Washington Policy Blog

OFM asks agencies: Are your activities core services; can they be contracted?

June 9, 2010 in Blog

The Office of Financial Management (OFM) released the state's 2011-13 budget instructions yesterday to help focus the information agencies are required to use for their budget requests. Included are details on the "new" budget process the Governor plans to unveil this summer. From OFM's cover memo:

"It will be important for you to recognize the following aspects of our budget approach when you are considering your budget requests:

  • The Priorities of Government process will continue to be the framework for a zero-base budget approach. Although Carry-Forward and Maintenance Level remain meaningful benchmarks, the assumption is that all state activities must re-qualify for inclusion in the budget.
  • The POG process will focus on six high-level value statements listed in Section 1.1 of the Budget Instructions. These values help define our statewide outcomes.
  • The Governor will be asking more questions about existing services, as well as alternative forms of service delivery or financial support, including:
  • Is the activity a core service? (Challenge this assumption thoroughly.)
  • Does state government have to perform the activity, or can it be provided by means other than state government?
  • Can the activity be eliminated or delayed in recessionary times?
  • Are there more cost-effective, efficient ways to do the activity? Why not?
  • Does the activity need to be paid for with state funds? Should user fees be charged or raised?
  • Are there federal funds or other fund sources available to support this activity?
  • Can the activity be the subject of a performance contract?
  • Can the activity be the subject of a performance incentive?
  • Performance will play a significant role in budget choices. Not only are we looking at program outcomes as a means of relating agency functions to statewide objectives, but we are seeking more opportunities to tie funding to performance.
  • Budget requests should include innovative ways to drive down the costs of essential services, so critical needs can continue to be met while using less of our resources."

It is very encouraging to see agencies being asked to answer these questions, especially with the state once again facing a multi-billion dollar budget deficit.

Olympian calls for more legislative transparency

June 9, 2010 in Blog

The Olympian today called on the Legislature to follow our recommendations to improve legislative transparency. From the editorial:

In the waning days of the regular legislative session, Senate Majority Leader Lisa Brown attempted to justify the indefensible. When questioned on Senate procedures that were squeezing the public out of the lawmaking process, Brown said, "I think our processes are much more transparent than when I entered the Legislature."

Brown is wrong and the proof comes in a recently released report by the Washington Policy Center that details a series of abuses by majority Democrats as they rushed sometimes flawed bills through the legislative process — often withou!
t giving the public time to read the bills, let alone react to them.

Granted, lawmakers faced a huge hurdle this year — a $2.8 billion budget deficit and the need to raise taxes to fill part of that hole. Tax increase votes are not something lawmakers want to do in an election year.

But the magnitude of the task in front of them did not warrant the Democrats’ tactics to deny public input. Their secretive and obstructive tactics are a violation of the public’s trust . . .

The policy center offered three recommendations to remedy the abuses:

  •  Require 72-hour public notification before any bill could receive a public hearing.
  • Prohibit title only bills. No public hearing or vote should occur on a ghost bill.
  • Prohibit votes on final passage until the final version of the bill to be approved has been publicly available for at least 24 hours.

Those are reasonable recommendations that would put the public back in the public policy-setting process.

Despite claims to the contrary by Senator Brown, transparency and openness were absent from the 2010 legislative sessions.

The Columbian has also called on the Legislature to adopt our proposed transparency reforms.

Politics before Schools: Goldmark Release Ignores $35 Million in School Cuts

June 8, 2010 in Blog

Lands Commissioner Peter Goldmark sent out a press release today attacking Attorney General Rob McKenna regarding an issue of eminent domain in Eastern Washington. The headline screams "McKenna refuses to stand up for Washington's schools, Goldmark is forced to seek other options."

Goldmark said he was concerned that the value of trust land would be diminished, leading to lower revenue for school construction since schools are the primary beneficiaries of revenue from trust land leases. The release quotes Goldmark saying:

"We have a fiduciary responsibility to manage the trusts for current and future generations. I believe that Okanogan PUD’s proposal will have unacceptable negative impacts, including increased fire risk and higher management costs for the trusts."

This is the strongest statement Goldmark has made supporting the state's obligations to manage trust lands for the benefit of schools. In the past, he has minimized this obligation, advocating policies that would reduce the value of state lands and harming schools.

What precipitated the change? Perhaps the cost is very high, significantly reducing funding needed at a difficult budget time. How much will this decision cost the state's schools? Here's what Goldmark's spokesman Aaron Toso had to say in an e-mail to me today:

"It is difficult to put a fine point on the dollar amount that schools would lose from this eminent domain action into the future. ... It is also impossible to see into the future and guess where the market for commodities may be for our grandchildren’s children—or even what the commodities may be (i.e. forest biomass, carbon sequestration, habitat credits or clean energy)."

Toso's e-mail can be shortened to: "I don't know."

This concern is especially ironic since many of the policies Goldmark advocates will have significant costs to taxpayers and the schools. For instance, Goldmark is advocating increasing the amount of state forest certified under the Forest Stewardship Council, a regulatory scheme favored by environmental activists. Such a move would reduce the amount of timber harvested, and revenue to the schools, by an estimated 25 percent. The Department of Natural Resources own numbers show that using this standard would reduce the revenue in the South Puget Sound region by 30 percent.

Statewide, timber harvests yielded $145 million for schools and other state programs in 2009. Using FSC statewide could cost taxpayers more than $35 million a year in lost revenue.

Sadly, this is a consistent trend with Commissioner Goldmark. Substitute politics for science and data. While claiming to be concerned about the impact this ruling will have on the schools, his own policies will cost schools tens of millions each year by the Department's own estimates.

People respond to incentives? Who knew?

June 8, 2010 in Blog

The Puget Sound Business Journal reports that

"The number of pending home sales in Western Washington plummeted in May
as federal tax credits for home buyers expired.

The number of pending sales in the 21 Western Washington counties
surveyed by the Northwest Multiple Listing Service (NWMLS) fell to 5,242
last month, down more than 44 percent from 9,438 in April. In King
County, the number plummeted to 2,169 from 3,855 a month earlier."

Similarly, last year with the "Cash for Clunkers" (CARS) program, Washington auto dealers saw a huge increase during the eligibility period for the tax incentive as cautious consumers came out of the woodwork. Environmental benefits (or lack thereof) notwithstanding, the tax incentive proved to be a boon to the auto industry -- at least in the short term.

But, as our state's chief economist, Dr. Arun Raha, pointed out last year (page 26), the CARS program merely shifted auto purchasing from the future (meaning now and the past few months of 2010) to the present, at that point late Summer, early Fall 2009.

Dr. Raha says that

he data] shows a blip due to the Cash for Clunkers program which temporarily boosted sales and registrations. Not only is that program no longer in effect, but it undoubtedly pulled sales forward, reducing sales in later months."

Keep these two examples in mind as we look forward to 2011. Dr. Art Laffer (of the eponymous Laffer Curve) in The Wall Street Journal predicts the long-feared "double-dip" recession due to the President and Congress' unwillingness to extend the Bush tax cuts. Why? Because businesses will take steps to realize as much income as they can during 2010 at the expense of income in 2011, which will be taxed at a much higher rate.

What happens in January 2011? The highest federal personal income tax rate will g!
o to 39.6% from 35%. The highest dividend tax rate increases t!
o 39.6% from 15%. The capital gains tax rate will rise to 20% from 15% and the estate tax goes from 0% to 55%.

Laffer says,

"If people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be."

It is clear that people and businesses respond to incentives, especially when their personal or corporate incomes are on the line. This is why high-wealth individuals fled New Jersey in the last several years for low-tax states, why some family-owned businesses have left Washington for states with no estate tax, and why some businesses are looking to relocate from California, as a high-tax state, to Washington and Idaho, states with les!
s of a tax burden.

In the first two examples, tax incentives (essentially temporary tax cuts) spurred economic activity, generating revenue for businesses and government. In the latter example, tax increases will surely artificially depress economic activity, leading to more strain on government and the private sector.

Policymakers from D.C. on down to city hall can make the smart decision to forgo increasing costs on a business community that is already nervous about the future. Smart, streamlined and predictable tax policy is important in economic development, especially during recessionary periods.

Why Seattle hates Macy's: my sidewalks are better than yours

June 8, 2010 in Blog

Untitled Recently, the Seattle City Council decided to increase a permit fee for the Macy's skybridge from $300 per year to $31,185 per year. That is an increase of more than 10,000 percent!

With the City's recent bend toward improving pedestrian facilities, discouraging skybridges seems counterproductive. 

City Official: The new permit formula is "essentially ensuring that the public is
getting the fair market value for this encroachment on their right of

A skybridge is nothing more than an elevated sidewalk, which was paid for by a private company, not taxpayers. If anything, a skybridge expands the public right of way with no public cost.  

But I think the quote of the day goes to Councilmember Jean Godden:

"What a skybridge does is it takes people off of the right of way and
puts them up in the air, and leaves usually the people who aren't good
enough to go in the buildings down below," City Councilmember Jean
Godden said. "It's really not very friendly."


There is just no logic in this statement and it seems to suggest that Councilmember Godden opposes any form of conveyance that is not public or on the surface, such as bridges, tunnels or elevated rail lines. Or maybe she just opposes the choice people have to use a facility that is more convenient than the City's?

Rational choices mean less people choose public transit

June 7, 2010 in Blog

Here is an article by Steven Polzin called The Cost of Slow Travel. He points out that public transit is slower than other travel modes and if you value time, the additional delay becomes a cost.

Transit’s slower average travel speeds result in approximately 3
billion hours annually of additional travel time.  If valued at the TTI
time value of $15.47 per hour, this equates to approximately $44
billion annually in lost productivity due to travelers having or
choosing to use transit.  Thus, the few percent of persons who use
transit (approximately 2% of total person trips are on transit {5% of
work trips} and approximately 1% of person miles of travel) incur 70%
as much lost time relative to driving as is incurred by the total of
auto travelers due to congestion, $44 billion for transit users versus
$64 billion for driving in congestion.

Polzin admits his calculations are not precise and ignore many factors. But his overall point is valid:

One of the reasons the country and individuals have become more
productive and the country has had growing gross domestic product over
the past several decades is that we have been highly mobile and travel
has gotten faster until recent years.  Part of the reason for faster
travel has been the shifting from slow to faster modes and facilities. 
There are lots of good reasons to enable and encourage use of
alternative modes but analysis of the consequences should strive to be
objective about the travel time and productivity consequences.

Columbian endorses WPC's legislative transparency reform recommendations

June 3, 2010 in Blog

The Columbian today called on the Legislature to follow our recommendations to improve legislative transparency. From the editorial:

Would you believe that the Legislature on many occasions this year actually was in too big a hurry? That might seem hard to believe, what with the lawmakers needing a long, drawn-out special session to finish their business. But according to a recent news release from the Washington Policy Center, the Democrat-controlled Legislature on numerous occasions this year rushed through decisions that — perhaps intentionally — worked against the principles of a fully informed and participating public . . .

This kind of closed-door government in Olympia must stop, and Mercier has some good ideas about how to stop !

“Require 72-hour public notification before any bill could receive a public hearing.” How could any legislator, regardless of party, oppose such a common-sense rule?

“Prohibit title-only bills. No public hearing or vote should occur on a ‘ghost bill.’ ” Such a shenanigan, deliberating on an undefined topic, is reprehensible in the public arena.

“Prohibit votes on final passage until the final version of the bill to be approved has been publicly available for at least 24 hours.” What are bill sponsors afraid of that would make them railroad a bill to approval? Possible rejection by the public?

What we’re talking about here is transparency and, with a few exceptions that are too rare to even describe in much detail, transparency in government is an attribute, not a liability.

We would like to see legislators routinely observe Mercier’s three practical recommendations. He, though, believes the best !
way to make sure lawmakers behave is through additions to the !
state constitution. That might be the best approach, but until then, here is our challenge: Which legislator(s) will step forward to lead this crusade toward transparency? Might it be a bipartisan coalition of open-government advocates? Might he or she or they be from Southwest Washington?

The lack of transparency by lawmakers this year drew the ire of several state newspapers. Here is a sampling of those editorials:

  • Public input? Who cares?, Everett Herald
    increasing audacity, key state legislators are taking control from the
    people and seizing it for themselves. Amid the difficult process of
    closing a $2.8 billion budget shortfall, they’ve skirted, waived or
    ignored the public’s right to know what they’re up to and comment on
  • A bad example of legislative 'transparency', Olympian
    the waning days of the regular legislative session, Senate Majority
    Leader Lisa Brown, a Democrat from Spokane, claimed the Legislature is
    much more transparent than it was when she entered the Legislature. 
    Brown is wrong . . ."
  • Sunshine and Clouds in Olympia, Kitsap Sun
    bad news is that public access to information and hearings about
    legislation has been ... challenging. There’s been a flurry of
    'title-only' bills introduced and set for hearings, sometimes on short
    notice, and with no timely public information on their content. Members
    of the public deserve better than that — and if they want to get it,
    they’d better say so this fall to those who seek to represent them in
    the Legislature."
  • State government clings to double standard, News Tribune
    it any wonder that city and county officials clamor for relief from
    open meetings and records laws when they see their counterparts in
    state government behave as they do? State officials profess a belief in
    public disclosure. They’re just not sure it always applies to them.
    Lawmakers in particular hold themselves apart from the state’s sunshine
    laws. They caucus in secret for any reason and insist that their
    correspondence is somehow constitutionally protected from public
    dissemination. They also apparently reserve the right to skip public
    process in the interests of expediency."

Hopefully lawmakers are listening to this growing citizen frustration with how business is being conducted and they will adopt common sense transparency reforms.

Edmonds School District has ample funding

June 2, 2010 in Blog

I was stunned to find this statement from School Board President Susan Phillips on the Edmonds School District website: “The dramatic reduction in state funding over the last several years limits our options.” 

King County's magic show on the West Seattle Ferry

June 2, 2010 in Blog

Last week, we released a study showing King County's take over of the West Seattle Ferry from Argosy Cruises (a private ferry operator based in Seattle) will cost three times more over the next decade.

In this Seattle Times article, King County officials disputed our analysis and claimed our estimate showing the cost differences was too high.

Here is a table showing the full budget for the West Seattle Ferry in 2009 (Argosy) and 2010 (King County). Judge for yourself....(see footnote #2 for source). King County's labor costs alone are higher than the entire annual operating budget under the public/private model.


Note: Argosy only operated the route for seven months. King County will operate the route for nine months this year and a full twelve months next year. To make a fair comparison, you must annualize the costs. Argosy's cost is about $115,000 per month. King County's cost is about $339,000 per month.

New Study Highlights Seattle's Competitive Advantages/Disadvantages

June 2, 2010 in Blog

International consulting firm KPMG recently released, "Competitive Alternatives," a new study gauging several city's competitive advantages and disadvantages in the global marketplace. Seattle scored relatively well in overall U.S. average scores, but ranked poorly among the 20 largest metropolitan areas. We also ranked 13th most expensive city among the top 41 global cities. Tokyo was the most expensive -- San Francisco the worst U.S. city; while Monterrey, Mexico was the lowest-cost city overall, Tampa, Florida earning top spot among U.S. cities.

This is important as businesses that rely on major metropolitan areas look for competitive alternatives, Seattle doesn't appear to be among the more competitive cities. The study looks at several different factors, mainly tax burden, labor costs, facility costs, transportation costs, utility costs, va!
rious HR rules and regulations and overall public policy.

One startling finding, however, shows that the U.S. in general is not competitive in several areas. In manufacturing, Canada, the Netherlands and Australia lead in the effective corporate tax rate category. In Corporate and IT Services, again Canada, the Netherlands and the UK lead. The U.S. does register well in R&D tax credits, but that's about it. We've written before about the need for corporate tax reform in the U.S. We simply aren't competitive in that category on a global scale. And Washington state would directly benefit from that because, as Governor Gregoire has said repeatedly, we are a global-oriented state. We do more business abroad per capita than any other state.

Washington state would greatly benefit from !
federal corporate tax reform. It would make Seattle and the Ev!
ergreen State an even more appealing place to start or expand a business.

This Bud's (now) for the state

June 2, 2010 in Blog

Remember the Budweiser commercials with the frogs croaking the slogan: Bud-Weis-Er? As of yesterday they are croaking a new tune in Washington: Tax-You-More.

To help remind their customers that the Legislature raised taxes on beer this year and they were running out of time to purchase at pre-tax increases prices, Budweiser ran a full page color ad in the Seattle Times on Friday (back page of the Sports section). The ad read (in-part):

"Dear Washington Beer Lovers:

Beginning June 1, the price of beer will increase due to the recent excise tax increase passed by the state of Washington. Budweiser wants to remind adult consumers that Memorial Day weekend is the last chance to take advantage of lower prices before the tax increase takes effect . . . "

Here is the full page ad

Along with your beer, as of yesterday you now have the privilege of paying more for bottled water, candy and gum.

You have another tax increase on your soda pop to look forward to beginning July 1.  Increased business and tobacco taxes already took effect May 1.

Unfortunately the budget adopted based on these tax increases neither tastes great nor is less filling with a multi-billion dollar deficit already projected for the next budget.

Seattle teachers' union allows quality teachers and performance pay at Hawthorne Elementary, West Seattle Elementary and Cleveland High

May 31, 2010 in Blog

Three Seattle schools will be allowed to operate outside of the strictures of Seattle's collective bargaining agreement with teachers. Normally, collective bargaining rules prohibit school managers from assigning teachers to their schools based on their effectiveness and from rewarding them for raising student achievement. See our recently released 

States go bust in blackjack budgeting

May 28, 2010 in Blog

The collective gasp being heard in capitols across the country is a result of Congress dealing gambling state officials a bust card in their game of blackjack budgeting. 

Earlier this month we highlighted how Washington was putting its faith in Congress to deliver $480 million in one-time federal Medicaid funds to help balance the budget. By leaving only $452 million in reserves, should Congress not come
through with the assumed $480 million, the Governor said she will be
forced to issue across-the-board cuts as required by law or call a special session. 

It looks like that is becoming more of a possibility with each passing day.

As reported by the National Conference of State Legislatures (NCSL):

"Last night, congressional leaders dropped the $24 billion extension of the enhanced match for Medicaid and Title IV-E programs authorized in the American Recovery and Reinvestment Act (ARRA)."

This was due to concerns with increasing federal deficits.

Responding to the news Governor Gregoire released this statement today: 

“I am certainly aw!
are of the pressure our congressional leaders are facing in the other Washington. Like them, I am too familiar with the struggles of deciding which government programs to support with tax payer dollars, while protecting our limited resources to maintain a strong financial footing as our state and nation move forward from the worst recession since the Great Depression. With that said, there’s no question that the programs Congress is currently considering will provide substantial help to our citizens, while ensuring economic growth.

Washington state has a lot at stake in a comprehensive federal jobs package – including nearly $500 million in FMAP money, as well as the extension of unemployment benefits for those looking for work and the Temporary Assistance for Needy Families program to help and provide work opportunities for struggling families. Each one of these programs has proven to create jobs while preventing our state from making further cuts that would hi!
nder economic growth . . .

I urge Congress to work toge!
ther to pass a package quickly. Our citizens, our communities and states across the nation are running out of time.”

According to my source at NCSL the FMAP funding is "Not dead but it's on life support. If this is going to happen it's going to have to happen before the July congressional recess." 

States that bet on Congress to help balance their budgets are learning the hard lesson that most gamblers eventually face: There is no sure thing when betting on the come.

Government Takeover Of West Seattle Ferry Triples Costs

May 27, 2010 in Blog

Last night, KIRO 7 (CBS) news in Seattle aired a special investigative
report based on our new study “King County Ferry Service Not as
Efficient as Private Operator.” You can read the story online here, and watch the video here.

Read the Policy Note that was the source for this story here >>

Here are the Key Findings:

  • This year, King County officials decided to cancel the public/private
    partnership with Argosy Cruises and operate the West Seattle Water Taxi
  • Annualizing costs shows Argosy Cruises was able to provide the same
    service for three times less money than a strictly government operation.
  • King County’s labor costs alone are higher than the entire operating
    budget of the public/private model.
  • Allowing Argosy Cruises to operate
    the West Seattle Water Taxi would save King County property tax payers
    nearly $30 million over the next ten years without sacrificing service.

Lawmakers passed 14% of tax or fee bills introduced in 2010

May 27, 2010 in Blog

The Office of Financial Management (OFM) has published its I-960 Bill Analysis Statistics for the 2010 Session.

According to OFM:

  • 206 tax or fee bills were introduced (7 percent of total bills introduced)
  • 29 tax or fee bills were adopted out of 337 total bills adopted (9 percent)

This means the Legislature approved 14 percent of the tax or fee bills introduced during the session. 

Here is a comparison with previous sessions:


  • 152 tax or fee bills introduced (3 percent of total bills introduced)
  • 39 tax or fee bills adopted out of 583 total bills adopted (7 percent)
  • 26 percent of tax or fee bills introduced adopted


  • 132 tax or fee bills introduced (4 percent of total bills introduced)
  • 14 tax or fee bills adopted out of 331 total bills adopted (4 percent)
  • 11 percent of tax or fee bills introduced adopted

Here are the I-960 updates for each tax or fee bill introduced:

Passed by voters in 2007, Initiative 960 required a two-thirds vote of the legislature to raise taxes. It also included several public information provisions. For each tax increase, the public was to receive:

  1. A description of each tax increase.
  2. A ten-year estimate of how much lawmakers increased the financial burden they place on taxpayers.
  3. A list showing how each lawmaker voted.
  4. Each legislator’s contact information.

Under Initiative 960, this information was to appear in the voters’ pamphlet for the November 2010 election. Since the Legislature suspended multiple provisions of I-960, Washington Policy Center will be publishing a "2010 Voters' Guide to Tax Increases" next month with the required details.