Adam Wilson of The Olympian wrote an interesting article this weekend about a state computer project that some legislators thought they eliminated this year. According to the article:
"The state Health Care Authority plans to spend an additional $9 million on a computer project that the Legislature tried to cancel this year.
State officials say the move will preserve work done so far and buy another chance at continuing the project. But a key lawmaker said it contradicts what the Legislature intended.
After $5 million had been spent on early development of the computer project, lawmakers approved spending $25 million more on the BAIAS system in 2007. The computer would replace the 30-year-old system that handles public employee health insurance.
The state spent $2 million last year on the project, but Democratic lawmakers, looking to save money, pulled $14 million from the project in March.
The cut effectively ended the effort to develop the system after $7 million in taxpayer money had been spent because there wasn't enough money left to finish it. But $9 million from the original budget was still available. The agency plans to spend that money on the system in the next year . . . A lawmaker on the board, Rep. Ross Hunter, D-Bellevue, warned against the proposal. He said he opposed canceling the project, but had no doubt that is what the Legislature wanted to do.
State spending is expected to outstrip revenue by $2.4 billion in the next two-year budget. Hunter said it's unlikely more funding will be given to the project next year, making spending more now questionable . . . As for concerns about reversing the decision of the Legislature, run by the Democratic majority, Swecker said it was fair play.
'My theory is if they were trying to terminate the project, they should have cut all the money,' he said."
So is the Health Care Authority an agency run amok blatantly disregarding the law and the intent of lawmakers?
Well, not exactly. Perhaps in their haste to rush through the $306 million 2008 supplemental budget increase, lawmakers left the original language in the budget concerning the project even though they reduced the funds:
"Sec. 214(7) $784,000 of the health services account--state appropriation for fiscal year 2008, $1,676,000 of the health service account—state appropriation for fiscal year 2009, $540,000 of the general fund--federal appropriation, and (($22,480,000)) $8,200,000 of the state health care authority administrative account--state appropriation are provided for the development of a new benefits administration and insurance accounting system"
We're all for reducing unnecessary spending and saving money, but lawmakers need to be more diligent in how they write the budget so they !
can clearly convey their intent. Perhaps if they had adopted a 72-hour budget review reform, this oversight would have been caught.
Peter Callaghan of the Tacoma News Tribune has a great column today on the increasing strategy of businesses trying to carve out exemptions from the crushing burden of taxes they face. While I find no fault with these employers for trying to make doing business in Washington more palatable, the answer is not discriminatory tax relief, but instead universal tax relief for all employers and individuals in Washington.
From Peter's column:
"If cities like Tacoma and states like Washington are willing to offer tax breaks and other public funding to keep big employers, DaVita would be silly – even financially irresponsible – not to grab them.
DaVita didn’t create the atmosphere that allows companies to set up bidding wars. That was begun years ago, ironically by a business that has been deemed by federal courts to be a nonbusiness, exempt from antitrust laws. That would be Major League Baseball, which wrote the textbook on getting ladles of tax dollars.
All sports franchises had to do was threaten to move a beloved team elsewhere (and persuade the people who run those elsewheres to play along). In nearly every case, it worked.
But while pro sports leagues created the technique, The Boeing Co. brought it into the private sector and perfected it, at least around here.
First, the aerospace company won $60 million in tax breaks from Chicago and the State of Illinois to move a few hundred corporate office folks.
It then launched a second round of civic bidding with its competition to site the assembly plant for the 787. Washington won – or perhaps bought – that race. The Legislature gave up $3.2 billion in future tax collections to keep the plant in the state. The state also paid for road improvements, a $30 million dock that turned out to be unnecessary, and a training center.
That worked out so well for Boeing that it has begun to set the stage for a third contest – this one to host the plant for the jetliner that will eventually replace the mid-sized 737.
Russell Investments must have learned from the Boeing example. Not just that there is money to be had but that seeking it can lead to bad feelings among taxpayers. Boeing looked greedy by asking, so Russell escaped that by not really asking. It continues to act as though it doesn’t even realize that cities and developers are drooling for a chance to host the company.
Altogether, Tacoma, the state and the feds have developed a package worth $140 million. But Russell has declined to comment throughout the competition, so no one knows if it will be enough.
Now comes DaVita. Russell employs 1,100 people downtown with promises of hundreds more if it stays. DaVita employs 850 and also predicts expansion. Russell jobs pay more, while DaVita is a solid employer of workers in its billing, accounting, information technology and government reporting sections.
DaVita has the city’s interest. But who’s next?"
It’s past time for elected officials to address the business climate (tax relief) on a universal basis and stop using the tax code to reward those employers deemed worthy of relief by the government. No more exemptions and subsidies, instead one flat universally low tax rate. Same goes for individual taxes. No more sin taxes or special exemptions (except for maybe food and medicine). If government wants to raise taxes, they raise taxes on everyone and if the tax rate is too high (which it is) they lower taxes for everyone. No more tax code winners and losers determined by the power and force of government influenced by he with the strongest lobbyist.
On April 15, 2008, former Comptroller General of the U.S., David M. Walker, provided the keynote address at our Government Reform Conference. The title of his presentation was "Learning from the Past and Creating our Future." Here are excerpts from Walker's speech:
". . . I am here to tell you, our Republic is at risk. Washington is out of touch and out of control. I’ve had the good fortune of going to 26 states and 40 cities as part of the 'Fiscal Wake-Up Tour' during the last two years. I’ve been to a number of other states, and many more cities in my capacity of the role as Comptroller General of the United States, and now in my capacity as President and Chief Executive Officer of the Peter G. Peterson Foundation . . .
Frankly, I’m not just concerned about the sustainability challenges we face. I’m concerned about how far this nation has strayed from the solid foundations that our Founding Fathers provided for us in 1789. And let me mention just a few examples.
First, the size of government. The Founding Fathers believed in limited government. In 1789 the federal government was 2% of the economy. Today it’s 20% and is scheduled to get a lot bigger.
Second, the composition of government. At the beginning of our republic, the federal government focused on things that realistically only the federal government could do. Responsibilities like national defense, foreign policy, treasury, postal service, Congress and the Executive Office of the President of the United States. Today, the 38% of the budget that is deemed to be 'discretionary spending' contains every major express and enumerated responsibility envisioned by the Founding Fathers for the federal government. Every single one. What happened to the provision written by the founders: that any role or function not expressly reserved for the Federal government belongs to the states and ultimately to the people? We have lost our way . . .
Let me touch briefly on a few sustainability challenges then wrap up and go to Q&A. Firstly, our federal fiscal challenge. It’s not our current deficits, and it’s not our current debt levels that are the problem. Yes, the deficits are larger than they should be. Yes, our debt levels can hardly be justified given the principles our founders established, and frankly, America’s history, up until the 1970s. When we incurred significant debt because of wars, whether it was the Revolutionary War, whether it was the Civil War, whether it was World War I, or World War II, our nation had a tradition of paying down that debt as quickly as possible so we did not encumber future generations with burdens that they should not be expected to bear. But since the 1970s, that tradition has gone by the wayside, and it’s time that we think about bringing it back over time.
We have large deficits and debt levels, but the real problems are off-balance-sheet obligations. As per the latest federal financial statements, we have over $44 trillion (there are 12 zeros to the right of that 44) in off-balance-sheet obligations, primarily in the form of unfunded Medicare and Social Security obligations. Adding this number to our nation’s current net liabilities means that our total federal fiscal hole was about $53 trillion as of September 30, 2007. That unfunded hole is getting bigger by $2-3 trillion a year by doing nothing. If you balance the budget tomorrow, which we’re a long way from doing, that hole would still grow by $2 trillion-plus a year. $2 trillion-plus a year!
Now, what is $53 trillion? It’s $455,000 per American household. What’s median household income in America? Less than $50,000 a year! Therefore, based on our present policies and programs, the typical American household has an implicit mortgage of over nine times their current annual income, but no house to back that mortgage. That’s the big sub-prime crisis . . ."
Presidential candidates John McCain (R) and Hillary Clinton (D) are proposing a federal gas-tax holiday to alleviate the pain Americans are feeling at the pump. Barack Obama (D), however, is correctly rejecting this unsound voter pandering but is instead unwisely proposing a "windfall profits" tax on companies that invest in oil production.
The Tax Foundation has a good write up on the folly of these proposals here.
As for the current debate on temporarily suspending the federal gas-tax, a better course of action would be to eliminate the federal gas-tax and return that taxing authority to the states to use. Rather than send our gas-tax dollars to Washington D.C. only to have to beg to maybe have them returned back to the state with numerous strings attached, we could keep all those gas-tax dollars here and use them on our priorities instead of having them earmarked for a bridge to nowhere or for an interchange no one asked for.
There is already a proposal in Congress to do this.
This means that if we increased our state gas tax by say 15 cents, the federal gas-tax we pay would be reduced by 15 cents so the overall tax burden would not increase but those gas-tax dollars would stay in the state for our transportation priorities – no federal strings attached.
The goals of the STATE Act are:
Free state transportation dollars from federal micromanagement, earmarking, and budgetary pressures;
enable decisions regarding which infrastructure projects will be built, how they will be financed, and how they will be regulated to be made by persons best able to make those decisions;
eliminate the current system in which a federal gasoline tax is sent to Washington and through a cumbersome Department of Transportation bureaucracy;
prohibit the federal government from forcing unwanted mandates on states by threatening to withhold transportation money; and
achieve measurable congestion mitigation and infrastructure preservation and safety in a cost effective way subject to available resources.
It would be interesting to see what the presidential candidates think of the STATE Act and whether or not they support the goal of returning transportation taxing and decision making authority to the states.
The New York Timesreports today that New York taxpayers could save $1 billion a year through consolidation of government services and requiring government employees to make more contributions to their health insurance plans.
The recommendations come from a special commission formed last year to help identify ways to address New York's growing budget deficit of more than $5 billion and to help ease the state's high property tax burden.
According to the Times:
With the worsening state financial picture as a backdrop, the commission, headed by Stan Lundine, a former lieutenant governor, made many recommendations to eliminate layers of government and bring more consistency and efficiency to those that remain, in part by eliminating duplications like garbage pickup and tax collection. The report also suggested working toward a single, state-run jail system.
The commission identified thousands of local government entities distinct from county, city, town and village governments, including a profusion of “special districts” created to provide water, library and other services to the state’s sprawling suburbs. Those entities are studded with appointive jobs and many can levy taxes, helping give New York “arguably the most complex property tax system in the nation,” according to the commission’s final report.
The report’s recommendations were endorsed by Governor Paterson, a Democrat, who said that some of the local boards had become “patronage mills.” He called the changes an essential step toward bringing down New York’s high property taxes and coping with an economic downturn.
Succinctly summing up the tax and budget situation, commission member Howard Weitzman said:
“Taxes are high because governments spend money. And therefore, the less government we have, the less money we’ll be spending.”
While NY is looking at government consolidation to address its budget deficit, no details have been made public on how Washington elected officials plan to address our self-inflicted $2.5 billion forecasted deficit. In fact, rather than reduce spending in th!
e face of the projected deficit, state officials increased spending this year.
This spending increase coupled with the Senate Majority Leader's lawsuit to help make it easier to raise taxes indicates Washington state officials plan to close the deficit with tax increases, not spending reductions.
On April 15, tax day, state and national policy experts gathered in Seattle for WPC's Government Reform conference. Two interactive panels discussed budget and tax policy reform issues, as well as budget accountability, performance, and the role of government.
The conference was very well attended including individuals from at least 26 states. It drew a wide variety of attendees including state legislators, agency and legislative staff, business owners, citizens and media.
Former U.S. Comptroller David Walker (pictured left) delivered the lunch keynote address to a packed room. He highlighted the looming fiscal crisis caused by government overspending and entitlement programs and record-low levels of savings amongst citizens.
Hoping to build on the successful adoption of WPC’s recommendation to create a searchable budget website this year (SB 6818), I had the opportunity to meet with the Governor's Chief of Staff and the Director of the Department of Information Services yesterday on ways to improve state agency website transparency. The meeting was set up on behalf of the Washington Coalition for Open Government (WCOG). WPC is a member of WCOG and I have the privilege of serving as Treasurer of WCOG.
Along with other representatives of WCOG, I encouraged the Governor's office to take advantage of tools offered by search engine companies (such as Microsoft and Google), to help improve the accessibility of information on government websites. Here is an example of the service offered by Google. Microsoft has indicated it is interested in providing the same type of service.
I also suggested the Governor could encourage state agencies and local governments to make information about requesting public records more accessible on their websites.
Former Comptroller General of the United States David Walker was in Seattle this past Tuesday (April 15) to deliver the keynote address for WPC's Government Reform Conference. Walker's speech concerning the nation’s fiscal prognosis was as powerful as it was disturbing. We'll be posting his speech in its entirety in the coming days. In the meantime, here is some the of media coverage:
On April 1, Governor Gregoire signed into law SB 6818: (Promoting transparency in state expenditures). The bill is based on Washington Policy Center’s (WPC) recommendation for the state to adopt a searchable budget website. It passed the legislature unanimously.
Here is a copy of the bill signing photo (I'm the bald guy).
Legislative supporters of increased budget transparency offered the following comments on the new law:
“One of two things will happen when you examine the budget. You either find m!
istakes so you can fix them, or you show what a good job you’re already doing. Either way, taxpayers win because we waste less on the bad and invest more in the good.” - Sen. Eric Oemig (D-Kirkland)
“My constituents tell me they’d need a PhD from MIT to understand how and where Olympia spends their money. With this new state budget website, the average person can track who gets the money, what they have to deliver, and whether or not we’re getting what we pay for. That kind of government transparency is long overdue.” - Sen. Val Stevens (R-Arlington)
“I have been an advocate for open, transparent government for many years, so I was very pleased to support the budget transparency bill pass the Legislature. Residents of Washington should be able to see how their tax dollars are spent.” - Rep. Kelli Linville (D-Bellingham).
“One of the most important changes we can make to achieve truth in budgeting is to bring more transparency to the budget process. The passage of SB 6818 is a giant step in bringing visibility to the very complex operations of state government. The Legislative and Evaluation Committee is the perfect web site to shine some sunshine on Washington State’s revenues and expenditures.” - Rep. Gary Alexander (R-Olympia)
Once the new law is fully implemented, any citizen with internet access will be able to go to a single website to search for details on where their tax dollars are spent and for what results.
Among the information required to be included on this new searchable budget website: state expenditures by fund or account; expenditures by agency, program, and subprogram; state revenues by source; state expenditures by budget object and subobject; state agency workloads, caseloads, and performance measurements; and historical information on state spending as well as access to state personal service contracts.
We'll be sure to let you know when the new website is up and running.
The Legislature’s use of referendum-denying emergency clauses dropped from 14 percent of all bills passed in 2007 to seven percent this year. Despite this reduction in the number of emergency clauses used by the Legislature, constitutional reforms are still needed to guarantee the people’s right of referendum.
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, like 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 764 bills since 1997, including 24 times during the 2008 legislative session.
This year Governor Gregoire vetoed the emergency clauses off of five bills before signing them into law. In 2007 the Governor vetoed ten emergency clauses.
Governor’s Gregoire’s decision to strip the emergency clause out of some bills, bills that clearly do not address public emergencies, is a positive development. The increased scrutiny by the public and the Governor has had a measurable impact on mitigating the Legislature’s abuse of the emergency clause.
There is no guarantee, however, that this trend will continue. The most effective way to end the Legislature’s abuse of the emergency clause is with a constitutional amendment creating a supermajority vote requirement for its use.
Click here for additional details on the emergency clause situation.
A recent controversy has developed around just how much state spending has increased. A quick glance at spending (Near General Fund State) for the 2003-05 budget shows $25.6 billion. Fast forward to the enacted 2007-09 budget and that number grows to $33.7 billion. That $8.1 billion increase in spending represents approximately a 32 percent increase.
According to the Office of Financial Management (OFM), however, state spending has increased by $6.9 billion, or 27 percent.
Why the difference?
OFM says that $1.2 billion is being counted twice, so they show state spending for 2007-09 at $32.5 billion, not $33.7 billion.
You may recall that during the 2005-07 budget lawmakers "spent" money into savings to artificially increase the I-601 spending limit. OFM says that if you count that money as being spent only once (during 2005-07) it isn't spent again in 2007-09.
The Legislative Evaluation and Accountability Program (LEAP) Committee, however, says it shows state spending for 2007-09 as $33.7 billion, not the $32.5 billion reported by OFM.
LEAP was created to be the "Legislature's independent source of information and technology for developing budgets, communicating budget decisions, and tracking revenue, expenditure, and staffing activity."
So has state spending increased by 27 percent or 32 percent? Good question and we're working on unraveling the discrepancy. There shouldn't be a $1.2 billion difference between OFM and LEAP on how much the state is spending.
Either way the non-partisan Senate Ways and Means Committee projects a $2.5 billion deficit for 2009-11.
Apparently some employees at the U.S. Postal Service (USPS) think happy hour is best when on the taxpayer's dime. A U.S Government Accountability Office (GAO) audit released yesterday found:
"USPS paid over $13,000 for 81 conference attendees to dine at an upscale steak restaurant in Orlando, Florida, in 2006. The dinner, which cost over $160 per person, included steaks, crab, appetizers, and over $3,000 in alcoholic beverages purchased over a 5-hour period. We define this transaction as abusive . . . According to USPS, 108 individuals were invited to the dinner and 95 attended. While USPS provided us a list of the 108 invitees, it was not able to identify the 95 invitees whom it claimed actually attended. Further, independent, third-party evidence we obtained from Ruth’s Chris Steakhouse showed that 81 individuals attended the dinner."
This was just one of man!
y examples identified by GAO in its review of wasteful purchases made with federal credit cards. The audit further notes:
". . . during the 10-year period from fiscal year 1996 through 2006, acquisitions made using purchase cards increased almost fivefold—from $3 billion in fiscal year 1996 to $17.7 billion in fiscal year 2006 . . . the number of purchase cardholder accounts peaked in 2000 at more than 670,000, but since then the number of purchase cardholder accounts has steadily decreased to around 300,000 . . . we estimated that 41 percent of purchase card transactions were not properly authorized or purchased goods or services were not properly received by an independent party (independent receipt and acceptance). We also estimated that 48 percent of purchases over the micropurchase threshold were either not properly authorized or independently received. Further, we found that agencies could not provide evidence that they had possessio!
n of, or could otherwise account for, 458 of 1,058 accountable!
and pilferable items."
Other examples of federal credit card waste:
From October 2000 through September 2006, a cardholder at the Department of Agriculture (USDA) fraudulently paid over $642,000 to a live-in boyfriend who shared the same bank account as the cardholder. The $642,000 was used for personal expenditures, such as gambling, car loan and mortgage payments, and other retail purchases. The activities took place over a 6-year period, but were not detected by the agency until a whistleblower reported the cardholder to the agency’s Office of Inspector General in 2006. The cardholder was sentenced to 21 months in prison and ordered to pay restitution of over $642,000.
A postmaster at USPS used his government purchase card to fraudulently subscribe to two Internet dating services over 15 consecutive months (April 2004 through October 2006). The monthly charges for these dating services were the only charges that appeared on the cardholder’s monthly statements during this period; yet each of these charges was authorized and paid for by USPS. The cardholder paid restitution of over $1,100 but faced no disciplinary action for this fraud.
It would be interesting to see if the same types of credit card abuses are happening at the state level. Perhaps this is something the State Auditor will look into.
Speaking of GAO, former U.S. Comptroller General David Walker will be delivering the keynote lunch address at our Government Reform Conference on April 15. Details here.
Governor Christine Gregoire signed into law today SB 6818 (Promoting transparency in state expenditures). The bill is based on Washington Policy Center’s (WPC) recommendation for the state to adopt a searchable budget website. It passed the legislature unanimously.
Click here to see our press release on the bill signing.
The Governor is planning to finish bill signings tomorrow which means she'll be taking action on SB 6818: Promoting transparency in state expenditures. SB 6818 is based on WPC's recommendation for the state to follow the lead of the federal government and other states by adopting a searchable budget website. Hopefully with an April 1 bill signing the joke will be on those who don't want increased budget transparency, not taxpayers.
"By the time state lawmakers convene again next year, their results will be under the scrutiny of a new set of eyes -- yours.
If you care to find out how they're spending your tax money, that is.
In a welcome boost for government accountability, the Legislature unanimously approved the creation of a new Web resource that will allow citizens to quickly and intuitively access detailed, understandable information on state spending and taxes. Much of that information is already available on the Web, but it's hard to find. And once you find it, good luck making sense of it. The idea of this new site is to bring it all together in one user-friendly place where average taxpayers can see where their money is going."
The Herald also ran a news article about the new reform yesterday. The bill is currently awaiting the Governor's signature.
Jason Mercier is Director of the Center for Government Reform at Washington Policy Center. He is a contributing editor of the Heartland Institute’s Budget & Tax News, serves on the board of the Washington Coalition for Open Government, and was an advisor to the 2002 Washington State Tax Structure Committee. In June 2010, former Governor Gregoire appointed Jason as WPC’s representative on her Fiscal Responsibility and Reform Panel. Jason holds a Bachelor’s degree in Political Science from Washington State University.