Based on conversations yesterday with a representative from Microsoft, it sounds like the home-grown software leader is ready to challenge Google for the mantle of "government transparency crusader."
Over the past year Google has been assisting states with the creation of free searchable budget websites to help improve government transparency. Since enacting such a website is a top priority for WPC, I reached out to Microsoft to see if they'd be willing to help the state move forward with this reform.
The answer is an enthusiastic Yes!
Microsoft also expressed interest in helping to make all government records online searchable via the web as is occurring in Florida.
Hopefully state officials will act on Microsoft's willingness to help and enact these reforms as other states are doing.
Port construction management lacks cost controls and accountability.
The Port circumvents competition requirements in violation of its own policies and sometimes in violation of state law.
Port policies and Port management’s interpretations of its policies result in a lack of transparency and thwart Commission oversight of construction management activities.
Port construction management records are incomplete and disorganized.
The Port fails to enforce basic contract requirements, resulting in delays, extra costs, and an inability to defend against claims.
Port construction management is vulnerable to fraud, waste and abuse.
According to the report "auditors identified $97.2 million in unnecessary costs. The Port has the potential to avoid similar costs in the future if it institutes every audit recommendation."
Among the other conclusions of the audit:
The Port lacks sufficient policies and procedures to safeguard public assets from misuse, abuse and fraud. In cases in which controls are in place, they are not always followed.
The Port Commission has largely delegated decision making responsibilities for construction projects to Port management and employees. In some cases, vendors control projects and make decisions that should be made by the Port.
Port executive management has withheld information from and sometimes has misinformed the Commission about the terms and progress of construction projects.
Auditors found these conditions are caused by:
"The Port Commission’s adoption of Resolution 3181, delegating some of its decision-making authority to Port administration, including some oversight of construction management. The former Chief Executive Officer’s broad interpretation of the resolution effectively distanced the Commission from information and oversight authority of capital projects. The audit found no record of the Commission reassessing or questioning whether it was meeting its responsibilities to oversee construction projects.
• Port management does not segregate the duties of procurement and contractor oversight. Port employees routinely award contracts and then oversee the contractors they selected. This creates a conflict of interest because those who work with the contractors may develop working relationships that prevent them from awarding and overseeing contracts with a higher degree !
of objectivity and diligence.
• Port commissioners have largely ceded the authority to award and manage contracts to low- and mid-level project managers.
• According to an e-mail to the contracted auditors, the Port maintains it “is not subject to any specific legislative framework governing its procurement practices other than those which govern public works design and construction contracts.”
• The Port does not enforce standard construction contract provisions, leading to significant cost and schedule overruns.
These conditions leave the Port’s construction management vulnerable to fraud, waste and abuse. For example, Port management authorized a Third Runway contract that cost $32.7 million more than the Port engineer’s original estimate. The contract violated state law, and details of the arrangement were concealed from the Commission.
In addition, a consulting agreement awarded in 1998 increased without competition from $10 million to more than $120 million and is being used to augment Port staffing, unnecessarily costing taxpayers $60.5 million."
I wonder if anyone at the Port will be getting a golden parachute as a result of this audit?
Although the governor's proposal leaves a reserve balance of $1.2 billion, only $429 million of that is allocated to the protected rainy day account. This mean $774 million is available for legislators to spend in the future. If anything, those numbers should be reversed securing more money in the restricted reserves to help avoid the temptation of state officials to spend more.
Why does this matter?
Due to the large spending increases over the past few years, the Office of Financial Management is projecting a $621 million DEFICIT in the coming years. Here is the updated forecast.
This is why having a REAL spending limit is important. If state officials hadn't circumvented I-601 in 2006 by SPENDING $825 million into "savings" when adopting the $1.3 billion supplemental increase, the budget wouldn't have been able to grow to the size it is today. This reduced spending coupled with the additional reserves that would be available would have prevented the current deficit projection all together and allowed enough money to be left over for tax relief.
According to a report issued today by Pew Center on the States, Washington is one of 20 states that are funding pensions at less than 80% of the required payout amount. When it comes to funding other retirement benefits such as retiree healthcare, the report says Washington has set aside ZERO percent of the estimated $3.8 billion "bill coming due."
"Washington is one of several states that fell behind in funding its pension plans during the last several years—a recent trend that could cause trouble if it persists. It was one of 20 states at the end of 2006 with less than 80% of the funds necessary to cover its long-term pension obligations—the level most experts consider healthy. Early in the decade, the !
pension system seemed to be doing well, and the state lowered its annual contributions. Then the stock market plummeted. In recent years, Washington raised its required contribution levels significantly, but the state has postponed making most of the payments.
In fact, in the aggregate, Washington hasn’t paid more than 30% of the payments required by its own actuaries since 2002. The state offers relatively modest non-pension benefits, but it would still take a major jump in the state’s payments—from $68 million spent on current retirees in 2006 to $314 million identified by actuaries as the annual required contribution—to move toward full funding."
Pew recommends the following strategies for states facing this problem:
PLUG THE LEAKS
EVALUATE THE FISCAL IMPACT OF BENEFIT CHANGES
CONSIDER HYBRID PLANS
REQUIRE FASTER, MORE ACCURATE FINANCIAL REPORTING
IMPROVE PENSION OVERSIGHT
The report concludes:
"The strategies discussed in this section can help states reduce government pension costs and improve current pension management and future decision-making. However, these strategies will not eliminate the fundamental issue—that some states have liabilities they have not adequately funded. For the states that have fallen behind, there is no easy fix.
Achieving an improved position requires the political will and discipline necessary to begin funding their pension plans at actuarially adequate levels. Even states that are currently in a good position in terms of pension funding should heed the lessons in this report to help avoid the poor decision-making that led to the problems other states now face. When states delay action, the problem grows exponentially and the costs of a solution grow right along with it."
Updated (9:15 a.m. 12/21/07) The state is taking issue with Pew's report. Yesterday the Office of State Actuary issued this response:
"A report recently published by the Pew Charitable Trusts includes information about the funded status of state retirement systems. The results of the report have been highlighted in national publications such as Pensions & Investments Daily, Governing.com, and PR Newswire. Pew identified the funded status for Washington’s plans as 79%.
The total funded status for all of Washington’s retirement plans is currently 100% (2006 Actuarial Valuation Report Click here to access the report online and go to the Funded Status page). In prior years the total funded status was 99% (2005), 105% (2004), 107% (2003), 118% (2002) and 126% (2001).
Why the difference? Pew’s report included only Washington’s closed plans (PERS 1, TRS 1, LEOFF 1, Judges, and JRS) and used numbers from 2005, rather than the most current numbers. It did not include Washington’s open plans. The open plans cover more members and currently have the following funded status: 121% (PERS 2 and 3), 133% (TRS 2 and 3), 125% (SERS 2 and 3), 99% (PSERS), 116% (LEOFF Plan 2), and 114% (WSP).
The 100% funded status for Washington's plans represents the aggregation of all state retirement system liabilities compared to all retirement system assets. Only two of the state's large retirement plans - PERS 1 and TRS 1 - have unfunded liabilities. In 1989, the Legislature enacted a policy that requires bringing those plans to fully funded status by the year 2024. See Washington's 2006 Actuarial Valuation Report for more detailed information regarding the funded status of each plan."
U.S. Comptroller David Walker, the nation's auditor, issued a report today identifying constructive recommendations to get America back on sound fiscal footing. According to the Comptroller:
"Since the founding of the republic and the ratification of the Constitution, the U.S. government has evolved to reflect changing circumstances at home and abroad. At the end of George Washington’s presidency in 1797, there were four cabinet-level departments—most run by small staffs of civil servants—and five cabinet-level officials, including the Attorney General. Today, there are nearly 30 major federal departments and agencies with cabinet–level officials in the executive branch, and the federal workforce, including military personnel, now totals in the millions. In 1797, U.S. government spending represented about 2 percent of the U.S. economy and now it represents over 20 percent.
A quick look at the federal budget reveals how much we have expanded beyond the Constitution’s framers’ original thoughts and our modest beginnings. In the coming decades, however, our ability to sustain even the constitutionally enumerated responsibilities of the federal government will come under increasing pressure . . . a top-to-bottom review of federal programs and policies is essential. Congress, the President, and the American people need to decide which federal activities remain priorities, which should be overhauled, and which have simply outlived their usefulness.
Much as the framers of the Constitution did, we need to ask some basic questions regarding what we expect from our government. As part of this process, policymakers may need to reconsider some long-held assumptions about what government does; how it does business; who should do that business and how those activities should be financed, whether through consumption taxes, income taxes, payroll taxes, or user fees. This reexamination should extend government wide and should be done on a continuing basis; goals and desired outcomes evolve over time, and government must stay attuned to those changes."
Click here to read the full report and for additional details on the Comptroller's recommendations.
It's not often the federal government does something worthy of praise but today's news that the free searchable budget transparency website for federal grants and contracts is now live is the exception. According to the Reason Foundation:
Today, the Office of Management & Budget and Congressional sponsors will announce the EARLY launch of usaspending.org, the federal website that will track and allow average citizens to review government spending in regards to federal grants and contracts above $25,000.
Many states have also created free searchable websites to help the public find details about how and where their tax dollars are being spent. In a policy note released last week, we discussed how Washington State should also enact this type of budget transparency reform.
Let's hope our elected officials take note of today's action by the feds and make this reform a priority when the legislative session starts in January.
To provide a check on the legislature, the state constitution grants the people the power to veto unwanted legislation through the use of a referendum. This right is guaranteed on any bill adopted by the legislature except those that include an “emergency clause.” An emergency clause states that a bill is exempt from repeal by referendum because the bill is “necessary for the immediate preservation of the public peace, health or safety, support of the state government and its existing public institutions.”
The purpose of the emergency clause is to allow state government to respond to true public emergencies, such as a large-scale natural disaster or wide-spread epidemic disease.
Yet, over the years lawmakers have routinely abused the exemption by attaching an emergency clause to more than 700 bills since 1997, including 75 times during the 2007 legislative session and special session. This means the people of Washington were denied their right to repeal bills by referendum on approximately 17 percent of all the bills enacted since 1997.
Following are examples of when lawmakers attached an emergency clause to bills when no true public emergency existed.
SB 6049 – To provide funding for Mariners’ stadium in Seattle, passed in 1995.
SB 5951 – Exempting a horse racing license from public inspection, passed in 2005.
SB 2419 – Allowing fundraising for the state to host the National Conference of Lieutenant Governors, passed in 2006.
HB 1813 – Changing the name of the Interagency Committee for Outdoor Recreation, passed in 2007.
SB 5926 – Creating a Joint Legislative Task Force to review the underground economy in the construction industry, passed in 2007.
The best way the legislature can preserve the people’s constitutional right of referendum is to refrain from attaching an emergency clause to controversial bills, and return to using the clause for its original purpose: to respond to true public emergencies.
Short of that, the only way to rein in the legislature’s abuse of the emergency clause is with a constitutional amendment creating a supermajority vote requirement for its use. If a true public emergency occurs that warrants denying the people their right of referendum, a 60 percent vote requirement in the legislature should not be difficult to achieve. In the case of a true emergency, the public would most likely welcome the use of the emergency clause by the legislature, recognizing it is intended to be used at just such a time.
Had a 60 percent vote requirement existed for the use of an emergency clause, the people would have been eligible to run referendums on the following controversial bills:
SB 6819 – Suspending 2/3 vote requirement for tax increases and for expenditures from emergency reserve account (passed in 2002).
SB 6828 – Securitizing the revenue stream from the tobacco settlement agreement (passed in 2002).
HB 1397 – Adopting California vehicle standards (passed in 2005).
HB 2255 – Adopting changes to the state’s unemployment insurance system (passed in 2005).
HB 2314 – Increasing various state taxes (passed in 2005).
SB 5097 – Requiring the use of apprentices on public work projects (passed in 2005).
SB 6078 – Suspending 2/3 vote requirement for tax increases and changing the calculation of the state spending limit (passed in 2005).
SB 6103 – Increasing transportation-related taxes (passed in 2005).
SB 6096 – Creating a state-only death tax (passed in 2005).
SB 6896 – Increasing the state spending limit (passed in 2006).
Last session a constitutional amendment was introduced to require a sixty percent vote of the legislature to enact a bill with an emergency clause (HJR 4218). Despite a legislative hearing at which no opposition to the reform was expressed, no public vote was scheduled.
It will be interesting to see if the legislature finds time to consider this reform next year.
Do taxes matter when it comes to where Americans choose to live and work? According to two new studies the answer is an emphatic yes!
The American Legislative Exchange Council released a study last week authored by noted economists Arthur Laffer and Stephen Moore. The two economists wrote about the findings of their study, Rich States, Poor Statesin today's Wall Street Journal:
Over the past decade, the 10 states with the highest taxes and spending, and the most intrusive regulations, have half the population and job growth, and one-third slower growth in incomes, than the 10 most economically free states. In 2006 alone 1,500 people each day moved to the states with the highest economic competitiveness from the states with the lowest competitiveness.
Of all the policy variables we examined, two stand out as perhaps the most important in attracting jobs and capital. The first is the income tax rate. States with the highest income tax rates -- California and New York, for example -- are significantly outperformed by the nine states with no income tax, such as Texas and Florida. As a study from the Atlanta Federal Reserve Board put it: "Relative marginal tax rates have a statistically significant negative relationship with relative state growth."
The other factor for attracting jobs and capital is right-to-work laws. States that permit workers to be compelled to join unions have much lower rates of employment growth than states that don't. Many companies say they will not even consider locating a factory in a state that does not have a right-to-work law.
How did Washington fare on the study's economic competitiveness index? The state ranked in the bottom half of the nation coming in at 31, with poor scores for sales tax burden (49), tax burden other than sales and income taxes (44), recent tax increases (40), debt service as % of revenue (43) and state minimum wage (50).
Taxes matter when businesses decide where to locate. This is particularly true for decisions about where to locate within a metro area, where the competing locations all have access to the same pool of labor (Mark,McGuire and Papke 2000; Wasylenko 1997).
Seattle faces strong competition from nearby suburban cities for jobs. In recent years, the majority of jobs created in King County have landed outside of the city. Recent success in redeveloping the city as a place to live and consume should not blind policy makers to the fundamental importance of enhancing the city’s attractiveness as a place to work.
Business taxes are higher in Seattle than in the suburban cities east of Lake Washington. These cities are growing jobs faster than Seattle. As we’ve said: Taxes matter.
Gov. Jennifer Granholm, stung by outrage from the business community over a now-repealed tax on services and some discontent with a state income tax increase, says she won't resort to tax increases to cover any future shortfalls.
"The most important thing I learned is I'm not ever going to raise taxes again. It's too hard. It's too impossible," Granholm said.
"Especially in light of our economy and what we've been through, I just don't think that there's anybody who's interested in proceeding down that path again. And I'm first at the head of that line," she added.
According to a Department of Revenue press release, the agency has received its 15th straight year of clean audits. This is in striking contrast with the Washington State Ferries and its 21 straight years of audit failures.
Here is DOR’s release:
The Department of Revenue, which processed nearly $18 billion in state and local tax revenue in the past fiscal year, has earned its 15th-straight clean audit from the Washington State Auditor.
State Auditor Brian Sonntag congratulated Revenue Director Cindi Holmstrom for what he called a “significant achievement.”
“Your outstanding record is indicative of management’s interest in full compliance with all laws and regulations,” Sonntag said.
Sonntag said he appreciated the cooperation and assistance provided by Revenue staff as his auditors examined the agency’s extensive operations, which include collecting and processing taxes and enforcing state tax laws.
“A willingness to work in partnership with our auditors to address any potential weakness or compliance problems is always beneficial,” he said.
Holmstrom agreed that the collaborative environme!
nt established during the lengthy annual review helps the agency fine tune its operations.
“I appreciate how well we worked together to resolve the issues that always surface during an audit, and how those discussions led to further improvements in how we manage our tax system,” Holmstrom said. “That’s the real value of an audit like this.”
Hopefully other agencies will take note of what DOR is doing.
At some point most citizens wonder, “Just how, when and where does government spend our tax dollars? What do our elected representatives want to accomplish when they spend public money, and what results are actually achieved?”
Considering Washington lawmakers will spend about $71 billion over the next two years, these are basic questions to which any taxpayer should be able to get answers quickly and conveniently. This is especially true since modern technology makes accessing large amounts of information easier than ever. Unfortunately, the opportunity to learn these answers is currently limited and difficult to achieve.
The current lack of spending transparency is not the result of some deep Machiavellian conspiracy to hide budget information from the public. Instead it is simply a failure of elected officials to keep up with the times by providing taxpayers with a free, easy-to-use website where people can find these details.
It was a bit surprising when Governor Gregoire appointed City of Seattle attorney Tom Carr as chair of the state's Sunshine Committee to review public records exemptions. Carr is best known to supporters of open government for his role in a Supreme Court case a few years ago RESTRICTING access to public records.
The editorial response to the governor's decision was not favorable but there was some hope that Carr would prove his critics wrong. It appears this hope was misplaced. As noted by Crosscut:
Seattle City Attorney Tom Carr is no media darling, and his stock is falling further. His reputation as a government lawyer who is hostile to a free press could soon be set in cement. His latest action might not only create trouble in the courts but could blow up in an unlikely place: Gov. Chris Gregoire's face.
Last week, Carr's office subpoenaed three Seattle Times reporters — Mike Carter, Steve Miletich, and Christine Willmsen — demanding to know their sources for a series of stories on cops who were under investigation for allegedly bad behavior in Belltown. The city is being sued by one of the key figures, John Powers, who is claiming he was defamed and wrongfully fired from the police department. The city wants to know who was leaking information to the paper.
Such subpoenas are an extreme and rarely used measure here. Even more eyebrow-raising is that Carr's legal gambit follows on the heels of the passage of a "shield law" signed by Gov.Christine Gregoire last spring that is designed to protect journalists from just this kind of harassment.
“It is outrageous that the person handpicked by Christine Gregoire to lead a committee on open government is now demanding confidential sources be revealed by the very people who help keep government accountable,” said Jill Strait, Rossi spokesperson. “We really shouldn’t expect any differently from Carr who has a long history of keeping the doors to government shut tightly. Gregoire, although no fan of open government herself, should immediately replace Carr as the head of the committee!
and allow some real sunshine in for once.”
The Seattle Timesreports "the governor's spokesman, Lloyd Brown, said Gregoire was 'troubled by the story.'"
"We need some time to talk to Tom Carr," Brown said. "What's troubling about the situation is the appearance of the person who's heading the Sunshine Committee challenging the ... shield law."
The state Expenditure Limit Committee (ELC) met today to adopt the spending limit for the 2009-11 budget. This was the first meeting of the ELC since the state Supreme Court ruled on the I-601 case and whether or not the legislature violated the law in 2005.
Prior to a change in 2005 by lawmakers, the spending limit was allowed to increase based on a three-year rolling average of increases in population and inflation (fiscal growth factor). That calculation was changed for the current budget to the ten-year average growth in state personal income. It was argued at the time that this change would allow the budget to grow at a much faster rate than under the limit original adopted by the voters in 1993 with I-601. Based on today's committee action, this fear has been realized.
Under the new spending limit the budget is allowed to grow to $32.9 billion in 2007-09 and $36.4 billion in 2009-11. This translates to a possible 11 percent increase in spending. Prior average increases under I-601 were 9 percent (including the large budget increases since 2005).
One positive development from today's ELC meeting, the committee adopted a proposal offered by OFM director Victor Moore to stop doubling counting appropriations from the general fund to related accounts for the current budget (meaning the money can't be counted as spent twice to artificially increase the limit). This has the effect of reducing the increased spending limit by $128 million for the 2007-09 budget. This issue was also addressed for future budgets by the recent passage of I-960.
I-601 had been working well controlling state spending increases before the legislature's changes in 2005. Lawmakers should consider returning to the original fiscal growth factor adopted by the voters to help mitigate the increased tax burden associated with a fast growing budget.
Updated (1:40 pm):Rep. Gary Alexander (the lone no vote at today's ELC meeting) released the following statement:
“Today’s decision by the Expenditure Limit Committee is disappointing. I voted ‘no’ because the state should not be manipulating its appropriations process in order to avoid the voter-approved spending limits of I-601. The majority party has, first, made hundreds of millions in appropriations to other accounts for fiscal year 2007 and counted them as expenditures when they’ve not actually been spent, and claimed that this allows them to keep the spending limits higher. Second, they’ve shifted hundreds of millions of dollars in spending for services historically funded from the general fund to an account not covered by the limit, without lowering the limit for the shift as required by law. This is not what voters intended when they!
passed I-601, it does not restore integrity to our budget process, and it is not in the best interest of our state financially.”
The House just passed the bill restoring I-747 by an 86-8 vote. Those opposed include Representatives Dickerson, Hunt, Nelson, Pedersen, Pettigrew, Santos, Simpson, and Sommers.
The Governor's second request bill, the property tax deferral proposal, faces a rougher road to passage. Serious constitutional questions were raised against the deferral bill with almost universal opposition expressed by those testifying at the House and Senate hearings.
For a split second it appeared the deferral bill was no more as the Senate Ways and Means adopted, by a 10-7 vote, an amendment offered by Sen. Hobbs to turn the bill into a study. That vote was quickly followed by a request for reconsideration, however, and the amendment failed 8-9 on the re-vote.
It is becoming likely though that if the deferral bill does pass the legislature today it will be in the form of a study as suggested by Sen. Hobbs.
Updated (7:15 pm):The Senate just passed the bill restoring I-747 by a vote of 39-9 making it a done deal. Those voting against the proposal include Senators Fairley, Jacobsen, Kline, Kohl-Welles, McDermott, Murray, Pridemore, Spanel, and Weinstein.
The Governor's property tax deferral bill was also adopted today. The closeness of the vote, however, illustrates the unease some lawmakers had moving forward with a controversial bill on less than a day's time to review the details. In fact, Rep. Kathy Haigh (D-Shelton) told The Olympian:
“I admit I don’t really know all the implications. I’m going to try to keep my head down and I’m going to vote as my caucus needs me to. On the surface it sounds good.’’
The Senate vote was 27-21 in favor and 55-39 in the House.
With the focus of this week's special session being relief from property tax increases, it is odd to hear the governor already talking about the possibility of future tax increases. According to The Olympian:
Gregoire later told a gathering of service clubs Monday — including Olympia Rotary — that she thinks voters did not merely reject taxes on Election Day.
The governor noted that voters approved all four measures the Legislature put on the Nov. 6 ballot — including the “rainy day” savings account for government and lower vote requirements for passing school levies.
Voters will support taxes if they are confident about what the money is going for, Gregoire said. She hearkened back to the phased-in gas tax package of 9 ½ cents that lawmakers approved in 2005; it survived a citizen initiative to repeal it.
“I have not lost confidence that if we’re in tune with the public, they’ll invest,” Gregoire said of future tax increases for education or transportation.
It is very unlikely that any tax increase proposals will be considered in 2008 until after the election but the governor's comments telegraph a willingness to increase taxes.
One ballot measure the voters approved the governor didn't mention, I-960, makes it probable the voters will have the final say on any tax increases via a referendum since 2/3 legislative support is unlikely.
Today's ruling by the state Supreme Court let the legislature off the hook for its 2005 violation of I-601 by saying lawmakers retroactively "cured" the problem by passing ESSB 6896 in 2006. It's too bad the Court didn't take the same position of the trial court on this matter:
The Court declares that ESSB 6896 (7)(6) providing that "In calculating the expenditure limit for fiscal year 2006, the calculation shall be the expenditure limit established by the state expenditure limit committee in November 2005..." must be construed as referring to said expenditure limit as modified by this Court.
In other words, the trial court said the changed limit would have to take into account the 2005 violation of law. Apparently this concept was too radical for the state Supreme Court to agree with.