Cgipson

Last week the Washington Research Council issued a short analysis entitled, "Washington's Economy Continues to Lag the Nation as a Whole." 

"For January Washington was one of the 19 states showing a one-month decline and one of the 31 states showing a three-month decline. For one month, Washington's decline was 0.1 percent, which ranked 36th among the 50 states. For three months, Washington's decline was 0.6 percent, which ranked 40th among the states.

As measured by the Philadelphia Fed indexes, California's economy, up 0.2 percent for both one month and 3 months, has better momentum than Washington's economy has."

Behind California? Not encouraging news.

On another front, it appears that Texas is among the first states to emerge from the recession, according to Comerca, Inc. 

"Texas will benefit more than other states from the national rebound in manufacturing and industrial production because of the state's diversified and sizeable manufacturing base, the report said. Manufacturing accounts for 13 percent of Texas's gross domestic product, the report said. 

The report predicted the state's low unemployment rate would continue to draw employees seeking work. Last year the state's population of about 24 million people extended by 2 percent, more than twice the national rate, Comerica said in its report."

Today the Federal Communications Commission released its long awaited National Broadband Plan and will deliver it to the Congress tomorrow. The plan is over 350 pages and encompasses dozens of areas -- policy, economy, social, education, etc.

Budgets are complicated and long piece of legislation, which is why hardly anyone actually reads them. But the devil is in the details, as they say, and two things in particular stand out in the House's version of the Senate's proposed supplemental operating budget. These two concerns would benefit labor at the expense of businesses and taxpayers.

First up, as pointed out by AWB's Jocelyn McCabe and Kris Tefft over at OlympiaBusinessWatch.com, a slimmed-down version of the employer gag rule was inserted into the budget. The language looks innocent enough, but there is reason to be concerned. The language in SB6444 (sections 205 & 206) says,

"No employer, provider, or entity receiving state funds to provide long-tem care services or services to the developmentally disabled may use these funds to assist, promote, or deter union organization."

Seems innocuous. The problem is the language is illegal due to a recent U.S. Supreme Court case where the Court invalidated a similar California statute that prohibited private employers that accepted state program funds from doing largely the same thing. Even if the language was not invalid due to the Court case, it would set a dangerous precedent from prohibiting employers from exercising their First Amendment rights simply because they accepted state program funds.

Secondly, the Evergreen State College's Labor Center is being relocated from the Evergreen State College to South Seattle Community College and at least $164,000 of state funds are being set aside to pay for its operations. The problem? An internal audit found the Labor Center guilty of 10 violations including violations of state ethic laws and the audit questioned whether or not the mission of the Labor Center is illegal. WPC's Jason Mercier researched this subject a year ago and reported the audit stated that:

A review of the Center’s mission statement and by-laws found that the revised documents currently used by the Center have not been reviewed and approved by Senior Management, the College’s legal counsel, or the Board of Trustees.  This created a lack of clarity of the activities and work allowed for the Center and boundaries for staff.  The Center’s mission creates close and strong ties with labor unions and in several instances, the members of the Center’s advisory board request and report on work to be done or which has been performed for labor unions. !
; A lack of a clear and approved mission and ambiguity related!
to the College’s relationship with these organizations provides the appearance of possible ethics issues.  Other possible ethics violations included:

• The website provided readers with two petitions:  one asking U.S. Congress and the President to declare the birthday of Cesar Chavez a national holiday and another asking reader to stop patronizing Burger King.  RCW 42.52.180 specifically prohibits use of State resources for political purposes.

•  In one instance, the website announces collections for an outside organization during a Center sponsored activity.  An announcement for a Farm worker’s Justice includes a wish list for Bellingham Cooperative and states donations for the cooperative will be collected as part of the event.  Collection during a campus event and announcement of this item on the Center’s website is a violation of the State Ethics Law prohibiting use of resources for an outside organization (RCW 42.52.160)

• Both Center newsletters available on the College’s websites and minutes of the advisory board include numerous references to efforts to oppose federal agencies, a rally held as part of a Center managed workshop, political work of the union in several industries, and the Center’s partnerships with special interest groups, all of which provide the appearance of potential violations of RCW 42.52.180 prohibiting use of State resources for political purposes.

• A review of the minutes for the advisory board meetings found several discussions about support of special interest groups.  In the October 29, 2006, minutes, a member suggests participation with an organization called “U.S. Labor Against the War”.  The committee agreed to advise the center to join the group and directed the Center’s Assistant Director to make a membership payment to the group in possible violation of the Ethics in Public Service Act. 

It remains to be seen if these provisions will survive the special session and upcoming budget re-writes. The first problem is one of legality, so that should take care of itself. The second problem is one of ethics, so who knows if the Labor Center will clean up its act or if the funding for it will be yanked. 

If you've been following the tiff over better business climates between Idaho's Governor "Butch" Otter and our very own Governor Chris Gregoire, you'll probably have noted that Governor Gregoire noted Washington's favorable Forbes ranking (ad nauseum) and more specifically, our high ranking in regulatory costs (5th) compared to Idaho's (35th).

According to Forbes's regulatory cost index, that category is based on "Measures regulatory and tort climate, incentives, transportation and bond rating." Not a bad mix of variables, but not comprehensive and Forbes does not get into the details of how they judge each variable in relation to the others. 

One such study that d!
oes get into a more comprehensive look into regulations is the Mercatus Center with its "Freedom in the 50 States: An index of personal and economic freedom."

Where does Washington rank (with #1 being best, #50 worst)? In fiscal policy Washington ranks 37th overall. In regulatory policy we rank 45th (6th worst). Economic freedom we are at 41st, and personal freedom we rank at 35th. Overall, Washington ranks 44th.

For regulatory policy, the Mercatus Center includes labor regulation, health insurance mandates, occupational licensing, eminent domain, the tort system, land and environmental regulation, and utilities. I would argue that this is a more comprehensive look at our regulatory environment. 

Now, we've target="_blank">written many times about relying on natio!
nal rankings to assess our business climate. Basically it boils down to this: Yes, the PR is good, and no, Washington is not the worst place, nor the best place for businesses. But how can we improve? There are many studies and reports out there that provide a snapshot of where we can improve. But using one good ranking to provide cover for discussion on "is Washington a good place for business" may come back to bite you when that ranking falls because of tax increases or other poor policy decisions. 

Long has there been arguments over what constitutes a "fee" increase versus a "tax" increase. It seems each year the legislature fights over the definition, even if the minds are made up about increasing whatever it is they end up calling it.

Senate Bill 6444, the supplemental operating budget, includes $130 million in fee increases over the next ten years. Many of these will hit the business community right in the pocketbook -- and so it doesn't really matter if it is a "fee" or "tax" increase; the point is that someone has to pay.

Some highlights ($$ total over 10 years):

• Acupuncture license fee -- $1.2 million
• Adult family home license fee -- $44.2 million
• Animal massage practitioner license fee -- $230,000
• Boarding home license fee -- $9.6 million
• Dental license fee -- $8.3 million
• Farmworker housing fee -- $1 million
• Mental health counselor license fee -- $2.2 million
• Nursing license fee -- $26 million
• Nursing Assistant license fee -- $10.2 million
• Nursing Home license fee -- $11.4 million
• Optometry license fee -- $655,000
• Respiratory Therapist license fee -- $2.2 million
• Child care provider license fee -- $5.4 million

Not all fees are bad. Sometimes the fees go towards programs or expenses that incur costs from a specific activity -- one that a general tax should not pay for. But, as in the tax discussion, the increase in fees should be weighed carefully against the benefits of levying the fee because it just raises the cost of doing business.

A great editorial in today's Wall Street Journal (subscription required) on the teen unemployment rate in America and how minimum wage laws are adversely affecting our future workforce. 

The editorial states,

"A higher minimum wage has the biggest impact on those with the least experience or the fewest skills."

When the feds increased the minimum wage from $5.15 to $5.85 the overall national unemployment rate was under 5% and the teen rate was at 14.9%. 

"But as the minimum wage increased even as the overall job market began to worsen, the damage to teen job seekers became more severe. By the time the third increase to $7.25 from $6.55 took effect in July 2009, the teen jobless rate was 24.3%, and by October it peaked at 27.6% before dropping to 26.4% in January."

But this sad situation is even worse for those in the African-American community.

"[Black teens'] jobless rate climbed from 38.5% before the third wage hike to 49.8% in November 2009, before falling back to 43.8% in January. For black male teens, the rate climbed to 52.2% in December from 39.2% in July."

Those are some telling and frightening numbers. Couple those jobless numbers with the fact that fewer than half of black students finish high school and you have a recipe for disaster (disaster being that black males are much more likely to end up in jail than any other ethnicity). 

So then, why does Congress continue to implement policies that contribute to teenage unemployment? For short-term publicity gains. 

Again, the Journal opines that,

"A Congress that has spent $862 billion to create jobs thus managed with its wage increase to harm tens of thousands of entry-level job seekers. And it did so in the name of "compassion" and a "living wage." In many cases that wage has since become zero."

It's unconscionable to favor short-term gains over the longer term effects here. We are sacrificing temporary wage increases for a few so that the least-skilled can get left behind. And those are the ones who truly need a chance to break into the labor force and learn valuable lessons -- lessons that a government-imposed wage hike cannot teach.

More on the minimum wage
National unemployment rate of 9.4% pales in comparison to teen rate 24%
Colorado minimum wage drops as living costs fall
Don't shut out those looking for experience in the workplace

A majority of yesterday's headlines proclaimed that the state had seen its first "positive job growth numbers in a year." While technically true, the increase is small relative to the overral jobs picture, down 170,000+ since the turmoil began, and the unemployment rate actually continued to climb. 

To be sure, even a faint improvement month-over-month is good news when compared to the drastic decline in private sector jobs. But we are still nowhere near out of the woods, at least jobs-wise. As we've stated before, you will see productivity and output grow before j!
obs largely recover their previous levels (which is still years away).

Over at Crosscut, Stephen H. Dunphy writes that 

Another measure shows the true problem with the economy these days: the unemployment rate that counts unemployed people as well as those working part-time for economic reasons and those who have quit looking for work because they are discouraged. That number stood at 16.2 percent statewide, the same as the national average. In Oregon, that rate is 20.7 percent; in California, 21.1 percent.

He also points out that Washington will benefit from exporting to!
surging Asian economies. That will help some of our states la!
rger businesses (Microsoft, Boeing, et. al.) as they export both manufactured goods and software overseas.

But before we begin popping champagne corks, Dunphy points out, correctly I might add, that

"An estimated 359,500 people (not seasonally adjusted) in Washington were unemployed and looking for work in January, Employment Security said. More than 305,000 people received unemployment benefits in the state in January.

A final caution from Employment Security: Remember, one month is !
not a trend, so don’t get too excited about fluctuations in the numbers from month to month."

Also, Nikki Reading over at TVW a> links to an interesting Wall Street Journal article showing average unemployment rates by state with a year-over-year comparison. Interesting to see how all the states were affected.