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September 2008
Tuesday, September 30, 2008
States Respond to Financial Turbulence
Posted by Richard Davis on 9/30/2008 1:24:00 PM
Stateline.org provides a nice roundup of stories on how state governments are responding to the financial mess. (Irrelevant query: What's the difference between a roundup and a rundown?) This puts it in context. ?The feeling in the states is that this is going to be a tough fiscal 2009, and 2010 is looking difficult, said Scott Pattison, executive director of the National Association of State Budget Officers. The tidal wave of bad news comes on the heels of an already brutal budget year that forced states to dip into rainy day funds, implement hiring freezes and put off projects to collectively plug deficits of more than $40 billion in their fiscal 2009 budgets ? triple the $13 billion shortfall they weathered the previous year.
The helpful overview may also be a preview of our next legislative session. Some bleak Medicaid news adds to spending pressure. After two years of flat Medicaid enrollment ? the same two years which also saw the smallest spending increases for the federal-state health insurance program for the poor ? the failing economy has led to a dramatic growth both in enrollment and spending, according to a new report.
And this from our state. Doug Porter, Washington state?s Medicaid director, said he has been given a goal of reducing expenses by 15 percent over the next two years. He said he will first cut new services provided by the state, such as interpreters for clients. After that, he would consider cutting payments to doctors, like the 48 percent hike to pediatricians the state enacted last year after years of increasing payments only by 1 or 2 percent. The last resort would be tightening eligibility for Medicaid, he said. ?We?re in survival mode here, trying to protect the core part of our program rather than improving our standards, he said.
And here's my column on the budget shortfall.
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Tuesday, September 30, 2008
Putting the Financial Crisis in Political Context
Posted by Richard Davis on 9/30/2008 8:11:00 AM
Michael Barone places the "financial ructions" of the day in historical and political context in a brilliant and brief column published yesterday, before the debacle on the House floor. You can sum up much of 20th century history by saying that in the 1930s Americans decided that markets didn't work and government did, and that in the 1970s Americans decided that government didn't work and markets did. The protracted and painful experiences of those decades changed basic public attitudes on the balance between government and markets, between regulation and enterprise, between government aid programs and self-reliance. The breadlines and depression of the 1930s moved Americans in one direction; the gas lines and stagflation of the 1970s moved them in the other. Which raises the question of whether the financial ructions of 2007-08 (09?) will move them back again.
He goes on to examine the passage of time has blunted collective memory, setting the stage for a pendular swing back to the 30s. Here's what's at stake. Reviewing the long course of history, I think it's obvious that market capitalism, together with the rule of law, hard currency and regulations that ensure transparency and accountability, has produced bounteous growth and the resources to address problems that require government action, like defending the nation and protecting the environment.
Read the whole thing. (Crossposted at Olympia Business Watch)
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Monday, September 29, 2008
State Unions Split on Contract - Does it Matter?
Posted by Richard Davis on 9/29/2008 4:46:00 PM
Members of the Washington Federation of State Employees voted to approve their new contract with the state. The Olympian's Adam Wilson notes: The contract covers 33,000 workers in state government, and set the tone for other union deals: 2 percent raises and an extra day off in each of the two fiscal years it covers.
The News Tribune's Joe Turner probably has it right. I wonder if the prospect of a $3.2 billion budget deficit for 2009-11 had any bearing on the rapid ratification of the contract. Workers may figure this is no time to dicker.
The Teamsters apparently are in a dickering mood.
Adam Wilson reports that at least one key legislator is willing to consider voting no on the deal. Rep. Hans Dunshee, the Democrat who is likely to take over as budget chairman, described the contracts exactly like this: "I think we can?t eliminate any option at this point. Those are well negotiated and such, but we don?t even know what the situation is in February. So at this point I?d say any option should be talked about."
Washington CEO thinks the tide is about to turn in Olympia and Thurston County. What do you think?
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Monday, September 29, 2008
WashACE Competitiveness Redbook Released
Posted by Richard Davis on 9/29/2008 4:33:00 PM
Last week, we released the 2009 WashACE Competitiveness Redbook, a comprehensive guide to key indicators of the state's business climate. This year's edition includes 53 data tables, providing national and statewide comparisons on a diverse set of factors, including higher education enrollment, energy costs, state and local government employment, union membership and ... well, too many to list here. Single copies of the book are available from WashACE founding member the Association of Washington Business. Carl Gipson at the Washington Policy Center has already begun to pore through the data.
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Monday, September 29, 2008
Budget Problems Spread
Posted by Richard Davis on 9/29/2008 9:28:00 AM
This morning's Seattle Times calls on gubernatorial candidates to be clear on how they're going to resolve the $3.2 billion budget problem without raising taxes. They agree with a no-new-taxes pledge. That is the only rational position for a state that cannot abide higher taxes at a time of such economic fragility.
The Times also carried a great column by Jon Talton on the week that changed Seattle's economy. Make that the state's economy. Talton effectively makes the case for the importance of healthy headquarters companies. And warns that the worse may not be over. Whatever one calls this economic distress, it is putting companies under stress they haven't seen in years ? even decades ? and shows no sign of letup.
That's why WashACE argues that lawmakers must evaluate every decision that make next year by asking: will this enhance or damage the economic competitiveness of our state's private employers? Here's an example of how states dig holes for themselves. (h/t stateline.org) Gov. Rod Blagojevich's administration doesn't know who it's signed up for an enlarged health insurance program, how much money in premiums it's collected or even where that money is, according to a court ruling Friday that blocked the program's expansion. Illinois' First District Appellate Court in Chicago upheld a lower court's decision to deny Blagojevich permission to broaden FamilyCare after he was rebuffed by the General Assembly and the secretary of state.
Expensive, open ended entitlements are always the wrong way to go.
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Sunday, September 28, 2008
Welcome!
Posted by Richard Davis on 9/28/2008 6:44:00 PM
Thank you for visiting the Washington Alliance for a Competitive Economy (WashACE) website. Perhaps you were drawn here by this radio ad. Or this one. Or maybe you saw this or this in your local newspaper. Regardless of how you found us, we're happy to have this opportunity to introduce ourselves.
WashACE was founded in 2000 as a partnership among the Association of Washington Business, Washington Research Council and Washington Roundtable to focus attention on issues relating to our state's economic competitiveness. In 2008, the Alliance was expanded to include a number of like-minded business associations and chambers of commerce. Here's a nice WashACE background article by Mike Flynn, former publisher of the Puget Sound Business Journal. Over the years, WashACE has published a number of in-depth Competitiveness Briefs and Special Reports, examining issues from unemployment insurance to infrastructure, health care to education. A major issue for us this year is the looming $3 billion budget deficit lawmakers will be facing in January and its implications for families and employers. Please take your time here. Review the blog posts below. Check out the 2008 research (link at right) and the archives. The candidate questionnaires. And sign up to be on our email list (form at top right). And don't hesitate to email us with your suggestions, questions, and comments. Thanks for stopping by.
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Wednesday, September 24, 2008
Light Blogging Ahead
Posted by Richard Davis on 9/24/2008 10:21:00 AM
I'm heading north to the AWB Policy Summit and will have limited opportunities for blogging for the balance of the week. Watch TVW for the candidate debates Thursday. Should be a lively time.
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Wednesday, September 24, 2008
Check out the Candidate Questionnaire Link
Posted by Richard Davis on 9/24/2008 10:19:00 AM
If you've not visited our candidate questionnaire page, this would be a good time. We've recently added dozens of new completed questionnaires. Good information.
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Wednesday, September 24, 2008
More Analysis of the State Budget Challenges
Posted by Richard Davis on 9/24/2008 10:16:00 AM
The Senate Ways and Means Committee updated its Six Year General Fund Outlook. While it differs slightly from the WashACE report released last week, the differences are minor and the bottom line is unaffected. A shortfall of $3.2 billion is projected for the 2009-2011 biennium. Draining the entire $728 million rainy day fund would still leave a gap of $2.5 billion. If the budget office succeeds in making the $200 million savings the governor ordered on top of the $90 million savings expected from the hiring and travel freeze, there's still plenty of work to do to close the gap. The Governor told the Columbian the rainy day fund may need to be tapped to manage the shortfall (h/t Jason Mercier). Elsewhere in the papers, Sen. Joe Zarelli has an op-ed in the morning Seattle Times, giving his perspective on how the state's fiscal house can be put back in order. And in the Herald of Everett, I write that the state has no budget crisis, it has a problem to manage. (My apologies for a transposition error in the "slice" number, which should be $529 million. Just a typo, it doesn't affect any of the analysis.) Rushing to The Last Resort, the Budget and Policy Center calls for a sales tax increase.
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Wednesday, September 24, 2008
New WashACE Competitiveness Brief on Unemployment Insurance
Posted by Richard Davis on 9/24/2008 9:44:00 AM
Yesterday, we released Make Unemployment Insurance Work, a Competitiveness Brief prepared by the Washington Research Council examining one of the critical issues before the 2009 Legislature. The bottom line: Washington?s unemployment insurance system remains one of the nation?s most generous.
The average benefit is fifth highest among the 50 states; the minimum benefit is second highest; the maximum benefit, sixth highest.
Among the factors that must be addressed next session: First, steps must be taken to bring the state UI system back into compliance with federal requirements. Members of the business community are working in a broad coalition to develop solutions, with technical assistance from the Employment Security Department. Second, in accordance with the intent of the 2003 legislation, the Legislature should clarify that the statutory enumeration of 11 good causes for voluntarily quitting is exhaustive. Third, while the UI tax rate of the average employer has declined significantly over the past several years, the state?s rates have remained among the nation?s highest. As a result, the state has built up an unnecessarily large balance in the UI trust fund. The Legislature should adjust the tax rate system to reduce the inflow of funds at times when the trust fund balance is high.
It's a good overview of our system, recent reforms, and challenges ahead. I encourage you to read it all and share with your colleagues.
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Monday, September 22, 2008
UI Benefits for Boeing Strikers: Unlikely, Irresponsible
Posted by Kris Tefft on 9/22/2008 9:50:00 AM
Late last week it was reported that the machinist's union had advised its members on strike with Boeing to apply for state unemployment insurance benefits. This is an unlikely strategy, as today's Everett Herald points out, but it's also irresponsible. State law disqualifies striking workers from receiving UI benefits. And there's a sound reason why -- not only are the workers not technically "unemployed," but making employers pay higher UI taxes to fund benefits for their workers who are on strike makes the employer, in part, subsidize the strike. That upsets the balance that labor law strikes between negotiating parties. In the jargon of traditional labor law, a strike is an "economic weapon" the union uses against an employer to force them to the table. Resort to a strike is meant to inflict pain -- but on both sides, to incentivize bargaining, under conditions federal law regulates. Subsidizing the strike through UI benefits (and taxes) undercuts the incentive to bargain.
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Friday, September 19, 2008
WashACE Takes a Closer Look at the Budget Crisis
Posted by Richard Davis on 9/19/2008 5:40:00 PM
In this just-released WashACE Competitiveness Brief , prepared for us by the Washington Research Council, we look at yesterday's revenue forecast and examine the cause of a likely $3 billion (plus change) budget deficit. The bottom line: The September forecast cut estimates of state revenues by $529 million, sending projections of the looming state budget shortfall to $3.2 billion. Although worsening economic conditions have deepened lawmakers' budget problems, unsustainable state spending dug the budget
hole.
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Friday, September 19, 2008
Everybody's Talking About the Budget Deficit
Posted by Richard Davis on 9/19/2008 4:13:00 PM
Yesterday's revenue forecast firmly placed the impending budget shortfall on the front pages of newspapers . Andrew Garber has Gov. Gregoire acknowledging the deficit in today's Seattle Times. The governor and her budget office still decline to put a number on the shortfall, but few others are so reluctant. The News Tribune's Joe Turner brackets it between $2.5 billion and $3.2 billion, saying the $728 million rainy day fund is the difference. Use it, and you're at $2.5 B; save it, and the hole to be filled is $3.2 B. Here's how he puts it. (The size of the deficit is in dispute because Republican gubernatorial candidate Dino Rossi and state GOP Chairman Luke Esser don't want to count the $728 million in the rainy day fund. That way, it appears Gregoire and Democrats are spending a lot more, and not saving anything.)
I think that misses the point. The size of the deficit doesn't change because the rainy day fund is used. It's just one way of bridging the gap. And no one - no one - seriously argues that you can responsible spend every dime in the state treasury, leaving nothing in reserve, even in normal economic times. And these are far from normal times. We still don't know definitively how deep the hole will be. The modeling for yesterday's forecast was done several days previous and didn't fully reflect the current turbulence. More lousy news could fuel another reduction in November. The upside bet has few takers. Rich Roesler, opting for an estimate of a $3 billion shortfall, puts it in context. That's about 10 percent of the state's discretionary spending.
The PI story points out business concerns, quoting Washington Roundtable president and WashACE supporter Steve Mullin. "With fiscal challenges like this, significant tax increases are clearly going to be on the table -- historically, they have been with problems of this size," he said. "Because our employers have opportunities to relocate to other places. Now is a very bad time to increase the cost burden."
Right.
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Thursday, September 18, 2008
Revenues Down $529.3 Million
Posted by Richard Davis on 9/18/2008 10:12:00 AM
The September revenue forecast today reduced projections for the combined 2007-2009 and 2009-2011 biennia by a net of $529.3 million . That's more than I expected. For the current biennium, the forecast knocks out a net of $273.1 million. For the next budget cycle, the forecast takes it down $256.2 million. Coming as Wall Street, Main Street and myriad paved and unpaved roads reel from a tumultuous ten days in the global financial markets, today's forecast clearly was not expected to produce good news. And this is not good news. The budget hole now exceeds $3 billion, assuming no substantial changes in the forecast spending trajectory. (Leaving for a meeting now, will post links later.) Update: Links added
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Wednesday, September 17, 2008
Looks Like the Rainy Day Fund is On Tap
Posted by Richard Davis on 9/17/2008 7:38:00 AM
More bad economic news this morning. Washington's unemployment rate climbed to 6.0 percent last month, a four year high. Drew DeSilver's story in the Seattle Times goes on: Another sign of weakness came in the nonfarm payroll report, issued along with the jobless figures. The state added just 1,300 nonfarm payroll jobs last month. August marked the fifth month out of the past six in which the payroll-jobs figure barely budged.
He quotes the state's labor economist as saying the slow growth is likely to worsen in coming months. Already, the two legislators largely responsible for writing the next state budget anticipate dipping into the state rainy day fund, writes Joe Turner in The News Tribune. It?s pretty clear that things are not going to get better soon, said state Sen. Margarita Prentice, D-Renton, chairwoman of the budget-writing Senate Ways and Means Committee. ?It looks as if we will (tap the rainy day fund). We can?t commit to a figure, but I think it?s pretty clear for now that everything has to be on the table.
And this: ?I don?t think (voters) would want us to slash $600 million from our education and social services, right? said Rep. Hans Dunshee, D-Snohomish, vice chairman of the House Appropriations Committee.
As this six-year budget outlook shows, there's about $728 million available in the fund, which can be tapped by a simple majority vote if job growth falls below 1 percent. That possibility now appears likely. Using all of the reserves to mitigate the $2.7 billion shortfall still leaves a $2 billion gap. And no one expects them to take reserves to zero. But the fact that lawmakers are already looking to the rainy day fund demonstrates the growing seriousness of our state's budget challenges.
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Tuesday, September 16, 2008
More on Job Security and Global Competition
Posted by Richard Davis on 9/16/2008 11:07:00 AM
Bad economic news plumbs new depths with the steep drop in the Dow, worries about Washington Mutual, and assorted concerns about financial markets and recession. And Hewlett Packard announces the layoff of 24,600 workers, half of them in the US. The Wall Street Journal story includes this bit of explanation. With the EDS acquisition, H-P, the world's second largest tech-services provider, has taken aim at International Business Machines Corp., which is No. 1. But Wall Street analysts have expressed concern that too many EDS employees are based in the U.S. at a time when competitors are cutting costs by sending jobs offshore. H-P's layoff announcement shows the company is addressing those concerns, said Shebly Seyrafi, an analyst at Calyon Securities. "They're basically replacing more expensive U.S. employees with overseas employees" who will work for less, he said.
Bemoaning brutal competition doesn't make it go away. While Seyrafi doesn't mention per worker productivity, winning that competition will be the key to retaining jobs here.
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Monday, September 15, 2008
Bellevue Teachers Strike Ends
Posted by Richard Davis on 9/15/2008 12:17:00 PM
Good news Sunday night. Members of the Bellevue teachers' union voted to end their illegal strike and return to the classroom, accepting a contract agreement that boosted pay and curriculum flexibility. While it's good that agreement was reached relatively quickly, the successful strike again demonstrates the toothless nature of the laws prohibiting public employee strikes. Two recent articles provide an intriguing frame for the dispute. Sunday's Seattle Times looks closely at the "push for perfection" that led to the now-controversial - or at least unpopular with teachers - common curriculum promoted by Mike Riley, Bellevue's acclaimed former superintendent of schools. It worked. A $1.9 million grant from the Bill & Melinda Gates Foundation in 2006 allowed the district to pay more teachers to write curriculum for six core subjects, post it to the Web and add supplemental materials. Teachers' daily calendars and lesson goals were posted. Some teachers created videos to reteach difficult concepts. Bellevue parent Susan Edmond remembers her daughter struggling with math three years ago as a freshman. She hadn't understood a teacher's explanation, but she went online and watched another teacher's video of the same lesson ? over and over until the light went on. "That's the beauty. Everybody is doing the same thing. It lets parents partner with teachers to make the kids more successful," she said.
But many teachers balked. [A district teacher] remembers a meeting at which teachers asked Riley when they could use their professional judgment to deviate from the set lesson plans. "Riley told us that the judgment had already been made and we were to teach the lesson as written," [he] said. Rob Prufer, a social-studies teacher at Newport High School, said Riley was an inspirational leader and a personal mentor to him, but he believes the superintendent began to view teachers as an obstacle to improving education.
Nonetheless, the district consistently ranks among the state's highest-performing public school districts. And as Marysville school board member Michael Kundu reminds us in this Everett Herald op-ed, we still have a long way to go. During the 2007-08 school year, only 39.7 percent of Washington's 10th-grade students met state standards in science. Fewer than half (49.3 percent) met math standards. While science percentages reflected a small (slow) increase over 2006-07 (science 36.4 percent, math 50.4 percent), and 2005-06 (science 35 percent, math 51 percent), math scores reflect a gradual decline.
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Monday, September 15, 2008
State Budget Outline Becomes More Clear
Posted by Richard Davis on 9/15/2008 11:49:00 AM
With tentative agreement between the state and its largest union, another piece of the budget puzzle falls into place. The News Tribune notes that the Washington Federation of State Employees secured a more generous agreement than other groups had settled for. Joe Turner's blog provides the WFSE's account of the deal. The WFSE/AFSCME 2009-2011 General Government agreement includes pay raises above what other unions have settled for so far, plus more time off, special pay adjustments for thousands in job classes facing disparities, an agreement to deal with other classes that may be facing disparities, plus innovative agreements on anti-bullying and workload relief. In these tough economic times where some say state employees should get no pay raises, the WFSE/AFSCME team negotiated across-the-board raises of 2 percent in 2009 and 2 percent in 2010. This tops the 1.6 percent and 1.7 percent settlements agreed to by some other unions. The contract also includes an agreement to create a new longevity step, Step M, but deferred it until state revenues recover. That new step would take effect July 1, 2012. The contract includes two additional days off - one personal leave day in each year of the agreement.
The AP reports on the budget impact. The Office of Financial Management pegged the cost at about $85 million. The deal is subject to ratification by union members in voting through Sept. 29 and the Legislature during the session that begins in January...
"State employees are looking at cost increases like everyone else, but we also had our eye on the bottom line for the state," budget director Victor Moore said. "With recent revenue collections (down) and future collections being tight, we had to be careful with what we agreed to."
Adam Wilson's reporting for the Olympian provides additional detail. Earlier, Tracy Warner, Wenatchee World editorial page editor, wrote of the tough decisions ahead for lawmakers. As the economic downturn increases the deficit, will the state be forced to increase taxes to keep the budget devastation to a minimum? And, will that tax increase magnify the state?s economic suffering?
This unfortunate decision, if it comes to be, will have fortunate political timing. It will come immediately following a general election. The most difficult decisions will be made by officials not soon facing the voters.
True. But that's all the more reason to press them now for how they'll handle the shortfall. MORE Jason Mercier alerts me to page 116 of the WFSE contract, which the union says contains more procedural protections and more rights for the union and employees as we battle against privatization.
So far, they seem to be doing pretty well in that battle, one front of which Mercier writes about here.
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Thursday, September 11, 2008
Milken Institute Ranks Tacoma, Olympia in Top 10 "Best Performing Cities"
Posted by Richard Davis on 9/11/2008 4:43:00 PM
Congratulations to our friends in Tacoma and Olympia. The two cities came in No. 8 and No. 9, respectively, on the Milken Institute 2008 Best Performing Cities Index. The Seattle-Bellevue-Everett metro area ranked No. 17. All three Washington metros improved on their 2007 rankings. We'll take a closer look at the methods later. Right now, it's enough to say, well done.
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Thursday, September 11, 2008
State Revenue Collections Flat in August
Posted by Richard Davis on 9/11/2008 3:35:00 PM
And I suppose that's good news. Here's the latest revenue collection report. The first paragraph sums it up. General Fund-State (GFS) tax payments revived somewhat in the August 11, 2008 - September 10, 2008 collection period. Receipts for the month were $6.8 million (0.7 percent) higher than expected, due mainly to a $19.9 million positive variance in Revenue Act receipts. All other revenue categories except for estate taxes and liquor taxes came in below their forecasted values.
Next week brings the September revenue forecast. While this is an improvement over the last few months, it's unlikely to suggest the kind of rebound that would result in an upward revision. And some dark clouds still haunt the horizon. Tax payments by firms in the retail trade sector were 4.3 percent below the year-ago
level. Tax payments from the retail trade sector decreased 6.0 percent last month and
have declined year-over-year in seven of the last eight months. Five of the twelve 3-digit NAICS retail sectors reported declines this month. The sectors
with the largest declines were motor vehicle dealers (-20.0 percent), furniture stores (-7.7
percent), building materials/garden supply retailers (-6.9 percent) and miscellaneous (-
3.7 percent). The auto sector, the largest retail trade category, has reported a year-over-
year decline in tax payments for eight consecutive months.
Yesterday, Gov. Gregoire announced a pilot program, putting some state departments on a four-day work week, which she expects to save on energy and janitorial costs. The state budget office is moving ahead with a Priorities of Government budget process. (Disclosure: I'm a member of the POG guidance team.) Elsewhere, California still does not have a budget and Florida lawmakers have drawn $672 million from budget reserves, after trimming $6 billion from the state's $66 billion budget.
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Wednesday, September 10, 2008
Thoughts on the Boeing Strike
Posted by Richard Davis on 9/10/2008 5:36:00 PM
In the Everett Herald this morning, I considered the IAM strike and its implications for Boeing and our economic competitiveness. Elsewhere in the Herald, the AP looks at the "pluses and minuses" of the strike. I don't see many pluses. What do you think?
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Tuesday, September 09, 2008
Revenues Down - Budget Hole Deepens
Posted by Richard Davis on 9/9/2008 2:52:00 PM
Brad Shannon reports in his blog for the Olympian what most of us have expected, state revenues continue to slide. The state?s general operating funds received about $119.7 million less than expected in tax revenues during the last three months, a new state report issued Friday says. The fall in tax collections is a clear sign the next revenue forecast, due for release on Sept. 18, also will be down, according to Rep. Jim McIntire, the Seattle Democrat who chairs the Economic and Revenue Forecast Council. If true, that would reduce the state?s shrinking ?surplus from $800 million today to something less than $700 million, a far cry from the $1.5 billion it once was.
I'd expect the September revenue forecast to take the estimated $2.7 billion budget gap for 2007-2009 to about $3 billion. That's for the budget lawmakers begin writing in January for the biennium beginning July 1, 2009. A lengthy strike at Boeing would further depress revenues. The Seattle PI has this story speculating on the effect of a 3-month work stoppage on exports. By dollar value, Boeing Co. ranks among nation's top industrial exporters. Exports are one of the few bright spots in the nation's economy. But that could change if the walkout runs beyond three months and customers are spooked, eventually turning to Chicago-based Boeing's European rival, Airbus S.A.S., for future orders of commercial passenger and cargo jets.
Then, after setting us up, they flash the silver lining. Few expect the strike to last that long. Besides, analyst Cai von Rumohr at Cowen and Co. noted on Monday that Airbus has a four- to seven-year backlog and thus is in no position to take any of Boeing's orders in the near term.
A swift resolution would be best for exports and for the state economy. Well into the new fiscal year, Califonia lawmakers remain unable to agree on a budget. And, using ominous language, New York Gov. David Paterson has directed his state agency heads to prepare a zero-growth budget. We cannot continue making excuses for why the State is unwilling to limit its expenses at a time when hard-working taxpayers are forced to do the same thing every day," wrote Governor Paterson. "Change is never easy. But it is unavoidable if we want to stem the tide of unsustainable spending growth, job losses, and declining population that has plagued New York for decades."
Fortunately, Washington's in much better economic shape than New York. But the struggles to bridge budget gaps will nonetheless require some tough decisions. Sooner rather than later.
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Tuesday, September 09, 2008
State Supreme Court Hears Arguments in Brown v. Owen
Posted by Richard Davis on 9/9/2008 12:15:00 PM
The State Supreme Court just concluded hearing oral arguments in Brown v. Owen. I watched on TVW. The case challenged the constitutionality of the Initiative 601 supermajority requirement for certain tax increases. As I've written here, I think the majority of the court believes the requirement fails to pass constitutional muster. But critics still seem to struggle to bring the right set of facts before the Court. And it may be that Sen. Brown's challenge of Lt. Governor Owen's ruling that a tax hike requires a supermajority may stumble on procedural grounds. Over at the Washington Policy Center blog, Jason Mercier thinks the Court will decline the invitation to get involved. Regardless, lawmakers can amend the law to provide for a simple majority vote at any time. Mercier urges a constitutional spending cap , something much more difficult to accomplish in Washington than in Oregon or California, which provide for constitutional amendment by initiative. Here, the legislature would have to put the amendment before the voters - and do it by passing the amendment by a supermajority. Not likely given the state's looming budget shortfall. UPDATE Jonathon Bechtle has more at the Liberty Live blog, with a useful link to court documents. ALSO AWB's Kris Tefft, whose amicus brief for AWB sparked Justice Stephens first question, has more here.
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Thursday, September 04, 2008
Bellevue Teachers' Strike - Some Context
Posted by Richard Davis on 9/4/2008 4:09:00 PM
The brief note on the Bellevue School District this afternoon website pretty much says it all. Public employee strikes are illegal in Washington, but the union has nonetheless called the strike to apply pressure on the District in collective bargaining. Negotiations continue with the assistance of a mediator from the Public Employment Relation Commission. Information about the issues in dispute and the District's contract proposals can be found on the District website.
The Seattle Times doesn't address the legal issue, but makes good substantive points about why the strike is wrong.
First, they point out the economic reality. ... the district's offer of an 8.1 percent pay raise over three years and an additional $1 million in health-care benefits ? allowing a third of the teachers to pay nothing and others to pay between $6 and $62 a month ? shines amid recessionary gloom. Yet, the Bellevue Education Association demands 14.1 percent raises. The district must say no.
The news story in the Times points out that compensation in the Bellevue district is already among the highest in the state. There may be - and probably is - an argument worth making about improving teacher pay in high-cost districts, but it ought to be explored in a more comprehensive conversation that includes performance pay, increased compensation for math and science teachers, and the like. The editorial goes on to dismiss the union's demand for curriculum change. Union cries that the curriculum imposes a one-size-fits-all standard are wrong. Parents ought to know when their children are going to learn fractions. This provides a counterbalance to education reform's emphasis on assessment. Classroom dynamics are constantly changing. Some students come to class half-asleep, others alert and ready to learn. Bellevue has said time and again that teachers can adapt the curriculum to fit individual needs... Bellevue has spent the past five years creating the curriculum with a $2 million grant from the Bill & Melinda Gates Foundation ? an organization known for vetting academic initiatives. Meanwhile, the district continues to be recognized nationally for its quality schools and its emphasis on getting all students into high-level classes.
Education Week provides valuable context in its examination of how teachers are faring in states hit hard by budget woes. Bellevue looks pretty good.
The episode is sadly reminiscent of the WEA's rejection of grant money to improve math and science education. In Bellevue, you have a curriculum that works. So the union demands it be changed? High-performing schools play a critical role in our state's economic competitiveness. We hope for a swift conclusion to this disruption of student education in Bellevue.
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Wednesday, September 03, 2008
Massachusetts Math: Paying Too Much for Health Care Plan
Posted by Richard Davis on 9/3/2008 4:58:00 PM
The blown cost estimates for the still-struggling Massachusetts health care reform are common knowledge. But last week the New York Times ran an editorial touting the plan's success in reducing the number of uninsured in the state. The State Policy Blog takes a look behind the numbers, though, and finds the touted success comes with a hefty price tag. ... even the figures reported in the editorial lead to the conclusion that this is a massively expensive experiment with miniscule results. The editorial reports that hospitals' uncompensated care dropped from $166 million in the first quarter of 2007 down to $98 million in the first quarter of 2008. That's $68 million, or $272 million a year. The state budget for the program is going to be $869 million this fiscal year. $272 million in savings for $869 million of costs: that's $3.19 of taxpayers' dollars spent for every dollar of uncompensated care avoided.
Just one of the reasons Massachusetts is among the states facing large budget deficits this year. And if a proposed income tax repeal is approved by the voters in November, Bay State politics could get exciting quickly. In 2002, a similar measure garnered 45 percent of the vote. Astonishing. Add Maryland and Illinois to the roll call of states in dire fiscal straits. We're not far behind, with a $2.7 billion shortfall projected last June. With a new revenue forecast due in a few weeks and revenue collections running below projections, the state deficit seems poised to deepen. And while the Seattle Times reports that economists say a Boeing strike would have "minimal impact" on the economy, I'm sure no one wants to put the premise to a test. Ask your candidates how they're going to address the shortfall without adding to business costs, taking money from consumers' pockets, and further dampening economic growth.
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Tuesday, September 02, 2008
Salary Negotiations Continue for State Employees ... and Bellevue Teachers
Posted by Richard Davis on 9/2/2008 3:08:00 PM
As state budgets continue to be roiled by the double whammy of excessive spending during good times and the feels-like-a-recession revenue slowdown, public employees here continue to bargain for pay and benefits. Adam Wilson reports in the Olympian that the state's largest public employee union wants a better deal than the ones already negotiated with other unions. The 1.6-, 1.7-percent raises agreed to by the Washington Public Employees Association give you a pretty good idea of where Gov. Chris Gregoire?s negotiators are coming from. Past rounds of bargaining indicate everybody will get the same deal. But the Teamsters have managed to eek out slightly bigger raises in the past, and the federation, which represents 30,000 general government workers and another 10,000 college employees, has never settled for as little as the WPEA got (even when Gov. Gary Locke was facing a deficit). Remember, many public employees also receive so-called "step increases" that increase their pay over time. An earlier Wilson story on pensions shows how that works. The [pension funding] council has assumed salaries would increase by 4.5 percent a year, counting both step increases based on experience and cost-of-living adjustments. But Smith recommended cutting those expectations to 4.25 percent, a move that would reduce costs to public employers by $57 million in the next budget.
Jason Mercier at the Washington Policy Center compares the Bellevue teachers' strike to how the governor handled agency directors' pay hikes. As bad news about the state housing market increases the probability of another downward revision in the state revenue forecast, any pay hike at all may seem generous. Certainly, there are lots of folks running small businesses and working for beleaguered industries that will go without a raise this year and be thankful they still have work. A possible Boeing strike may also negatively affect revenue collections. Washington has never endured the calamitous budget gridlock that routinely plagues California (see previous post). But a potential $3 billion shortfall suggests that we should prepare now for hard times agead. The Washington Policy Center recommends a constitutional limit to rein in expenditures and make it more difficult to raise taxes. In a few weeks, the September forecast will be released. The preliminary economic forecast doesn't give us any reason for sustained optimism. Washington's new chief revenue forecaster joins state government at a particularly challenging time. But then, challenging times are when we most need good forecasts.
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Tuesday, September 02, 2008
Lessons from California ... and elsewhere
Posted by Richard Davis on 9/2/2008 10:29:00 AM
California, ranked as the worst state to do business, failed to write a budget before the legislative session ended this weekend. The Sacramento Bee reports this is the first time ever that lawmakers left with the must-do budget bill unwritten. The Bee's Aurello Rojas frames the stalemate: Gov. Arnold Schwarzenegger's proposed budget, to bridge a $15.2 billion deficit, includes a temporary 1-cent sales tax increase, future spending restraints and an economic stimulus plan. But Schwarzenegger's plan has not been warmly embraced by Republicans who balk at the temporary tax increase, or by Democrats who oppose key elements of the spending restraints and stimulus plan.
Today, Rojas reports that the budget impasse has pushed some health care providers to the edge. Businesses and nonprofits that rely on Medi-Cal payments haven't been paid since July 1, when the new fiscal year began. If reimbursements don't start flowing soon - unlikely - expect some agencies to fail. And when they do, the bankrupt California Unemployment Insurance fund won't be much help. It all makes Georgia's threatened golf courses seem like trivial collateral damage, but I'm sure some readers would disagree. Hard to know how California's ranking as the worst place for business could fall. But if it could, it would.
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