Washington Policy Blog

Bill drops to privatize state's workers' comp system

January 14, 2010 in Blog

For years the business community, representing both large and small businesses, has asked that the state-run workers' compensation system either be privatized or that the system should be amended to allow for private sector industrial insurance companies to compete with the state-run system. Washington is only one of four states that do not allow for competition in this area. And given the 7.6% 2010 average rate increase, businesses are looking for some relief. 

HB 2879 introduced today, looks to do just that. It aims to:

"Create an efficient and cost-effective industrial insurance system for the benefit of both employers and workers by introducing competition into the system through a choice of insurance carriers from whom employers may purchase industrial insurance;

Provide workers the benefits of safety systems developed by both private enterprise and by government;

Improve the state's economic climate by providing the private sector with the opportunity to engage in the industrial insurance business with appropriate standards and oversight; 

Eliminate a government monopoly with respect to industrial insurance choices for small employers and provide private sector insurance choices for all employers; and

By July 1, 2011, make Washington a state in which employers may self-insure or obtain private sector industrial insurance and eliminate Washington's state-run industrial insurance fund."

Over the past year there have been several examples of other states that have either privatized their state-run system or opened up their industrial insurance market to private competition

This news comes on the heels of the state auditor's report from last week that warned that one of the workers' comp funds has a decent chance of becoming insolventover the next two years.

 So, does this bill have a chance in this legislature? Perhaps that's not the goal, as Erik Smith over at Washington State Wire reports. This could just be a precursor to a statewide initiative this fall. 

Sound Transit: $10,000 for art on plywood construction wall

January 14, 2010 in Blog


Act as the lead artist in scoping and overseeing projects that will be created by a variety of artists for the plywood Construction Wall surrounding the site where the Capitol Hill light rail station is being built on Broadway between John and Denny streets in Seattle.

Make the fence surrounding a block of the Broadway neighborhood active, interesting and relevant during the multi-year construction period with art that engages the residents and visitors of the dense urban neighborhood.

Read the full request.

Economic stimulus benefits come home to roost

January 14, 2010 in Blog

A year ago the term "economic stimulus" was used to justify almost any policy proposal in either Washington D.C. or Washington state. We warned state lawmakers that true economic stimulus should focus on cutting taxes and regulations on private sector industries, thereby allowing them to grow. Increasing costs, either through tax hikes or regulatory proliferation, would cause businesses to contract. Obviously, if an economy is in retraction that means more people are out of jobs and relying on government safety nets. And if the government expanded the scope of the safety nets then that would result in higher costs to taxpayers...You see where this downward spiral is going. 

Some new information from the state's Employment Security Department shows why we were concerned with state lawmakers' attempt at boosting unemployment insurance benefits in order to stimulate the economy. In fact, we wrote on this several months ago as well, but now there are updated numbers for the entirety of the stimulus program. 

Last year lawmakers passed ESHB 1906, which, among other things, provided an additional $45 per week benefit for UI recipients through the end of 2009. The UI trust fund was very healthy at that time and so drawing down the trust fund by $111 million (as forecasted) wouldn't make much of a dent. We understood that, but were wary that drawing down the trust fund too much could result in tax increases in 2010 and beyond and that no one in their right mind thought that the economy would have turned around enough by January 2010 in order to justify the increased costs to the system and therefore businesses.

Sure enough, the $45 economic stimulus UI benefit ended up costing the state not $111 million as originally forecast, but $247 million -- they missed the forecast by 123%. Obviously, no one could have known just how bad our economy was going to get, but the forecast predicted 7.5% unemployment, not the 9-9.3% Washington has had the last several months. 

And lo and behold, last month ESD announced that they would have to raise UI premiums an average of 54% for the business community in 2010. And yesterday, in a hearing before the House Commerce & Labor Committee (slide 13), department officials basically forecasted that UI rates would continue to increase through 2012 to rates more than double that of 2009. As one legislator asked at the hearing [and I'm paraphrasing], "Shouldn't UI taxes go up in good times and down in bad times?"

Obviously the $45 benefit is not the sole cause for the much higher tax rates that businesses will have to absorb the next several years, but the principle remains. When lawmak!
ers expand the scope and cost of government benefits, whether those benefits stimulate the economy or not, someone is going to have to pay for it. This idea was touted as economic stimulus and while the benefit surely helped those who received it, that money was never going to be able to grow the economy the way some policymakers claimed. A big reason is that this money has to be removed from businesses over the next few years in the form of higher taxes. That's not economic stimulus. That's more like a loan taken out on the back of the business community without the accompanying benefit.

Bills propose advertising on school buses and commercial business at rest stops

January 14, 2010 in Blog

It looks like lawmakers are starting to get serious about exploring opportunities to partner with the private sector to increase state revenues.

Here are details on two bipartisan bills introduced today.

SB 6465 - Authorizing certain commercial activity at state-owned safety rest areas:

"To the extent permitted under federal programs, rules, or law, the department may enter into a lease with private entities allowing them to operate food or beverage retailers, restaurants, grocery and convenience stores, service station businesses, or other private enterprises that are of benefit to the traveling public at state-owned safety rest areas." (Section 1, 1)

SB 6466 - Authorizing advertising on sch!
ool buses

"The rules of the state superintendent of public instruction under RCW 46.61.380 governing the marking of school buses shall allow school districts to place advertising and educational material on and in school buses if such advertising and education material is approved by the school district board of directors. The advertising and educational material shall not be placed on the front or rear of a school bus." (Section 1,1)

It is encouraging to see lawmakers putting these proposals up for public debate.

Study: Cigarette smuggling will grow with tax increase

January 14, 2010 in Blog

The Michigan-based Mackinac Center issued a warning yesterday that a $1.00 increase in Washington's cigarette tax would "ensure that half of all cigarettes smoked in Washington are smuggled in from other states."

From Mackinac's blog:

In December 2008 we published a study "Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review." The study reviewed the efforts of states trying to fight the growth of smuggling, documented the history of cigarette taxes in Michigan, New Jersey and California, and modeled the level of illicit tobacco use in states due to cigarette tax rates. We recently updated the model to include changes to the Federal Excise Tax, as well.

The 2008 study already found that Washington has the fourth highest smuggling rate. In applying the model to the proposed tax increases, we found that a $1.00 per pack increase in taxes would jump the state's smuggling rates from 39.3 percent to 51.5 percent.

Legal sales would decrease by at least 20 percent over 12 months. This is evidence not of people quitting smoking due to higher taxes, but of individuals and businesses finding ways to evade cigarette taxes. A 2004 study helps confirm this by finding that up to 85 percent of the sales tax decrease comes from tax avoidance rather than actual declines in smoking.

The bulk of the cigarette smuggling increase comes from commercial smuggling--of organizations that import cigarettes from lower tax areas or through counterfeiting with distribution systems in state. If the tax hike passes, it's expected that 3 out of 10 cigarettes in Washington will be through these me!

The House Committee on Finance heard public!
testimony this morning on HB 2493: Concerning the taxation of cigarettes and other tobacco products.

Among other things the bill would increase the state's cigarette tax by $1.00 per pack.

Federal transit funding criteria now to circumvent performance

January 14, 2010 in Blog

Dr. Sam Staley, a transportation policy expert at Reason Foundation, reports on USDOT Secretary Ray LaHood's address to the TRB conference happening this week in Washington D.C. Staley's observation is worth noting here:

In what can only be considered a bizarre turn in a presidential
administration committed to so-called "evidence based" public policy,
the U.S. Department of
Transportation has announced
it will approve public transit investments
based on political popularity and reduce the importance of cost-effectiveness
and performance in its approval criteria.

Sound crazy? Here is a excerpt from the official, formal
remarks U.S. Department of Transportation Secretary Ray LaHood

delivered at the keynote luncheon address at the 89th annual meeting of the Transportation Research Board, perhaps the
world's largest conference of transportation professionals:

"We’re going to free our flagship transit capital program from
long-standing requirements that have allowed us only to green-light projects
that meet very narrow cost and performance criteria.

"Instead, as we evaluate major transit projects going forward, we’ll
consider ALL the factors that help communities reduce their carbon footprint,
spur economic activity, and relieve congestion.

"To put it simply: We WILL take livability into account.

"This new approach will help us do a MUCH better job aligning our
priorities and values with our investments in transit projects that truly
strengthen communities.

"We’ll finally be able to make the case for investing in popular
streetcar projects and other transit systems that people want – and that our
old ways of doing business didn’t value enough."

The emphasis is in the original remarks.

Did his real remarks reflect the formal remarks? Yes. I was there.

CES/TPS Wrap up: The future is bright but uncertain

January 13, 2010 in Blog

This post is a few days late; the legislative session often has a way in bumping other projects. Now that the Consumer Electronics Show and Technology Policy Summit wrapped up this past weekend, the feel from both the show and the policy roundtables is that we are but at the cusp of something big. But at the same time, many of us wandering the immense halls of the Las Vegas Convention Center were nervous about where some of the talked-about government policies could take the communications industry.

Should government compete with the private sector?

January 13, 2010 in Blog

The Governor said yesterday in the State of State that "Jobs are the way out of this recession." Based on a bill introduced today, some lawmakers believe that one way to increase private sector jobs is to stop government from providing commercial type activities.

Here are some of the details from HB 2808 - Regarding commercial activities by state government:

Sec. 1. (1) The legislature finds that in the process of governing, the state of Washington should not engage in commercial activity in competition with its citizens. The legislature finds that the competitive enterprise system, characterized by individual freedom and initiative, is the nation's primary source of economic strength, and that the growth of pr!
ivate enterprise is essential to the health, welfare, and prosperity of the citizens of the state of Washington. The legislature further finds that the role of the private sector is to provide commercial products and services for which there is demand in the marketplace, while the role of state agencies is limited to performing functions that are in the public interest and inherently governmental in nature.

(2) The legislature therefore declares it to be the general policy of the state that state agencies are prohibited from providing to the marketplace for a fee those products or services that could be obtained from a private enterprise . . .

Sec. 2. (1) State agencies are prohibited from engaging in commercial activities for a fee, unless they are granted an exception by the office of financial management.

Continuing this theme, Sen. Joe Zarelli (R-18) issued a new "Budget Tidbit"!
today focusing on the need for the state to take advantage of the seldom used competitive contracting reform adopted in 2002. Zarelli recommends that the state enact a Competition Council to determine "the privatization potential of a program or activity and performing a cost-benefit analysis."

We highlighted how other states are utilizing Competition Councils in our recent competitive contracting study.

Interesting business bills begin dropping

January 13, 2010 in Blog

One of the fun activities when the Legislature kicks off its session is to peruse the bills that are introduced. Keep in mind that for every passed bill there are 3-4 bills introduced that are not passed; in fact, many don't even get hearings. But it is still fun to highlight some of the more "interesting" pieces of legislation (a great tool to track legislation is over at washingtonvotes.org).

Two that would affect small businesses if passed:

HB 2737 -- would require employers to get waivers from the Department of Labor and Industries in order for employees to have intermittent rest breaks instead of the Department-required scheduled rest breaks. Employees are entitled to ten minutes of break time for every four hours worked, with a 30-minute break time after working five consecutive hours. 

HB 2764 -- would protect employees "from adverse employment actions because of influenza." That's right. It would be illegal to discriminate against an employee for taking time off due to an outbreak of influenza. Problem is, it is already illegal to discriminate against an employee for sickness, but not expressly influenza. 

There will certainly be many more interesting pieces of legislation forthcoming. Stay tuned. 

Light rail misses 2009 ridership target by wide margin

January 13, 2010 in Blog

According to Sound Transit’s ridership figures from its
first six months of operation, the initial light rail segment between downtown
Seattle and the airport carried an average of 14,806 trips per weekday.

The following table summarizes the average number of weekday
trips by month since the line opened in July.

Average trips per  weekday, 2009














Six Month Average



But Sound Transit has projected ridership would be much
With the opening of the airport segment in December, Sound Transit
officials promised light rail would carry an average of 21,000 riders per
weekday.  Yet average ridership by the
end of the year (December) was only 14,639 trips per weekday. That is 31.3 percent less
than what Sound Transit officials said it would be.

Even if you only count the average weekday ridership since
the airport segment opened on December 19th (eight days) it still
only carried 16,809 trips per weekday, which is 20 percent less than what
Sound Transit officials promised.

Either way, Sound
Transit officials failed to deliver their promised ridership projections for 2009, and not by just a
little but by a wide margin (20-30%). Officials will probably point to the
economy as the reason for chewing into their higher estimate. But the region
has been in a recession for about two years and as you can see from this press
release in July
, Sound Transit still promised 21,000 trips as recently as five
months ago!

Here is the full ridership report obtained by the Seattle Times.

The State of the State's Commitment to Eco-Fads is Strong

January 12, 2010 in Blog

For those on Twitter, you can follow the Environmental Center @WAPolicyGreen

In her State of the State address today, the Governor announced a program to retrofit state buildings with a "green building program" she claims will save $60 million. Washington politicians frequently make such claims, but in the past they have been consistently inaccurate and even retracted by the agencies overseeing the projects.

Proposing projects with a history of failure is not only bad for taxpayers, it also wastes resources that might truly promote environmental sustainability.

·         In 2005, the Governor signed legislation requiring schools to meet “green building” standards, claiming that such buildings would use 30-50 percent less energy. Since that time, however, audits show that “green” schools in virtually every district use moreenergy per square foot than other schools in the same district. In the Tacoma, Bellevue, Everett and Spokane school districts, “green” schools use 30 percent more energy per square foot than schools built just before the law.

·         The Office of the Superintendent of Public Instruction, the Department of Ecology and school district directors have all now admitted that these “green” schools don’t save energy.

·         The state currently has a program to retrofit buildings to improve energy efficiency. Savings, however, are not based on actual performance, but projections that often prove to be inaccurate. General Administration has not audited the information to see if those projections are accurate.

·         A federal audit of a similar program found significant problems with the projections and auditing so significant that the program may actually spend more money than it saves. The report noted that “the Department may risk spending up to $17.3 million more than it will realize in energy savings.”


As long as Olympia continues to focus on costly and ineffective eco-fads like "green" buildings, Washington will continue to waste resources and opportunities for environmental improvement.

Public records reform introduced

January 12, 2010 in Blog

The recommendations of State Auditor Brian Sonntag's and Attorney General Rob McKenna's Open Government Task Force have taken bill form. HB 2736 and SB 6383 (Establishing the office of open records) was introduced this afternoon.

According to the bills, a requester seeking relief from a records dispute may either use the new office of open records or the current legal remedies available. The major change, however, is that a requester would not be entitled to penalties for a records violation unless they first sought relief from the office of open records.

;However, in no event may a court award a penalty unless such person received a final order from the office of open records before prevailing against an agency in court pursuant to this subsection." - (Section 4, 4)

We made this recommendation at the October 5 meeting of the Open Government Task Force to help incentivize the use of the new office of open records while not restricting the right of citizens to go directly to court for relief.

Initiative 728 class-size reduction initiative has been repealed, apparently

January 12, 2010 in Blog

I was doing some routine research on the education budget, and to my surprise discovered that lawmakers have repealed, in effect, Initiative 728, by cancelling the Student Achievement Fund and rolling its money into General Fund Spending, for this year anyway.  Federal stimulus funds were instead given directly to school districts, amounting to $444 million in SY 2008-9, and $255.6 million budgeted for SY 2009-10. 

Initiative 728, passed by voters in 2000, transferred a portion of the state property tax from the state general fund to the Student Achievement Fund. This fund has been used by school districts for class size reduction, extended learning opportunities for students, professional development for educators, early-childhood programs, and necessary building improvements to support class size reductions or extended learning.  

Before Initiative 728 was cancelled, some school districts chose not to use these funds to reduce class sizes; other school districts achieved class sizes reductions of one to two students per class, a negligible amount by any measure. 

Cancelling Initiative 728 gives school districts more flexibility over school spending, which is a step in the right direction.  But it is a step in the wrong direction to tell voters that they must pay higher taxes or class sizes will increase, especially when lawmakers are aware that they have effectively, without a vote, cancelled the class-size reduction Initiative 728.

It would be far better for lawmakers to inform voters that reducing class size is nowhere near as important for student learning as having an effective teacher.  Teacher effects are much stronger than class-size effects.  As Mortimer Zuckerman puts it:  "We would have to cut the average class almost in half to pick up the same benefit that a student gets after switching from the average teacher to a teacher in the 85 percentile."  But then lawmakers would have to make necessary legislative changes and ban those collective bargaining rules which prevent school principals from improving teacher quality. 

Next year funding for I-728 must be made up, as required by HB 2356.  Over $700 million will be poured back into class-size reductions. 

Liquor privatization bill to have hearing

January 12, 2010 in Blog

There will be a public hearing on Thursday at 3:30 p.m. to consider SB 6204 - Privatizing the sale of liquor. This reform has surfaced since the end of prohibition but is receiving added attention in light of the state's budget deficit and a favorable report by the State Auditor's Office highlighting the potential savings from ending the state's liquor monopoly.

State Auditor Brian Sonntag was recently interviewed by KING 5 News and said, "Is it a core function of the state to be selling alcohol? I don't think so."

The state's liquor monopoly was also the subject of this editorial today in the Longview Daily News: Don't ignore long-term benefits of privatizing liquor sales.

Here are additional details on Thursday's hearing:

Labor, Commerce & Consumer Protection -  01/14/10  3:30 pm
Full Committee
Senate Hearing Rm 4
J.A. Cherberg Building
Olympia, WA

REVISED 1/11/2010 4:10 PM

Public Hearing: 

   1. SB 6239 - Making technical corrections to gender-based terms.
   2. Exempting pipe tobacco from restrictions on shipping tobacco to consumers in Washington [S-3480.1].
   3. An act relating to creating a beer and wine tasting endorsement to the grocery store liquor license [S-3579!
   4. Concerning beer and wine tasting a!
t farmers markets [S-3563.1].
   5. SB 6204 - Privatizing the sale of liquor.

Gov owned car company gone wild: GM chief wants higher federal gas tax

January 12, 2010 in Blog

Its difficult to imagine a private car manufacturer calling for higher federal gas taxes. Generally, car manufacturers want to decrease the cost of car ownership. But when that car manufacturer is owned by the United States government, its interests change.


GM chief wants higher federal gas tax

By: Mark Tapscott
Editorial Page Editor

01/12/10 8:45 AM EST

International Auto Show time in Detroit, so senior executives from
automakers around the world are in the Motor City this week showing off
their latest wares, including concept vehicles that may or may not give
hints to their future products, and making pronouncements on topics far
and wide.

So you never know what to expect in the way of news from Detroit.
Take, for instance, Ford's announcement yesterday that due to growing
demand, it is ramping up production of two of its least fuel-efficient
products, the Ford Expedition and Lincoln Navigator SUVs.

Expedition sales are up 45 percent, compared to a year ago, while
Navigator sales have climbed fully 60 percent for the same period,
according to Ford Americas president Mark Fields. He was quoted by Automotive News, the trade publication.

But over at Government Motors - formerly known as General Motors -
one of its most gregarious and visible executives is calling for a hike
in the federal gas tax.

"You either continue with inexpensive motor fuels and have to find
other ways to incent the customer to buy hybrids and electric vehicles,
such as the government credits," Lutz told journalists at the show
yesterday, according to CNN Money.
"Or the other alternative is a gradual increase in the federal fuel tax
of 25 cents a year, which in my estimation would have the benefit of
giving automobile companies a planning base, and giving families that
own vehicles a planning base."

Lutz expressed frustration that buyers react so quickly to changes
in gas prices: "Every time gas prices go back down, everybody starts
buying big stuff again. Gas prices go up a buck, the big stuff is
unsellable and everyone wants small cars. Go figure. It's like the
collective memory is about three weeks long. We can't run a business
that way."

Lutz may have an ulterior motive in calling for a federal gas tax
increase. He has been a vigorous advocate within GM for the Chevrolet
Volt electric plug-in that will be unveiled this fall. Making gas more
expensive would tend to help sales of vehicles like the Volt because
they use less gas than conventional vehicles.