In a new WashACE Competitiveness Brief, we take an in-depth look at health care spending in the state budget.
The Healthcare Spending Squeeze , prepared by the Washington Research Council, examines the effect of rapid growth in health care spending on the state budget, noting that from 1997-99 through 2005-2007, health-related spending grew by 85.5 percent, compared with a 30.1 percent growth in non-health-related spending. Health care spending in the 2005-07 biennium amounted to one-third of all Near General Fund Spending, up 7.6 percentage points over the 1997-99 biennium.
Rising health care costs squeeze virtually all other state priorities and drive up the operating cost of state government. The brief also looks at the costs of state employee health care benefits, a growing share of compensation and extraordinarily generous when compared with the private sector.
Controlling health-related spending will play a critical role in overall budget discipline, with clear and direct implications for our state's economic competitiveness. A second brief to be released in December will examine various health care "reform" proposals to be considered by lawmakers next year.
DCI asked about how executives got information about a state's business climate, what they considered important, what marketing strategies were most effective, and other factors relevant to economic development strategies. It's interesting and worth a look.
But in the "best states" competition, there's no surprise.
When asked to select the most favorable business climates among the 50 states, respondents gave Texas, North Carolina and Georgia the highest tally (in order of selection). California, New York and Michigan were selected as the three states with the least favorable business climates.
More detail is available in Appendix B. Texas was ranked most favorable by 41 percent of respondents, North Carolina by 30 percent and Georgia by 20 percent. Florida and Tennessee tied for 4th place with 15 percent of the tally.
Washington was picked as best by 2 percent, coming in 29th in a 4-way tie. On the flip side, the state garnered 7.1 percent of the votes for worst climate, in a tie with Louisiana for 8th place. Coming in first in the worst, California grabbed 72 percent of the vote.
Does it all mean much? I don't think so, other than the strong consensus around the top states. As we've noted before, Texas, N. Carolina, Georgia, Florida and Tennessee tend to cluster near the top.
That the evaluators rank Labor (availability, quality, cost) and Overall Operating Costs as the two top factors in business location decisions (followed by efficient transportation systems and business-friendly government) might have something to do with it.
Washington CEO confirms the continued slump in retail sales tax revenues(here's the state revenue department report). WA CEO writer Bryan Corliss summarizes the bad news:
As a whole, Washington companies did $26.6 billion worth of activity subject to sales taxes in during the first quarter 2008 - a scant 1.4 percent increase over 2007's first quarter. When you compare that to previous years, the slow-down is striking. Between Q1 '05 and Q1 '06, for example, state sales tax collections jumped 10.3 percent. Between Q1 '06 and Q1 '07, they were up 7.9 percent.
For another look at the situation, consider this chart presented by WRC president Al Ralston at a recent AWB government affairs committee meeting. Hard to see signs of an uptick before the September revenue forecast.
Corliss again:
... for now, two things are clear: Washington's economic growth has largely stalled; and state and local governments will have lots of belt-tightening to do during their next budget cycles.
Richard Davis draws my attention this morning to an op-ed in the San Francisco Chronicle proposing that union membership be added to the federal Civil Rights Act as a protected class in employment. These "six little words" -- prohibiting discrimination in employment "on the basis of union membership" -- would, the author proposes, allow workers to "defend themselves" against "union-busting thugs." How? By filing lawsuits, of course.
But is the proposal -- which if enacted, might go by its short title, the "Labor Lawyers' Full Employment Act" -- entirely without merit? Query whether the modest addition of just another ten words -- "or the refusal to join or financially support a union" would make it a fair compromise?
I'm a day late with this (and the states are many dollars short).
Yesterday's Wall Street Journal ran a front-page story with a tells-it-all headline, States Slammed by Tax Shortfalls. It may be the first time that the National Conference of State Legislatures annual June budget update received play like that from the WSJ. Announcing a $40 billion shortfall will get you that kind of attention.
The stumbling U.S. economy is forcing states to slash spending and cut jobs in order to close a projected $40 billion shortfall in the current fiscal year.
That gap -- identified Wednesday in a survey by the National Conference of State Legislatures -- is more than triple the size of the previous year's. It is the result of broad economic weakness at the state and local levels that could cause pain throughout this year and into 2010.
Washingtonians who saw the story and the US map highlighting state budget conditions may have been comforted to see that our state was not identified among the states experiencing a shortfall. We shouldn't get too comfortable. As most of us acknowledge, our state faces a $2.7 billion shortfall in the next biennium.
For the second year, Forbes.com ranked the country's 40 biggest metros on economic opportunity for up-and-coming young professionals to gauge which cities are attracting the next generation of top business talent.
They looked at where graduates from elite universities landed. Then, they were able to use a couple of other Forbes lists to shape this one.
We then combine those rankings with the locations of Forbes' 400 best big companies and 200 best small companies; these are rated by revenue and high rankings for corporate practices, as well as long- and short-term sales, earnings growth and stock market performance.
And some other stuff, including salaries, cost of living, number of young adults and their marital status.
Finally, for today's list wrap-up (with a h/t to Kate Riley on the Seattle Times Blog), we have Reason Magazine's list of best and worst cities for personal freedom - Riley more accurately pegs it as a nanny list. Seattle ranks as the nation's second most nannyish, behind Chicago. Do the young professionals know this?
Although, for our friends at the Economic Opportunity Institute, there may be no bad times to talk about taxing the rich. Marilyn Watkins, acting EOI executive director, argues the case in this Everett Herald column that did double-duty as a PI op-ed today. After acknowledging the state's coming budget shortfall, she offers a modest solution to the problem.
Here are small steps next year's Legislature could take that would make a big difference. It could institute a new "high incomes tax" that exempts the first $200,000 of family income, starts at 3 percent and jumps to 5 percent on incomes over $1 million. Couple that with a reduction in the property tax, and most families would see their tax bills decline. Only four percent would pay the new tax, and it would be those whose incomes grew fastest and for whom federal taxes fell the most in the past decade.
Revenue from the new tax could be dedicated to our highest priorities: education and health care.
Well, our highest priorities - education and health care - also happen to be where most of the state budget currently is spent. So she wants a new dedicated tax to go to traditional general fund programs. Not much targeting there.
The larger problem, which never seems to bother EOI, is that the "high incomes" tax introduces considerable volatililty to our tax system, particularly when you cut the remarkably stable, if unpopular property tax. Even the Tax Structure Study Committee chaired by Bill Gates, Sr., not a group hostile to income taxes, concluded that the
Graduated personal income tax is more volatile than sales tax or property tax. It is also more volatile than a flat rate personal income tax.
There's history of such shenanigans with EOI, a group that earlier championed the latte tax in Seattle (rejected by the voters), paid family leave (adopted and unfunded by the Legislature), the family and business punishing estate tax, and touted a cigarette tax hike to fund health care (declining revenue base mismatched with rising health care costs).
The common element unifying these schemes: promises of a pain-free way to substantially increase public spending. The proposed revenue hikes never cover the costs of expanded entitlements.
Paul Guppy, with the Washington Policy Center, writes about the income tax scheme here, pointing out that the federal income tax originally appled to only the richest 2 percent of the population. We know how that worked out.
And you just want to be careful with tax hikes proposed by folks who treat lattes as luxury items indulged in by the rich.
Yesterday Don Brunell sent me a copy of a data-rich presentation by Jock Finlayson, executive vice president, policy, of the Business Council of British Columbia (like a state chamber of commerce). Finlayson made his presentation during a panel discussion that Don moderated at this year's Pacific NorthWest Economic Region (PNWER) conference in Vancouver, BC.
A couple of points stand out. Overall, the region - the US Pacific Northwest (Alaska, Idaho, Montana, Oregon and Washington) and Western Canada (Alberta, British Columbia and Yukon) - has shown stronger population and GDP growth than the rest of Canada and the US. PNWER states and provinces remain heavily trade dependent, with markedly increasing exports, with China as the dominant trading partner.
Although there are clear differences among the states and provinces that make regional identity sometimes difficult to grasp, common themes emerge. In particular, Finlayson's list of "medium term economic development issues" in BC could have been the focus of any conference on Washington state competitiveness in the last five years:
Labor scarcity, skill shortages
Investing in infrastructure (esp. transportation, energy, communications)
Understanding both urban and regional development opportunities
Climate change
Good stuff. Click through the slides and see for yourself.
Another "best places" list: Money Magazine ranks the "best places to live." Surprisingly, Bellevue is the only Washington city to crack the top 100, coming in at 42nd.
Texas took top honors with 13 cities making the list. New Jersey came in second with 9. Money is candid about the criteria, and the website allows you to slice-and-dice among cities, states, and data with abandon.
As I've said before, these things are always a bit gimmicky. But the real benefit that comes from them can be seen in this report from No. 10 Fishers, Indiana.
Town Council President Scott Faultless, in a news conference Monday that included business owners, community leaders and local government officials, was obviously pleased.
"We finally cracked the top 10 list," he said. "This is great recognition to everyone in the community. For the schools, volunteers, service organizations, parks and recreation, Chamber of Commerce and the rest of the community, this is widespread recognition."
(And how cool is it to have a "Faultless" town council president?)
It's better to be on the list than off it. Congratulations, Bellevue!
This month's issue of Washington CEO carries an excellent cover story, Failure to Compute, on math and science education in Washington. Senior writer Aaron Corvin puts the issue in proper context.
Our state may now be a hotbed of high-tech, bioscience and entrepreneurial activity, but that hotbed will cool if we don't have educated workers with strong math and science skills.
The numbers don't look good.
The story looks at dismal WASL performance - scores so bad that lawmakers postponed requiring students to pass the science and math WASL in order to graduate from high school. Corvin reports on how the US lags globally in math and science, the challenges tech businesses face in recruiting employees with solid math credentials, and the remedial math now required at the UW to overcome the knowledge deficit of incoming freshmen.
And he identifies one source of the problem.
...critics say, when it comes to math and science education, Washington has been watching the grass grow, in part because changes in the teacher-pay policy have been resisted by the politically powerful Washington Education Association, the teachers' union.
...Given the shortfalls in funding and teachers, experts say it's important to narrowly focus policy prescriptions. One of the cheapest, quickest and most laserlike ways to remedy the shortage of math and science teachers and pump up student performance is to pay salary premiums to those teachers, especially in high schools.
Yet, as we've written here, the union balks at even modest pilot programs designed to strengthen math and science education.
Read the whole story. And remember that if we're going to continue to have a strong tech sector in this state, lawmakers will have to put the interests of students ahead of those of the WEA.
MORE Liv Finne of the Washington Policy Center has an op-ed in The News Tribune today proposing other reforms to address the shortage of qualified math and science teachers. (h/t Jason Mercier)
Andrew Garber takes an in-depth look at the state budget in Sunday's Seattle Times. It's an interesting read and a balanced, well-executed analysis of a topic that's usually treated episodically through serial anecdotes about what various state programs mean to different constituencies.
He gets right to the point:
As much as anything, Gov. Christine Gregoire's first term in office is notable for one number: $8 billion.
That's how much state spending has increased since Gregoire, a Democrat, was elected in 2004.
Another way of looking at it: The two-year general-fund budget has jumped 31 percent, to $33.6 billion. That's the largest percentage increase in the past 16 years.
He compares Gregoire's first term with her predecessors back to John Spellman. The piece comes with plenty of charts and graphs, slicing spending by function and object and examining compensation and workforce growth.
Read the whole thing for a clear look at this campaign season's most important issue. Washington Roundtable president Steve Mullin sums up why the budget is a critical concern:
"We will have a multibillion-dollar shortfall to deal with," said Steve Mullin, president of the Washington Roundtable, an association of corporate executives. "That's not open to debate."
And,
"We think it's become clear that the significant increase in state spending over the past four years is simply not sustainable."
For a look at what happens when these warnings aren't heeded, consider what's going on in California as reported in the July 17 Wall Street Journal.
California faces a $15 billion budget deficit and Democrats who rule the state Legislature have proposed closing the gap with a $9.7 billion tax hike on business and "the rich."
The WSJ noted the announcement came as AAA announced its decision to close call center operations in the state, shifting 900 jobs elsewhere, and as Toyota canceled plans to build a Prius plant in Bay Area, opting instead for Mississippi.
The root of the California deficit is too familiar.
What the politicians in California refuse to address is their own overspending. State outlays were up 44% over the past five years, meaning that California is spending at a faster pace than even Congress.
Enough said.
UPDATE Tennessee has attempted to mitigate its budget shortfall with early retirement buyouts. This morning, Gov. Phil Bredesen says it's not going well.
MORE Several readers have asked about the difference between the 31 percent growth in spending cited by Garber and the 33 percent figure commonly cited by Republicans. Here's the difference, as I understand it: The governor's budget office says the main state two-year budget has risen 31 percent in four years, from $25.6 billion to $33.65 billion. But the Rs counter that when the governor took office, the budget was $25.2 billion, not $25.6 billion. The budget office excludes the 2005 supplemental budget, which the governor signed. The Republicans count all budget growth since the governor took office. Using the $25.2 billion baseline and including the 2005 supplemental yields a 33.6 percent increase.
Either way, as Patrick O'Callahan writes, they're tough numbers.
77% of Americans are satisfied with the quality of their own healthcare, but only 38% say they are satisfied with the country's healthcare.
48% would prefer to maintain the current system based mostly on private health insurance while 41% would replace the current system with a new government-run healthcare system.
... 94 percent of voters are covered by health insurance and most of them (87 percent) are satisfied with their coverage. A lot of people in the state get good coverage through plans offered by associations and other member-governed groups. Yet, many voters (70 percent) do not believe that most people in the state have adequate health insurance coverage.
There are legitimate reasons to be concerned about America's health care system. And we all know them. But it's important to remember that for most of us, most of the time, the system works remarkably well. If nothing else, that should alert would-be reformers to be both humble and cautious. There's a great deal at risk.
MORE Pat Muir writes in the Yakima Herald-Republic of another of the "Healthy Washington" forums. Again,
People's highest health care priority is making sure everyone is covered.
Initiative 1029: To the Ballot, the Legislature, or the Court?
Posted by Richard Davis on 7/18/2008 9:49:00 AM
The Secretary of State's decision to accept Initiative 1029 for the fall ballot comes under more scrutiny by the editorial boards. Although the petitions clearly state that the measure is an initiative to the legislature, SEIU - the union backing the initiative - says 1029 was intended to be an initiative to the people. And the Secretary of State says he'll overlook that mistake and let it go to the ballot.
I wrote about it in a column that ran Wednesday in The News Tribune and Herald of Everett. At first, I'd not considered it a topic for WashACE. But now I think it worth mentioning here. So much of public policy in our state comes via the citizen initiative that the processes by which measures reach the ballot cannot be ignored. I'll not re-argue my concerns here. They're laid out in the column.
... handling I-1029 will involve tolerance for irregularity. If Reed is forced by court order to submit the initiative to the Legislature, that will be contrary to its sponsor's affidavit and the measure would bear a way-off serial number (were this correctly filed as an initiative to the Legislature, it would have likely been called I-409). But it seems to me those irregularities have less gravity than assuming voters didn't know, or didn't care, about the plain language of what they were signing, a position which effectively removes them from the constitutional equation and reduces them to mere cogs in a sponsor's signature-harvesting combine.
The requirement that all residents of Massachusetts have health insurance has run into problems. A lot of people choose not to buy the policies, possibly because they cannot afford them. The Boston Globe reports that the agency overseeing the "Connector" regulating the state's vaunted health care reform will be setting aside a chunk of money for appeals. (h/t State Policy Network)
The Commonwealth Health Insurance Connector Authority set aside $3.3 million - nearly 10 percent of its $39 million fiscal 2009 budget, which it finalized yesterday - for the 8,000 appeals the board expects to process. In the year that ended June 30, there were an estimated 2,000 to 2,500 appeals, the board said.
One reason for the increase in appeals: The penalty for not having coverage has bumped from $219 to $912.
Oh, and this will make it better.
Also, the board is considering regulations that would set a minimum standard for what kind of coverage individuals must buy, and members said that probably would also raise the price of coverage.
Coming in No. 14 overall, Tacoma came in first among Washington cities, followed by Bellingham (18), the Tri-Cities (23), Olympia (27), Seattle-Bellevue-Everett (54), Spokane (55), Bremerton-Silverdale (115), and Yakima (146).
Bragging rights go to Texas, as the cover story by Joel Kotkin and Michael Shires makes clear.
In many ways Texas has become the new Florida, dominating the top of the list. Among the largest metro areas, a remarkable five of the top 12 best places to do business are from the Lone Star State, ranging from Austin (No. 2) and Houston (No. 4) to Ft. Worth (No. 9) and Dallas (No. 12). Among the small cities, Midland, now ranks No. 1, up 10 places from last year. Odessa and Longview, both big gainers, round out the Texas stronghold on the top portion of the list.
Texas' boom reflects solid growth in a variety of industries, from energy and agriculture to manufacturing and trade. "The big difference for Texas is we did not rely on the real estate bubble," suggests Bill Gilmer, a Houston-based economist for the Federal Reserve. "Our gains are based on jobs elsewhere and that has insulated us pretty well."
There's some good news for the Evergreen State, however.
Seattle continued its strong growth, notes economist Paul Sommers, due largely to the success of two companies -- Microsoft and Boeing. These companies have been expanding, providing high-wage jobs, and attracting skilled talent to the area. Another key advantage in this high energy cost environment: the Northwest's prodigious supplies of cheap and clean hydroelectric power. This helps everyone, from people building airplane parts to dot-com firms sucking copious amounts of electricity to run their servers.
Along with the good news, then, come two notes of caution: the continued reliance on the two pillars of the regional economy (aerospace and software) and the eroding energy advantage. As noted earlier, Washington has become less competitive for aerospace since 2003. And maintaining what's left of our energy advantages may depend on whether I-937 can be amended to allow clean and abundant hydro to meet the increased energy demand.
The Inc. rankings amount to a sophisticated look in the rear-view mirror. Places do well on the rankings because they've shown growth in recent years. The ranking methods are nicely summarized this way.
The index is calculated from a normalized, weighted summary of: 1) recent growth trend: the current and prior year's employment growth rates, with the current year emphasized (two points); 2) mid-term growth: the average annual 2002-2007 growth rate (two points); 3) long-term trend: the sum of the 2002-2007 and 1996-2001 employment growth rates multiplied by the ratio of the 1996-2001 growth rate over the 2002-2007 growth rate (two points); and 4) current year growth (one point).
No pesky public policy considerations to complicate the assessment. Nonetheless, you can infer some clues from the fact that most of the "best cities" are in states that typically show well on other lists that explicitly consider costs, workforce, transportation, and education.
Best States for Business, CNBC Edition: WA Tied for 18th
Posted by Richard Davis on 7/15/2008 2:01:00 PM
Here's another of the annual business climate scorecards. CNBC's "America's Top States for Business" puts Washington in a tie with New Jersey for 18th place.
The Top 5? Texas, Virginia, Utah, Idaho, and Colorado.
CNBC lays out its criteria fairly well, unlike some other mediareports. The analysts look at ten categories: cost of doing business, workforce, economy, education, quality of life, technology & innovation, transportation, cost of living, business friendliness, and access to capital. Washington cracks the top 5 in only one category. We rank fourth in access to capital. The state does, however, do well in technology and innovation (6th) and quality of life (9th).
Of continuing concern, Washington ranks near the bottom on four critically important criteria: cost of doing business (35th), workforce (37th), cost of living (36th), and business friendliness (34th).
As we've said, these rankings vary some and no single study should be considered the last word. But our high business costs have consistently placed us at a competitive disadvantage in national rankings. That's a major reason Washington business leaders look at a looming budget deficit, paid family leave, unemployment insurance issues, and the potential impacts of regional cap-and-trade legislation with concern.
State Revenue Collections Below Expectations Last Month
Posted by Richard Davis on 7/14/2008 9:23:00 AM
Well, this isn't good news. The July 11 release from the Economic and Revenue Forecast Council shows June revenue collections coming in about $61 million below expectations. The analysis provides more reason for concern than simply June's underperforming revenue collections. Some excerpts:
All revenue categories except for liquor and cigarette sales came in below their forecasted values...
Adjusted for special factors, Revenue Act receipts this period (primarily May 2008 business activity) were 0.6 percent below the year-ago level, the second collection period this year that has shown a decline in adjusted year-over-year growth (adjusted April 11- May 10 collections declined 0.7 percent year-over-year)...
Adjusted Revenue Act growth has averaged only 1.8 percent in the first five months of calendar 2008 activity. This reflects a sharp deceleration from the 5.9 percent average growth in the last six months of calendar 2007 and the 8.9 percent average growth in the first half of 2007...
There has been no improvement in real estate activity. June 2008 real estate tax receipts excluding penaties and interest were 51.8 percent below the year-ago level...
And so on. Chris Mulick's Olympia Dispatch blog reports it this way.
Bottom line, there?s one less month for the state to be rescued by an economic upturn before budget writers have to start figuring out how they?re going to plug a budget hole that isn?t getting any shallower.
While we track the negative numbers, it's worth remembering that, although the sluggish economy has deepened it, lawmakers dug the hole with two biennia of overspending.
On the Washington Policy Center blog, Jason Mercier writes that Governor Gregoire doubts the Senate Ways and Means Committee projection of a $2.7 Billion gap between revenues and business-as-usual state spending. The comments came during an interview on KIRO radio with Dori Monson. (Jason provides the link.)
Without wanting to get between dueling analysts - and, to be sure, we're not, because OFM hasn't offered an alternative budget outlook - we have a lot of respect for the work of the nonpartisan Ways and Means Committee. And, while there certainly a lot of twists and turns yet to be navigated before the governor presents her budget in December, the likely shifts in caseloads, health care costs, and revenues ultimately will be trivial relative to the shortfall.
The governor has reinstated the Priorities of Government (POG) process to set spending priorities. That will work best if she similarly commits to containing spending within available revenues. Ultimately the gap, which is probably in the $2.7 billion neighborhood, will be closed. A disciplined use of the POG will close it without a tax hike.
We have another recent example in our state. The Health Services Account, which funds the Basic Health Plan here, is projected to be short by about $434 million at the end of the 2009-2011 biennium. What's it mean when it's short? That's money that's likely to be backfilled from the general fund, a common pattern in recent years. So much for the cigarette tax paying for health care.
The conference runs for nearly two hours, a long time to watch on your computer. But take the time to watch the nine-minute vide Kirsch to kick off his presentation. It comes on at about 17:58. Even those of us who've grown weary of "perfect storm" analogies will have to agree that the folks at ETS didn't overstate.
The challenges identified are real. They're here. And they're eroding our competitiveness.
Still catching up on some post-holiday reading, I cam across this bit from the State Policy Network blog. Massachusetts Gov. Deval Patrick recently signed legislation to boost the state's cigarette tax to pay for - wait for it - health care.
Up a buck, to $2.51 a pack, that puts the Bay State in the tobacco tax big leagues. Washington, with its tax of $2.025 has played there before. (Here's a brief description of how the Washington cigarette tax is distributed. The revenue department's tax reference manual provides a longer discussion of the uses and issues associated with the tax.)
Taxing to discourage consumption works. Sin taxes to fund rapidly growing programs doesn't. As an earlier WashACE Competitiveness brief put it,
Health care costs are increasing at the rate of about 10 percent a year. The long-term rate of general fund revenue growth is about 5 percent. And the tobacco and alcohol taxes supporting the Health Services Account increase at an annual rate of from one to two percent.
The mismatch results in a rolling fiscal crisis, which can only be averted by controlling spending... A turn to sin taxes provides, at best, temporary relief. Worse, it allows spending growth to continue unabated, increasing the magnitude of the next shortfall and, therefore, the likelihood of larger general tax increases in the future.
The nonpartisan Senate Ways and Means Committee projects a $2.7 billion shortfall in the coming biennium. That includes about $1.4 billion in "backfill" spending to support Near General Fund accounts, several of which were launched with the promise that they would be self-sustaining from earmarked taxes - often "sin taxes," usually the cigarette tax. Remember Initiative 773. How'd that work out?
In recent legislative sessions as well as in current policy forums, a number of folks urge us to emulate the Massachusetts health care reform. As far as fund paying for it goes, it looks like Massachusetts has decided to follow us. Bad idea.
Richard Florida recently linked to a good Wall Street Journal piece by Zachary Karabell. Karabell's opinion piece does a neat job of explaining why the "macro data and big picture statistics" we use to get a handle on the economy fail to help us understand how the various econmies - his point: there is no "the economy" - work.
Here's Florida's useful summary and conclusion:
the economy is a composite of many different industries and sectors that perform at varied levels and even more importantly very different regions.
...Much of the data we need simply do not exist, especially when trying to make meaningful comparisons on a global scale - a pressing need for research and policy.
And Karabell's point:
The world is composed of hundreds of economies that interact with one another in unpredictable and unexpected ways. We cling to the notion of one economy because it creates an illusion of shared experiences. As comforting as that illusion is, it will not restore a simplicity that no longer exists, and clinging to it will not lead to viable solutions for pressing problems.
When it comes to competitiveness and the business climate, many of the same points are real. That's why magazine pieces claiming to rank states as "best for business" obscure more than they illuminate. I tried to address the issue in this column a few years ago.
The state business climate increasingly can be divided into microclimates, with some conditions better suiting one industry than another.
That doesn't mean there aren't uniform policies that can "lift all boats," to borrow John F. Kennedy's observation about the rising tide of a strong economy. But it is to suggest that policymakers can be easily misled when their heads are turned by the latest "best states" rating or the stellar performance of the latest "hot" industry.
This editorial in the Bellingham Herald gets the fiscal situation right. Aimed at local officials, the editorial provides good advice for all candidates for public office this year.
They must make plans for how to deal with smaller budgets before the realities of the slower economy cause significant problems in the delivery of critical public services.
At all levels of government, that means reducing spending, freezing hiring and delaying any project not essential to the basic functions of government.
And this.
The biggest possible mistake elected representatives can make in the face of current economic woe is to look to taxpayers to somehow make up the difference. New or increased taxes are a drag on the economy.
Finally, the bottom line.
It is now incumbent on our governments to spend more wisely, and frugally, than they have the past few years and to find a way to lead that doesn?t make tough economic times even tougher.
Responsible management in tough economic times separates good government leaders from bad.
Credit to Chris Mulick of the Tri-Cities Herald for bringing to light the effects Initiatives 985 and 1029 could have on the state's $2.7 billion budget hole. Both initiatives apparently gathered the required number of signatures for the fall ballot. If both should pass, the budget problems worsen, with the deficit expected to exceed $3 billion. Here's how Mulick reports it.
Preliminary estimates from the Department of Revenue indicate that professional initiative promoter Tim Eyman?s traffic congestion measure ? Initiative 985 ?would cost the state about $290 million during the next two-year budget cycle and the rest of the current one.
And the campaign for Initiative 1029, a home-care worker training measure backed by the powerful Service Employees International Union, believes its measure would cost at least $23 million during that time. That number?s based on a nonpartisan analysis of similar measures before the Legislature this year.
Tim Eyman was quick out of the blocks this morning with an email arguing that I-985 would be good for the state's economy.
Nothing slows down our economy more than traffic congestion. Nothing would boost our economy more than reducing traffic congestion. State Auditor Brian Sonntag's performance audit report on transportation confirms that implementing his recommendations will result in a $3 billion boost to our state's economy.
I-985 will boost our state's economy both by the implementation of its policies and by illustrating the public's support for making reducing traffic congestion the top transportation priority.
Stopping short of claiming that their initiative will be a boon to the economy, SEIU argues that, well, it's about more than the money. From Mulick's story:
Worries about its costs don?t stand up to its benefits, campaign manager Jeff Parsons said.
?How can we not afford to take care of our seniors? he asked. ?They need to have the best care we as citizens of the state of Washington can afford to give them.
It's early days yet. And more analyses of the initiatives will be available before the election. It is safe to say, however, that it is about the money. (Cross-posted at Olympia Business Watch)
Aerospace Competitiveness Slipping ... and Not Just Aerospace
Posted by Richard Davis on 7/2/2008 2:02:00 PM
Last week, the Aerospace Futures Alliance hosted a briefing on the, well, future of aerospace in our state. About sixty folks attended - industry representatives, economic development leaders, consultants - but, as I say in today's column in the Herald of Everett, the critical attendees were the dozen or so members of the legislature's aerospace task force. (Other coverage of the day here and heree.)
The briefing was informative and sobering. For me the stark news, coming in a presentation by Deloitte's Tom Captain, was this (from the column):
Since the 2003 success, Washington has been out of the running in five site selection contests. In 2006, South Carolina landed Global Aeronautica, a 787 supplier. This year Bombardier opened a major plant in Mexico that will eventually employ 1,000, Spirit Aerospace unveiled a new composite plant in North Carolina and Rolls Royce agreed to site a new jet engine plant in Virginia. And, although we're tempted to move it from the loss column, the Air Force tanker deal remains up for grabs.
As technology replaces labor, airplane manufacturing becomes increasingly mobile. And the costs of production -- including compensation, living costs, transportation, purchased parts and supplier reliability -- matter more.
We've lost our competitive edge and the world is after the business. Too quickly, our leaders grow complacent - a dangerous indulgence in a competitive world.
Linda Lanham, head of the AFA, put together an extroardinary program, underscoring the need for Washington's political leadership again to make competitiveness a priority. Lanham has placed Captain's presentation and an excellent overview of Boeing's prospects by Boeing VP Mike Bair on the AFA website.
