Washington Policy Blog

State Audit shows Puget Sound Partnership misuses taxpayer funds

May 14, 2010 in Blog

This week the Washington State Auditor released an audit, evaluating the use of public funds by the Puget Sound Partnership, the state’s lead agency on protecting the Puget Sound.

According to the audit the Auditor’s office found that:

“The Puget Sound Partnership circumvented state contracting laws, exceeded its purchasing authority and made unallowable purchases with public funds.”

And that:

“The Puget Sound Partnership failed to enforce the terms of its agreements with a foundation it created, incurring costs without clear public benefit.”

In an exchange with KUOW auditor Emily Johnson, who led the audit, stated:

“From their inception up until the date that we had finished the audit, there was just really no indication that they had ever made following state rules and regulations a priority….it is alarming and surprising.  And as an auditor, in a way, you’re used to finding things like this, you’re just not used to finding this many things.”

Johnson’s right, the results of the audit are alarming, unfortunately the results are not as surprising.  Reading between the lines, the audit highlights a state agency that displays lack of institutional control were politics prevail.

On Earth Day this year we released our critique on the past five years of environmental policies in our state.  Included in the analysis was a review of Partnership’s work.  To be fair, there are some good things coming from the Partnership, but we also noted that too often politics trumps policy.  We wrote:

“However, there have been several setbacks as well as indications that politics is always nearby…. There is a dramatic, and disappointing, example of this.  Announcing $92 million in funding for stormwater and toxic cleanups in the current budget, PSP also praised the allocation of $15 million toward the purchase of the Maury Island gravel mine.  This is despite the fact that the project is not listed as a priority concern on any scientific list of clean water needs in the Sound.  The emphasis from the PSP on this highly political project is disturbing evidence of the way politics threatens to corrupt a promising, scientific and priority-based process.”

Based on the results of the audit and the political games that have been played, it’s incumbent on the Puget Sound Partnership to prove they care as much about taxpayer green as they do being green and that they have the best interest of Washingtonians and the Puget Sound in mind.

UW set up for touchdown with new stadium funding plan

May 14, 2010 in Blog

After several false starts, the University of Washington has positioned itself to score a touchdown with its new funding plan to renovate Husky Stadium.

As reported by the Seattle Times

"For three years, the UW has tried in vain to persuade lawmakers in Olympia to help it collect $150 million in public money to go toward a $300 million stadium remodel. Now, as early as Friday, it plans to ask developers to come up with a new plan that doesn't rely on any tax dollars . . .

Both Evans and Woodward said the new proposal doesn't mean the UW has given up altogether on the idea of securing at least some public financing.

However, the proposal may simply confirm to lawmakers what some have argued from the beginning — that the UW needs to find a way to pay for the renovations itself without turning !
to taxpayers."

To avoid subjecting this potentially winning touchdown to yet another taxpayer instant replay challenge, the school should take the idea of additional public funding for the stadium completely off the table.

This may help to keep the in-state civil war between the Huskies and Cougars focused on the playing field instead of who is paying for the fields.

Washington State University has been moving forward with plans to renovate Martin Stadium without asking for public funds.

Spokane Mayor takes out budget knife, asks union workers to accept more responsibility

May 13, 2010 in Blog

Spokane Mayor Mary Verner today announced a budget outline for the upcoming fiscal year that trims some jobs, does not raise taxes, and asks city unions to accept more responsibility for the cost of their own health care.

The Mayor's proposal seeks to cut $10 million from the city's budget. To do that, she wants to eliminate 18.5 police positions, nine firefighter positions, and reduce some city services to just four days a week. Many of the eliminated positions don't necessarily mean job cuts, as some openings will just remain vacant.

Perhaps the most interesting part of the proposal is the mayor's request that some city workers be willing to consider changing the way the city funds their health care coverage. The mayor wants to cap taxpayers’ annual exposure to health care premium increases at 4%. That means if health care premiums in subsequent years increase 10% (which has been the case in recent years), city union workers would have to pick up the remaining 6% of the tab or pick a different health benefit. Right now, various unions in the City of Spokane pay as little as 6% or as much as 25% of their benefits. Taxpayers cover the rest.

Washington Policy Center recommends state workers also open up their contracts to pay more for their own health care costs. Right now, state workers pay nothing for their dental care and far-less than their private sector counterparts for health benefits. While the workers enjoy great benefits, taxpayers are the ones left holding the bill. 

Governor puts universities on notice

May 13, 2010 in Blog

Those attending this morning's GMAP session on education performance saw the Governor repeatedly voice displeasure with the performance of the state's four-year universities. Saying that the performance agreements with the universities have resulted in zero change, Governor Gregoire served notice that she expects better results and wants to see them provide incentives to students to graduate in four years. 

The Governor used a personal example of how she was able to encourage her daughters to graduate in four years. She said she told them that after four years they had to pay their own way.

Here is the audio of the Governor's agitated comments:  

One example the Governor could consider is from Colorado. A reform enacted in 2004 created the Colorado Opportunity Fund (COF). Rather than fund the institutions, Colorado provides eligible students a credit hour stipend to apply toward tuition. The stipend is only available until a student reaches 145 credit hours. 

Another reform would be to create a highly transparent report card for the state's universities so parents and students could make informed decisions on which schools to attend.

In its report on the performance of the state's universities, the Evergreen Freedom Foundation highlighted model language sponsored by the American Legislative Exchange Council that would require universities to report to the Legislature and prominently post on their websites (page 63 of report) information on institutional profile, student and faculty engagement, student achievement, and institutional efficiency.

Noticeably absent from this morning's GMAP session were details on K-12 education performance. This was not an omission but rather a symptom of the Office of Superintendent of Public Instruction (OSPI) being an in!
dependently elected office. To help provide the Governor more control and accountability for the billions being invested in K-12, OSPI should be restructured as a cabinet agency

During the 2008 election campaign, then candidate Randy Dorn supported this type of reform.

WSDOT official: replace domestic airline travel with publicly subsidized rail

May 13, 2010 in Blog

I recently taped a segment for TVW on some of the problems with High Speed Rail (HSR). My main argument is that it competes with the airline industry:

public taxes to artificially shift demand from an efficient sector of
the economy to one that loses money is a waste of resources and places hometown businesses at a competitive disadvantage.

Andrew Wood, Deputy Director of the State Rail and Marine Division of the Washington State Department of Transportation, disagrees. Director Wood seems to argue that HSR should replace domestic airline travel:

I'm not familiar with the Spain example cited by Director Wood but I've highlighted a case in China in a previous post. As reported by Reuters, several Chinese airlines shut down some flights because passengers are instead using a new HSR line.

This is not a big deal when the government owns both the airline and
the train company....chalk it up to efficiency. But in the United
States, spending billions in public money to prop up a passenger rail
system that loses an average of $37 per rider will harm competing companies that do make money.

I wonder if officials from Boeing and Alaska Airlines know that a cabinet level state agency is advocating and working toward replacing all domestic airline service with publicly subsidized rail?

Hey Seattle, what about traffic congestion?

May 11, 2010 in Blog

In anticipation of today's announcement from Seattle Mayor Mike McGinn on pedestrian, bike, and transit funding, I'd just like to point out Seattle's bigger transportation problem: traffic congestion.

Traffic on downtown streets ranks Seattle as the most congested city in America.

Seattle has the 13th worst commute in U.S.

Highways around Seattle are !
the ninth most congested in the country

Arizona passes genuine education reform bills, revealing weaknesses of Governor Gregoire's bill

May 11, 2010 in Blog

Education reformers in Arizona have passed a set of education reforms which are likely to improve education for students in Arizona.  By contrast, Governor Gregoire's Race to the Top bill, SB 6696, which I have analyzed here, and here, requires very little genuine change to the behavior of entrenched school bureaucracies and unions, nor does it increase choices for students and parents.

High school student in Tacoma declares that he wants effective teachers

May 10, 2010 in Blog

Today, in the Tacoma News Tribune, Mount Tahoma High School students eloquently speak out against teacher seniority assignment rules.  Student Derrick Reinhardt observes that these rules mean that "ineffective teachers stay and effective teachers leave" his school.

R-52 subject of ballot title challenge

May 10, 2010 in Blog

The Association of Washington Business (AWB) filed a ballot title challenge today to R-52, the green jobs bond bill.

From AWB's press release:

"Citing the importance of clarity for Washington voters this fall, the Association of Washington Business today filed a ballot title challenge to Referendum 52, authorizing the state to sell more than $500 million in bonds to finance green energy construction projects in K-12 schools and public higher education facilities . . .

AWB contends the Legislature did not craft a transparent ballot title for R-52 because it omitted the fact that voters would be making the bottled-water tax permanent. 

The language put forward today in the petition filed by AWB adds the information about the tax while also removing prejudicial language about the perceived impact of the proposal."

Here is a copy of AWB's ballot title challenge.

Supporters of R-52 can't say they weren't warned. During the floor debate an amendment was introduced to change the suggested ballot title. Sponsors of the amendment warned that the proposed ballot title would invite a legal challenge. 

 The current ballot title reads:

"The legislature has passed Engrossed House Bill No. 2561 (this act), concerning job creation through energy efficiency projects in school buildings. This bill would promote job creation by authorizing bonds to construct energy efficiency savings improvements to schools, including higher education buildings."

Senator Parlette offered an amendment to change that to read:

"The legislature has passed Engrossed House Bill No. 2561 (this act), concerning job creation through energy efficiency projects in school buildings. This bill authorizes bonds in excess of the Article VIII, section 1 constitutional debt limit to construct school energy efficiency improvements, and makes permanent the sales tax on bottled water."

The amendment failed by a vote of 16-30.

Those opposing the change worried that voters would be confused by the reference to debt in excess of the constitutional limit and describing the removal of the expiration date on the bottled water sales tax increase as being permanent. Sen. Lisa Brown argued that calling the tax permanent would be misleading since the Legislature could repeal it at any time.

The hearing on AWB's ballot title challenge is set for May 28 at 9:00 a.m. in front of Judge Carol Murphy. 

Is your favorite candy a taxable candy?

May 10, 2010 in Blog

To help the state's shop owners decipher whether the candy sitting on their shelves will be subject to the state's sales tax starting June 1, the Department of Revenue (DOR) has created a list of which candies failed the tax exempt lottery.

The good news, around 260 candies are still exempt from the sales tax. The bad news, more than 3,000 aren't.

So what qualifies as taxable candy? 

According to Section 901 of SB 6143:

"'Candy' means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. 'Candy' does not include any preparation containing flour and does not require refrigeration."

There you have it, clear as fudge!

For the current list of taxable candies click here.

The DOR list includes this disclaimer:

"This list identifies taxable candy products and exempt products that are similar to candy. The Department will update the list periodically. The list is not all-inclusive. If a product that appears to be candy is not on the list, you can request a binding ruling from the Department."

Race to the top in union pay

May 7, 2010 in Blog

Earlier this week the state Department of Personnel (DOP) released the results of its salary survey to help determine how state worker pay stacks up against market rates.

As reported by The Olympian

A new survey done for state government shows most of Washington’s state workers still earn less than their counterparts in the private sector or local governments. But they also frequently have better health care coverage and other benefits.

Details of the report, prepared for the state Department of Personnel by national survey firm Segal Co., were to be released this morning. Labor groups preparing for contract talks this month are waiting to see the data to determine which pay inequities they likely will target in the negotiations.

“It validates that we still have the same problems we had before. It d!
oesn’t change the picture,” Department of Personnel director Eva Santos said Wednesday, sharing a few general conclusions of the report in an interview.

The survey results will be used to help frame the negotiations with state unions on pay issues.

According to the Washington Federation of State Employees (WFSE): 

The salary survey along with the June revenue forecast are two prime measures used in contract negotiations over your economic issues. The state has signaled there will be tough bargaining on economics in these down economic times, but even state negotiators have to concede the numbers show a smoldering problem that has to be acknowledged.

So are state employees working at bargain basement wages while their private sector counterparts rake in the dough?

Good question, but !
not one that can be answered as a result of the DOP survey. p>

As noted on page 6 and page 10 of the survey details, 60% of the respondents were government entities and 61% had a majority union workforce. 

Based on this information it appears the survey is less a comparison of how state workers compare to private sector workers but instead how they compare to other unionized government workers.

This raises a few red flags as to whether negotiators should be basing compensation decisions on a race to the top for highest government union pay.

FCC to Move Forward with Reclassification of Internet. Lawyers Rejoice.

May 6, 2010 in Blog

It's been a week full of surprises from the FCC. News broke on Monday that FCC Chairman Genachowski had decided to forgo imposing new net neutrality regulations on Internet Service Providers. But no sooner was the dust settling from that supposed decision than word came last yesterday from The Wall Street Journal that Genachowski had actually decided to go with reclassifying the Internet as something other than an "information service;" a move that makes imposing net neutrality regulations much more likely. 

Is an income tax the only alternative to the dreaded B&O tax?

May 6, 2010 in Blog

This November voters will likely have the opportunity to vote for the tenth time on an attempt to create an income tax in Washington. As evident by the lack of an income tax in the state, past attempts have not been successful at the polls (with the exception being in 1932 though the tax was ruled unconstitutional).

What is interesting about the new income tax proposal being discussed is the attempt to sell it as small business relief from the state's unique and onerous Business and Occupation (B&O) tax. There is, however, a better way.

Last year Governor Gregoire said, "If you want to come forward with an alternative to the B&O tax system in the state of Washington, the welcome mat is out f!
rom me."

The Washington Policy Center decided to take her up on her offer and modeled the impacts of various replacement taxes. Not surprisingly an income tax modeled the worst, causing the most economic distortions. With other options showing approximately the same impact, we turned our attention to reforming the B&O based on sound principles of taxation.

The result is our proposed Single Business Tax or a gross receipts margins tax that would be:

  • Revenue neutral.
  • Treat all business owners equally by using one flat rate.
  • Eliminate loopholes and special treatment.
  • Simplify administration of the tax to reduce compliance costs for business.

This proposal would result in radical simplification of current business taxes by eliminating the confusing multiple rates on business activities, and by repealing the special interest tax credits and exemptions for some industries that have built up over the years. The Single Business Tax would be phased in over multiple years to allow employers and public officials time to adjust to the new system.

Here is how it would work:

The business owner would be given a choice of three ways to calculate their taxable margins, and would be allowed to choose the one that results in the lowest tax burden. Calculating the taxable margins could be based on either the business’:

  1. Total gross receipts minus labor costs
  2. Total gross receipts minus all production costs except labor
  3. 60% of total gross receipts

Then the business owner would multiply the taxable margin by the Single Business Tax rate for each taxing jurisdiction. The final amount owed for each taxing jurisdiction would be sent to the state in one payment and then distributed by the state to local governments.

Our goal is to offer a B&O reform proposal that is not based on imposing an income tax on businesses or individuals, but to offer a way policymakers can constructively improve the business climate while collecting needed revenue for government. A solid set of tax principles must guide the adoption of any effective tax structure, otherwise our state would again end up with a system riddled with loopholes and special-interest carve-outs.

There is no silver bullet to solving the problems inherent in the gross receipts tax. However, through embracing solid tax principles and meaningful reform – both in the short and long-terms – we can help encourage future economic growth.

>Here are additional details on WPC's B&O reform proposal: Replacing the Business and Occupation Tax with a Single Business Tax

2010 new laws

May 5, 2010 in Blog

By signing the budget yesterday Governor Gregoire wrapped up (hopefully) the 2010 actions of the Legislature.

The House Office of Program Research has put together a good summary of the more than 300 bills passed by the Legislature this year. From the report:

This "Summary of Legislation Passed by the Washington State Legislature" summarizes all of the bills that passed the Legislature during the 2010 Regular Session. Transportation budget summaries are also provided. The report includes prime sponsors, a brief summary of each measure, a brief explanation of partial vetoes, and the final status of each measure.

A preliminary report for the special session can be found at the end of this repo!
rt. A final report including the special session will be distributed in late May and will include information regarding any special session bills that have been vetoed, or partially vetoed, by the Governor. Budget information will also be available at that time.

Here is the Senate version of the report.

Details on the Governor's bill actions are here.

For additional information on how your lawmakers voted on each of these new laws, visit Washingtonvotes.org.

Jefferson PUD to pay double initial estimate for PSE electrical service

May 4, 2010 in Blog

According to the Peninsula Daily News, Jefferson County Public Utility (PUD) Commissioners have reached a deal, at least in principle, to purchase Puget Sound Energy’s (PSE) electrical service system in East Jefferson County.

In 2008, voters approved a ballot measure, giving authority to the PUD to pursue the take-over of electrical services from PSE, a private-owned company, to the control of a public agency.  At the time proponents argued that a publicly-controlled agency could offer lower utility rates and better customer service.

Whether or not the proponent’s claims are true is yet to be determined, but the announcement of the nonbinding agreement between the PUD and PSE should serve as a reminder that the transfer of service from a private utility to a public one will not come without some costs to taxpayers.

For instance, during the campaign, proponents claimed that it would only cost taxpayers about $47 million to purchase PSE’s electrical services.  However, the tentative agreement reached between the PUD and PSE commits taxpayers to $103 million, more than double the cost claimed during the campaign.

There is, as PUD Commissioners move forward in their pursuit to become the provider of electrical services, no guarantees that rates will be lower or service improved.  As we highlighted in our Policy Note, “Moving to Government-Owned Power,” taxpayers in East Jefferson County should consider the following:

· New PUDs do not have guaranteed access to the best power rates, leaving them vulnerable to volatile price swings in the market,

· Ratepayers will lose access to PSE, which has a consistent record or providing reliable power, and

· Ratepayers, under a PUD, are exposed to more political risk and financial burden than ratepayers of a private utility.

In the end, our analysis shows that it is unlikely that shifting to a government-owned utility in Jefferson County would result in improved service or reduce costs for residents and business owners.  In fact, if the nonbinding agreement between the PUD and PSE is any indication, ratepayers in East Jefferson could be on the hook for more than they bargained for.