclude:
All I can say is they must be on Democrat time.
Here it is the 28th day of the 2009 session and the majority party has yet to send Gov. Chris Gregoire a single piece of legislation to cut a single dollar of spending by state government. Tomorrow, on the 29th day, they won't again, and maybe not even Tuesday.
Joe Turner breaks it out in The News Tribune. Read his complete blog post, but here's the bottom line.
If the cards fall just right, maybe $1 billion to $1.5 billion might be available to help the state with its $6 billion, going on $7 billion budget deficit over 30 months. That's the best-case scenario. So does that mean the Legislature is looking at a tax increase to put on the ballot? Probably.
And for a thoughtful assessment of the federal stimulus package, read this piece in the Wall Street Journal by Gary Becker and Kevin Murphy. After a rundown of key provisions, they conclude:
Our own view is that the short-term stimulus from the legislation before Congress will be smaller per dollar spent than is expected by many others because the package tries to combine short-term stimulus with long-term benefits to the economy. Unfortunately, short-term and long-term gains are in considerable conflict with each other. Moreover, it is very hard to spend wisely large sums in short periods of time. Nor can one ever forget that spending is not free, and ultimately it has to be financed by higher taxes.
Gov. Gregoire's announcement yesterday of a comprehensive government reform campaign looks like an appropriate respond to the challenges of the time. Few of us would argue the the effort's three goals: reducing the bureaucracy, improving government service, and streamlining government operations? And it's encouraging to see the business-labor committee includes AWB president Don Brunell and Puget Sound Energy executive Phil Bussey.
As expected, she's cutting the number of state boards and commissions, something other governors have attempted with minimal success. Fifty of them disappear with a stroke of the gubernatorial pen. Not a bad start. (Link to disappearing groups here.)
Rich Roesler has more, including the governor's plan to restructure the Department of Community, Treade and Economic Development into a more focused Department of Commerce. Roesler also posts on Senate Democratic staff director's awarding the governor (on his personal blog) the Herbert Hoover for her decision to handle the budget challenge with cuts, not new taxes. (Looks like that post may have been taken down.) Roesler also links to my column in the Puget Sound Business Journal. (Thanks, Rich!)
It's good to see that the governor's plans include a statewide performance audit undertaken the direction of Brian Sonntag, state auditor.
Stimulating Business To Stay in Washington Should be Legislature's Priority
Posted by Richard Davis on 2/6/2009 3:20:00 PM
But, as I argue in the Puget Sound Business Journal today, an awful lot of what's being considered in Olympia seems designed to stimulate business departures.
Right now we need a long-term vision for the recovery. What we?re getting are recycled union and environmental initiatives that will deepen our recession and send jobs and investment out of state.
For example, with unemployment rising dramatically, the governor wants to divert money from the Unemployment Insurance Trust Fund. And with manufacturing layoffs piling up like pizza boxes after the Super Bowl party, lawmakers are considering job-threatening climate change regulations. They call this stimulus?
As well, they continue to impose paid family leave requirements on every business in the state. And unconstitutional, union-backed restrictions on employer free speech have gathered significant legislative support.
Provides for a temporary increase in unemployment benefits by adding $45 tothe weekly benefit amount, and making $155 the minimum amount payableweekly.
Expands eligibility for the training benefits program to low-wage workers,honorably discharged military personnel, and persons who are disabled.
Eliminates restrictions in the shared work program on the number of an employer's employees that must be enrolled, and the number of weeks thatsuch employees may receive benefits.
Provides for non-charging of the additional $45 and training benefits.
Unemployment filings have soared so high in recent months that seven states have already emptied their unemployment-insurance trust funds, which were supposed to see them through recessionary periods. Another 11 states are in jeopardy of depleting reserves by year's end, according to the National Conference of State Legislatures, which published a January report entitled "The Crisis in State Unemployment Trust Funds." So far, states have borrowed more than $2.3 billion in emergency funds from the federal government, money they are required to pay back.
Our trust fund is high, no doubt. But I thought that we got over that peculiar Washington exceptionalism ("we're not like other places") when the deficit projections reached $6 billion. You know, it can happen here.
The February revenue forecast shapes up as a bleak tune-up for the big show in March. Today's Wall Street Journal has a couple of stories assessing the January damage. Auto sales for the Detroit carmakers plunged, again.
The declines were steeper than anticipated and came against a backdrop of sluggish consumer spending for all types of goods...
Overall, auto makers industrywide sold 656,976 cars and light trucks in January, according to Autodata Corp., down 37% from January 2008. It was the lowest total since December 1981 -- and the first time U.S. sales were lower than in China, where about 790,000 cars were sold last month, according to GM.
Granted, those are national numbers, but we're over the illusion that Washington's immune. I doubt we'll look much different.
And the longer people look at the federal stimulus plans, the more troubled they appear to be. Bruce Ramsey raises some unwelcome and thoughtful concerns in his Seattle Times column this morning. Today's Rasmussen Reports reveals that half of America believe the package will make things worse.
Fifty percent (50%) of U.S. voters say the final economic recovery plan that emerges from Congress is at least somewhat likely to make things worse rather than better, but 39% say such an outcome is not likely.
It's beyond strange that with things looking this bleak lawmakers are giving serious consideration to any legislation that will drive up costs (climate change) or make Washington an outlier in labor relations (Worker Privacy Act).
Brad Shannon from the Olympian reported both sides of the story this morning. KPLU's Austin Jenkins put up a short broadcast piece as well. Finally, Niki Sullivan at TVW's new Capitol Record blog has a series of blurbs about the hearings, including the humorous (and spot-on) observation that House and Senate floor sessions routinely start with a prayer, which under this legislation apparently means the chambers could not require legislative employees' attendance at the sessions.
AWB's message at both hearings yesterday was clear: in these extraordinary, almost surreal, economic times, when the focus must be on maintaining jobs and keeping Washington working, the Legislature should not waste its time with a bill that will not withstand legal challenge and which fosters a political atmosphere that unfairly slams employers at a time when we need jobs the most. If ever there were a time for business and labor to beat their swords into ploughshares and work together on job creation, this is it. And yet the agenda is consumed by the most divisive labor law bill the Legislature has heard in decades.
First Steps Taken to Close the Deficit with Spending Cuts
Posted by Richard Davis on 2/3/2009 4:07:00 PM
With the continued erosion of state revenues, Washington's current budget, the one for the biennium ending June 30 this year, is in the red. Legislators have been working to trim spending to bring it into balance.
Ordinarily such midterm corrections are handed in the supplemental budget. This year, the House has passed what it's calling an "early action savings plan." Moving right along, the Senate Ways and Means Committee is hearing the bill right now.
It's a start. But there's a long way to go.
How far we have yet to go we'll learn sooner than later, with news that the Economic and Revenue Forecast Council will hold a special February meeting . The governor and legislature wanted to track revenues more closely given the depth of the recession. Arun Raha, the state's chief revenue forecaster, warns that this won't be the last word.
The preliminary forecast is meant to provide the Legislature, at its request, with early guidance regarding the impact of deteriorating economic conditions on state revenues since the official November 2008 forecast.
Please note however, that given the current uncertainty about the economic environment and stressed financial markets, conditions may change enough between the preliminary forecast and the official one, such that the final forecast may differ significantly from the preliminary estimate.
That's been the pattern. No one's expecting a quick uptick in tax revenues.
New WashACE Brief on Economic Impact of Cap-and-Trade
Posted by Richard Davis on 2/2/2009 3:58:00 PM
Don't believe the Western Climate Initiative's promises of a cost-free cap-and-trade system. That's one of the important findings in anew Competitiveness Brief by the Washington Alliance for a Competitive Economy.
... the WCI?s conclusions about the cost of its proposed cap-and- trade system are wildly optimistic and are not justified by the incomplete modeling work.
The report includes some good estimates of the impacts cap-and-trade would have on Washington businesses.
Forecasts of emissions prepared for the state indicate that baseline 2020 greenhouse gas emissions (the level of emissions forecast absent the cap-and-trade system) would total 121.9 million metric tons, of which 113.4 million metric tons would be subject to the WCI cap. At the WCI predicted price of $24 per ton (which we believe understates the 2020 allowance price) allowances sufficient to cover the baseline emissions would cost state residents and businesses $2.7 billion.
Of this $707 million would be borne by the industrial sector; $295 million, by the commercial sector, $354 million, by the residential sector; and $1.4 billion, by the transportation sector (this includes personal automobiles). The cost of gasoline would rise by $698 million; the cost of diesel fuel, by $288 million.
The burden on manufacturing businesses would be significant. Emissions data from the Boeing Company indicate that at $24 per metric ton the annual cost would be $8.4 million. Emissions data from the Northwest Pulp and Paper Association indicate the annual cost to a large pulp and paper mill would be $1.8 million, while the cost to a medium sized mill would be $980,000.
Numbers like that put jobs at risk. And the economic modeling of the WCI falls far short of what's required to estimate the economic impact of this legislation on the state. With the Obama administration ready to implement a national climate change policy, Washington lawmakers should reject efforts to push us ahead unilaterally, with predictable negative impacts on our state's industry and long-term competitiveness.
Read the brief. And tell your legislator not to risk good jobs on flawed analysis.
Today's Wall Street Journal carried a front-page story about what states are doing to build their economies during the recession. Under the headline, More States Considering Tax Breaks to Woo Jobs, Stephanie Simon reports the intense jockeying for position as state governments compete for new investment and to retain the employers they have.
Rising unemployment has touched off a race among state governors to woo companies with tax breaks and financial incentives, even as budget shortfalls force cuts in education, health care and other services.
She notes that most states are counting on federal stimulus money, but
they're not convinced it will be enough. So they've laid out urgent calls to chase private-sector jobs with public money.
Why? This is what Missouri's Democratic Gov. Jay Nixon says:
"Everything stems from jobs," Mr. Nixon said. "Now is not the time to back off the field of economic development."
It's a good, balanced account of the current competitive landscape. And, it's a reminder that when we say "location is a choice" 49 other states are working to make themselves the right choice by reducing costs and uncertainty for employers.
One of the problems with plans to increase unemployment insurance benefits and temporarily cut the tax is that it increases uncertainty by raising the specter of higher costs in the future. With the economy still deteriorating, employers rightly fear reducing the trust fund when demand for benefits continues to rise.
Snohomish County Exec: "Eliminate Barriers to Competitiveness"
Posted by Richard Davis on 2/2/2009 12:27:00 PM
In his "State of the County" address last week, County Executive Aaron Reardon put economic competitiveness at the top of his agenda. And he framed the issues effectively, with a sobering assessment of the conditions facing Washington business, particularly his county's largest employer. There's a refreshing summons to action in Reardon's comments that doesn't yet seem to have hit Olympia.
Staying competitive in this global economy means continued vigilance...We must act with a sense of urgency to make our region more competitive and to shore-up investor confidence. But our most important short-term economic opportunity isn?t being discussed in the halls of Olympia and on the front page of our newspapers, or at the tables of the many good and decent associations and committees of government and business leaders.
Though times may be different, our key economic objective remains tied to the future of the Boeing Company in Washington State. We must do all that isnecessary as a region and state to make certain that the second line of the Boeing 787 is built here in the Puget Sound.
For the last five years, as our state reaped the benefits of our success in landing the 787, other states have made tremendous efforts to gain a competitive advantage. It is imperative that the second line of the 787 not be taken for granted...
It's not, of course, just about Boeing. It's about doing what's necessary to make this state the smart choice for business location. But as Reardon knows, a Boeing decision to move operations from Washington would be devasting to his county and the regional and state economies.
With more than 20,000 jobs disappearing in the last few weeks, there's nothing more urgent than keeping the jobs we have.
