The State Auditor's Office today released a performance audit of the state's 10 largest school districts' administrative practices. According to SAO:
"If our recommendations for improved economy and efficiency are followed, school districts could achieve cost savings exceeding $54 million over five years. Of the 13 audit areas we identified, not all affect each district; in fact certain districts are commended for their work in some areas."
One of the areas reviewed was district financial management and cost analysis:
"For school districts to achieve the objectives of accountability and comparability, financial information must be both relevant and reliable for reasonably informed users. Financial reports must satisfy numerous and diverse needs or objectives, including short-term financial position and liquidity, budgetary and legal compliance, and issues that hav!
e a long-term focus such as capital budgeting and maintenance. Additionally, differences exist in the amount of detail that various users need . . .
Currently, Washington school districts do not have a complete and accurate financial picture of their programs or functions. This does not mean that costs associated with each program are not reviewed and carefully monitored throughout the year. Additionally, each district can point to aggressive steps they are taking to cut budgets and reduce costs in all areas. However, without accurate cost accounting for each project, it becomes increasingly difficult to assess and compare programs or departments and determine any areas that can afford budget cuts . . .
One of the important uses of accurate financial data is for comparability purposes. There are an infinite number of ways that financial data can be analyzed using historical data, industry data and 'what-if' scenarios. All cost analysis can be valuable, but in the government sector, especially in entities such as school districts that are subject to rigorous cost scrutiny, the ability to respond to the public and other groups as to why they operate under certain conditions or models is critical to public acceptance, which in Washington State is critical to funding approvals and other school district actions."
This past weekend I was in Baltimore at a national open government retreat working on recommendations for the next President on how to make the federal government more transparent and accountable.
Among the 70 individuals at the retreat were representatives from OMB Watch, National Security Archive, ACLU, Society of Professional Journalists, OpenTheGovernment.org, League of Women Voters and Reporter’s Committee for Freedom of the Press to name a few.
The federal bailout bill also was discussed at the retreat. There is serious concern about the level of secrecy being included in the draft bailout proposal. Here is a memo that was worked on at the conference that is circulating amongst open government groups. Here is the language of the bailout proposal.
Continuing our transparency efforts, last week I also participated on a panel on government transparency in Phoenix at the annual meeting of the State Policy Network, the national organization of state think-tanks. I announced WPC's recommendation for a tax transparency website that would provide an online searchable database of all tax rates in the state. The Seattle Post-Intelligencer endorsed our recommendation shortly after its release. Other SPN groups may now take our recommendation to their own states for their lawmakers to consider.
I’ll provide updates on both these efforts (Baltimore/Phoenix) as they develop.
In response to today's revenue forecast the Governor said she is "directing the Office of Financial Management to locate additional budget savings of $200 million, without affecting vital programs." Hopefully this effort will have more success than her August request that state agencies not sign personal service contracts unless they are an emergency.
Here are examples of some of the personal service contracts signed since the Governor issued this contract freeze:
CTED: $400,000 - "The purpose of this contract is to provide tourism and trade services to Washington in the nations of China, Japan & France."
Department of Archaeology and Historic Preservation: $149,714 - "Develop a feasibility study for a Washington State Maritime Heritage Area."
State Parks and Recreation Commission: $254,701 - "Additional work to address additional funding from the legislature for the Seminary design at Saint Edward State Park."
Turns out the projected revenue for next biennium is better than I reported this morning. I originally used the numbers from OFM's press release which showed $1.4 billion more in revenue for the 09-11 budget cycle than the current budget.
First the good news, the state is projected to have $1.4 billion more in revenue for the 09-11 budget cycle than the current budget. Now the bad news, the carry forward cost of the current budget leads to a projected budget deficit of more than $3 billion.
2007-09 forecasted revenue: $29.9 billion
2009-11 forecasted revenue: $31.3 billion
Projected revenue increase: $1.4 billion
So if the state will have $1.4 billion more in revenue but is facing a $3 billion budget deficit, is that a revenue problem or an overspending problem?
Yesterday we posted details on the Governor's statement that she's cut taxes by approximately $900 million since 2005. According to OFM, the table it provided did not account for tax increases, only tax cuts.
Here is the follow up detail OFM provided on the General Fund tax cuts.
Since the OFM information doesn't account for tax increases I reviewed the Legislative Budget notes for 2005-08. Here is the breakdown for the General Fund net tax cut or increase:
So has the Governor been a tax cutter or tax raiser? Short answer, yes but more tax revenue has been raised than returned to taxpayers (at least for the General Fund; discussion of workers' comp tax cuts/increases here).
Even though the Governor has yet to acknowledge the projected multi-billion dollar budget deficit (difference between growing revenues and even faster spending growth), key lawmakers are starting to signal a willingness to break the state's new rainy day piggy bank to help balance next year's budget. According to the News Tribune:
"The 2009 Washington Legislature probably will dip into the state’s emergency 'rainy day' savings account to balance the budget because, economically speaking, it’s raining.
Although the state has a budget surplus today, that amount is expected to shrink as Washington’s economy catches up to the rest of the nation and follows a downward economic spiral, due in large part to a sudden drop in home sales and a worsening crisis in the national financial markets.
'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.'"
Last week we highlighted an Olympian blog post that quotes Governor Gregoire on whether or not she's raised taxes. Among the statements made by the Governor:
"Did I raise your sales tax? No. Did I raise property taxes? No. In fact, I brought the Legislature in to cap the property tax with a special session last fall. Did I raise B&O tax? No. What’s the truth? The truth is we cut those taxes almost by $900 million since I came into office."
I asked the Office of Financial Management (OFM) for additional details on these tax cuts. OFM provided the following table in response (Dollars in Millions):
General Fund - State
Unemployment Insurance Trust Fund
Workers Compensation Trust Funds
Total Tax Cuts
WPC's Small Business Director Carl Gipson takes a closer look at the Workers' Compensation numbers in his blog post today.
In light of the $400 million in tax INCREASES during the 2005 Session, I'm following up with OFM to learn if its table accounts for these increases and for additional details on the General Fund tax cuts reported. I'll update this post once I have the answer.
The Olympian today has an interesting blog post quoting Governor Gregoire about whether or not she's raised taxes (excluding gas-taxes). Here is what the Governor said (in-part):
"Did I raise your sales tax? No. Did I raise property taxes? No. In fact, I brought the Legislature in to cap the property tax with a special session last fall. Did I raise B&O tax? No. What’s the truth? The truth is we cut those taxes almost by $900 million since I came into office. So the money that we used to do what we’ve done has been because our economy has been humming. And that’s why I’ve tried always to get new employers in here and to make sure we have the skilled work force, because when the economy hums, we can pay for education, we can pay for health care, we can pay for community safety. When the economy slumps, then we can’t." "So he [Rossi] then!
says, ‘she is going to raise taxes,’ Well I didn’t raise taxes to get out of the $2.2 billion deficit he gave me. On what basis does he say that? … (H)e wants you to be afraid. He wants you to be afraid. I just think this ought to be a straight-up election."
Based on this quote one is left to wonder just what the Governor believes qualifies as a tax increase. For example, in 2005, the Governor signed into law approximately $400 million in tax increases made possible by suspending the 2/3 vote requirement from I-601. The largest of these tax increases were:
Cigarettes – $175 million
Death-tax – $139 million
Liquor – $47 million
Extended warranties for product repairs or replacements – $37 million
. . . I'd put money on the State Supreme Court dismissing Senator Lisa Brown's tax lawsuit on procedural grounds. At today's Court hearing on the constitutionality of I-601, the Justices spent most of their time questioning whether the way Brown filed her lawsuit is something they can rule on. In particular, Justice Barbara Madsen expressed concern with the Senator's attempt to have the Court inject itself in the legislative process of passing a bill.
If the Court does ultimately pass on deciding the constitutionality of a 2/3 vote requirement for tax increases, the clearest way to resolve this issue once and for all is for the Legislature to put on the ballot a constitutional amendment and allow the voters to decide.
While reviewing state personal service contracts back in July, a $50,000 lobbying contract for the University of Washington (UW) caught my attention. Unfortunately, the information listed on the Office of Financial Management's website didn't disclose what the lobbying was for so I asked the UW for a copy of the contract. Nearly two months from my first request, I finally received a copy of the contract today.
Turns out the $50,000 contract is for a consultant "to provide legislative drafting and fiscal analysis related to the 2008 request for state financial assistance to remodel Husky stadium." The contract was originally to expire March 31, 2008, but its terms have been extended until June 30, 2009.
The contract further notes the "consultant will be paid $175 per hour for his services, and receive reimbursement for associated reasonable expenses, including travel costs."
On September 9, 2008, the State Supreme Court will consider Senate Majority Leader Lisa Brown's lawsuit seeking to have the 2/3 vote requirement for tax increases ruled unconstitutional to make it easier for state officials to raise taxes.
Last week I asked spokespeople for both Governor Gregoire and Senator Rossi if they support a 2/3 vote requirement for tax increases and if yes, would they support placing them in the Constitution like was done with the rainy day reserve from I-601.
Here are the official responses:
Gregoire* - “I think it’s a moot issue because I think it [tax increases] ought to go to a vote of the people.”
Rossi spokesperson - "Dino believes in upholding the will of the people and does support I-601’s 2/3 vote requirement. He would be supportive of a constitutional amendment to require a 2/3 vote for tax increases."
Based on these responses, it appears that both Governor Gregoire and Senator Rossi support WPC's recommendation to amend the Constitution to require either a 2/3 vote of the legislature or voter approval for tax increases.
*These comments were made on 8/27 during a KIRO 710 radio interview. On 8/29 a spokesperson for Gregoire said to refer to this interview in response to my question for an official position.
"After much thought and in light of our nation's economic struggles, I have decided the cost of living raise, which you were scheduled to receive on September 1, 2008, is not appropriate at this time. My decision affects all agency directors under my control in addition to the Senior Staff of the Governor's Office . . . I take this step because I believe you and I should make a clear statement to the people of Washington: we understand that many families are not rece!
iving pay raises while coping with high food and fuel prices, and other financial challenges."
So what "statement" are Bellevue teachers sending taxpayers and students by breaking the law?
Earlier this week I asked spokespeople for both Governor Gregoire and Senator Rossi if they support a 2/3 vote requirement for tax increases and if yes, would they support placing them in the constitution like was done with the rainy day reserve from I-601.
Though I haven't received an official response yet from the candidates, Governor Gregoire was on the Dori Monson show today (KIRO 710) and was asked the same question.
Here was the tail end of their exchange on this issue:
Dori: "Yes or no, do you support the 2/3 legislative majority for tax increases?"
Gregoire: “I think it’s a moot issue because I think it [tax increases] ought to go to a vote of the people.”
The full interview is worth listening to. Discussion about the budget deficit starts at 12:50 of the interview (audio here). The exchange on the 2/3 requirement for tax increases starts at 21:22 on the audio link.
I'll post the official responses from Governor Gregoire and Senator Rossi once I receive them.
The State Auditor's recent performance audit of state debt collection practices received numerous kudos today at a public hearing. Along with receiving congratulations from legislative members of the Joint Legislative Audit and Review Committee, the Director of the Office of Financial Management also thanked the auditors for their work.
". . . eight programs that need to improve their collection practices. If the eight programs reduce their delinquent account balances by a modest 5 percent, the state will collect approximately $15.6 million more per year. If they reduce delinquent account balances by 50 percent, they can collect an additional $159.7 million."
Rep. Gary Alexander and Sen. Phil Rockefeller encouraged the State Auditor's Office to expand this effort to review the practices of the state's higher education schools. The auditors agreed to look in that direction.
The Department of Revenue (DOR) received special recognition for not have any findings in the audit. It looks like DOR is really on the ball. Last year it received its 15th straight clean state audit.
"Gov. Chris Gregoire, locked in a close race for re-election, has repeatedly declined to say if she supports Brown's case. She says she's not familiar with the specifics.
'I know that everybody thinks that's surprising. I have not studied it,' Gregoire said in a recent interview."
With the State Supreme Court set to hear arguments about the case on September 9, there is still time for the Governor to study this issue and form an opinion.
This morning I asked spokespeople for both Governor Gregoire and Senator Rossi if they support a 2/3 vote requirement for tax increases and if yes, would they support placing them in the constitution like was done with the rainy day reserve from I-601. I'll post any responses I receive.
Perhaps this is a question that should also be asked at one of the upcoming gubernatorial debates.
Jason Mercier is Director of the Center for Government Reform at Washington Policy Center and is based in the Tri-Cities. He serves on the boards of the Washington Coalition for Open Government and CandidateVerification, and was an advisor to the 2002 Washington State Tax Structure Committee. Jason is an ex-officio for the Tri-City Regional Chamber of Commerce. In June 2010, former Governor Gregoire appointed Jason as WPC’s representative on her Fiscal Responsibility and Reform Panel.