During the gubernatorial debate last night, Governor Gregoire mentioned that she would be suspending the paid family leave insurance program as a way to help save the state some money since it is now facing a $3.2 billion budget deficit.
The family leave plan would have paid up to $250 per week for five weeks to qualified workers in the event of the birth of a child or adoption of a newborn. WPC's concerns for this type of government-mandated program are numerous. There were also technical questions about such a program that were raised by other groups studying the issue.
The bottom line is that a state-run family leave insurance program would be an unnecessary burden to the small businesses that deal with these types of situations with their employees on a case-by-case basis.
The supplemental budget passed by the 2008 Legislature only approved $6.2 million to go towards set-up costs, so shutting down this program is a drop in the bucket towards the projected $3.2 billion deficit. However, the Governor's suspension will have longer-reaching benefits as it is one less thing the small business community has to worry about for the time being.
So, as of now, or until legislators make up their minds during the 2009 Session, the paid family leave program is on hold and I am assuming that means the legislated October 1, 2009 deadline will have to be reevaluated.
Alex Fryer of Mass Transit Now!, which is the "Yes" campaign for ST2, has and continues to suggest that WPC does not agree with the $107 billion cost estimate calculated by Jim MacIsaac.
This is not true.
There is no language in any of our reports nor have I ever said the $107 billion cost estimate is inaccurate. In fact, I have looked at the methodology that MacIsaac uses and agree it is perfectly legitimate and is an accurate approach to calculating costs. Just because I did not use this method myself, does not mean that I think it's wrong.
I have emailed Alex Fryer to stop saying WPC disagrees with the MacIsaac estimate.
State finances are a shambles. Olympia leaders have racked up a $3.2 billion deficit and unlike Wall Street, Congress is not going to bail them out. How did we get in this mess? It is not for lack of money. Tax revenues have increased every year, and today the people of Washington send more money to Olympia than ever before. The cause of the deficit is overspending. Tax revenues are up - by $2.4 billion according to the latest forecast - but state elected leaders have spent it even faster. Permanent spending is up 34% in four years, and this doesn't count a new entitlement that is due to kick in next year. One group is pushing for a sales tax increase. Boosting taxes is wrongheaded for three reasons:
1. It is not fair for state leaders to turn to working citizens and businesses that already shoulder a heavy tax burden and make them pay even more to fix Olympia's budget mess. 2. Tax increases depress economic growth, so raising the sales tax would only make a dire situation worse. 3. It doesn't make sense to reward the very Olympia leaders who created the deficit in the first place by letting them ratchet up the state's financial commitments. If we raise taxes lawmakers and the governor would say to themselves, "Wow, we spent all the money people pay in taxes and what happens - they send us MORE money!
Right now a tax increase doesn't look likely. The governor says she has no plans to raise taxes at this time. There are ways to solve the deficit without raising taxes - ways that do not require cuts in any programs and provide increases where they are needed. I'll provide the details in a future post.
A fascinating article in Forbes magazine in July lays out the case to how one human being (and the company he built) is fighting tyranny in emerging markets through the proliferation of wireless devices -- cell phones.
The article -- more of a story really -- shows the determination and grit of Denis O'Brien and his company Digicel as he boldly heads into nations that most larger international wireless companies shy away from, and for good reason. For instance, when was the last time Verizon, Sprint or T-Mobile had to worry about rebel uprisings?
Another snippet from the story that carries some shock-value:
Samoan fisherman Finau Afitu
earns $80 a week, four times his pre-Digicel pay, because he can check
which markets want his fish by phone instead of walking to each one
while they go bad. "My kids can buy lunch at school now," he says.
It's hard to imagine a day before wireless phones. It's good to see risk-taking entrepreneurs find ways to spread some of the things we Americans probably take for granted.
In economics, supply is a function of demand. This means a willingness to use a service must exist before a supply of that service is created. Boeing executives do not make 300 airplanes knowing they will only sell 100. Likewise, governments should not spend a disproportionate amount of taxes in low demand sectors, where the willingness to use the service does not justify the investment.
European transit systems provide a good contrasting example of how these economic concepts apply.
In Switzerland, transit is successful, not because of the amount of service or infrastructure, but because the country has certain demographic and economic characteristics that induce demand.
In other words, there is an existing market with a customer base and Swiss policymakers responded with proportional infrastructure investments. As a result, mode share, ridership and fare box recovery are high.
In the United States, transit resources are distributed in just the opposite way. Under the “build it, and they will come” theory, policymakers think that increasing the supply of transit will somehow create more public demand. This speculative model fails because most U.S. cities do not posses the economic or demographic characteristics that create enough voluntary consumers for public transit.
Using the economic principles of supply and demand shows that building excess transit capacity before there is an equal amount of willingness to use it leads to an underperforming system. As a result, mode share, ridership and fare box recovery are low.
When prioritizing transportation projects,policymakers should use consumer demand to drive investments, not the other way around.
• ST2 would spend about $22.8 billion, yet serve only 0.4 percent of all trips in 2030.
• ST2 would shift only 0.84 percent of passenger vehicles from the road to transit by 2030.
• ST2 would spend $22.8 billion to reduce VMT by only 0.867 percent.
• The cost for ST2 to serve one additional trip would be about $368,000. Under Transit Now, the cost for King County to serve one additional trip is about $10,000.
• The ST2 proposal would be 37 times less efficient than a traditional bus system like the one in King County.
• ST2 would increase traffic congestion for passenger cars and freight trucks by about 25 percent across the I-90 bridge.
• ST2 would reduce lane capacity on I-90 by 20 percent during the morning and afternoon peak commute periods.
• ST2 would eliminate subarea equity protections.
• Not counting CO2 emitted during construction, ST2 would reduce regional CO2 emissions by up to only 1.11 percent. The same reduction could be achieved through purchasing carbon offsets for only $2.3 million.
This past weekend I was in Baltimore at a national open government retreat working on recommendations for the next President on how to make the federal government more transparent and accountable.
Among the 70 individuals at the retreat were representatives from OMB Watch, National Security Archive, ACLU, Society of Professional Journalists, OpenTheGovernment.org, League of Women Voters and Reporter’s Committee for Freedom of the Press to name a few.
The federal bailout bill also was discussed at the retreat. There is serious concern about the level of secrecy being included in the draft bailout proposal. Here is a memo that was worked on at the conference that is circulating amongst open government groups. Here is the language of the bailout proposal.
Continuing our transparency efforts, last week I also participated on a panel on government transparency in Phoenix at the annual meeting of the State Policy Network, the national organization of state think-tanks. I announced WPC's recommendation for a tax transparency website that would provide an online searchable database of all tax rates in the state. The Seattle Post-Intelligencer endorsed our recommendation shortly after its release. Other SPN groups may now take our recommendation to their own states for their lawmakers to consider.
I’ll provide updates on both these efforts (Baltimore/Phoenix) as they develop.
The Seattle Times today correctly points out that when it comes to dealing with the $3.2 billion deficit people are in no mood for a tax increase, but they get it wrong when they say Gregoire and Rossi should talk more about what they want the government to do less of. That's because no matter who is governor, the state is going to spend more next year. Lost in the reporting about the deficit is the fact that Olympia lawmakers will have $2.4 billion more to spend next year compared to the current budget. Of course this is less than the $5.6 billion more they were hoping to get, resulting, to the disappointment of lawmakers, in a $3.2 billion deficit.
To folks in Olympia a slowing in the rate of revenue increase FEELS like a cut, even though we taxpayers are providing them with more money than ever. This paradox explains why politicians talk constantly of chronic budget crisis and painful spending "cuts," while taxpayers never feel any actual financial relief.
Sure, some state programs will need more money next year, while others should get less (like the $160 million in waste we identify in our Washington State Piglet Book), but the bottom line is Olympia lawmakers are going to control considerably more of our money next year than they do now. Lawmakers and the governor (whomever he or she is) will have to set firm priorities within a rising budget - after all, that's their job - but there is no question overall spending is going to go up. Of course, if Olympia hadn't cranked locked-in spending by more than 34% over the last two budgets, we wouldn't face this problem in the first place.
Tomorrow, we will release WPC's analysis of ST2 and I will present the findings at the Bellevue Downtown Association breakfast. I will be on a panel with the Mayor of Seattle, Greg Nickels, the Mayor of Bellevue, Grant Degginger, and a representative of the "No" campaign, Dick Paylor.
My presentation will be strictly quantitative and focus on the cost and benefits of spending $22.8 billion.
In a press release today, Sound Transit says it has carried more than "ten million riders" since its inception and averages about "61,000 riders per weekday."
This is not true.
These figures represent the number of trips, not riders, served by Sound Transit. And trips do not equal riders.
For example, a rider who makes a round trip commute to and from work counts as two trips. If that same rider took a bus to lunch and back, he counts as making four total trips during the day.
Because daily trips can double, triple and sometimes quadruple count the same individual, trips should be adjusted to estimate unique riders. The standard assumption is that single riders will equal 45 percent of trips. To look at it another way, 45 percent assumes less than half of total trips in a day will be the same person making a round trip. This does not capture all of the double counting of a single rider, but it is closer to accurately estimating how many different individuals will ride a transit system.
So Sound Transit has actually carried the equivalent of 4.5 million riders and averages only about 27,450 riders per day.
Sound Transit's numbers are not insignificant, but they should not be reported at RIDERS because it gives an inaccurate representation of how many different people actually use the Sound Transit system.
Once again, the media is describing the state's $3.2 billion budget deficit as a "shortfall" that will require "cuts" in the budget, leading the public to think painful reductions in current programs are coming. What political reporters often neglect to tell us is that state tax collections will be $2.4 billion higher next year than in the current budget. State spending will go UP, just not as much as lawmakers were expecting. The most accurate way to report on the state budget is to say: "The latest forecast shows Olympia lawmakers will have $2.4 billion more to spend next year, instead of the $5.6 billion they were expecting, resulting in a $3.2 billion deficit compared to the planned increase in spending." Sure it's a mouthful - but it's more informative than saying the "shortfall" will lead to difficult "cuts." State and local tax revenues are constantly rising, yet when was the last time !
you heard a governor, a legislator or a local official say, "Thank you"?
In response to today's revenue forecast the Governor said she is "directing the Office of Financial Management to locate additional budget savings of $200 million, without affecting vital programs." Hopefully this effort will have more success than her August request that state agencies not sign personal service contracts unless they are an emergency.
Here are examples of some of the personal service contracts signed since the Governor issued this contract freeze:
CTED: $400,000 - "The purpose of this contract is to provide tourism and trade services to Washington in the nations of China, Japan & France."
Department of Archaeology and Historic Preservation: $149,714 - "Develop a feasibility study for a Washington State Maritime Heritage Area."
State Parks and Recreation Commission: $254,701 - "Additional work to address additional funding from the legislature for the Seminary design at Saint Edward State Park."
Turns out the projected revenue for next biennium is better than I reported this morning. I originally used the numbers from OFM's press release which showed $1.4 billion more in revenue for the 09-11 budget cycle than the current budget.
First the good news, the state is projected to have $1.4 billion more in revenue for the 09-11 budget cycle than the current budget. Now the bad news, the carry forward cost of the current budget leads to a projected budget deficit of more than $3 billion.
2007-09 forecasted revenue: $29.9 billion
2009-11 forecasted revenue: $31.3 billion
Projected revenue increase: $1.4 billion
So if the state will have $1.4 billion more in revenue but is facing a $3 billion budget deficit, is that a revenue problem or an overspending problem?
Bellevue schools are back in session, which is great. However, we still face serious challenges in Bellevue and across Washington State in finding sufficient numbers of math and science teachers for our classrooms. These numbers will only get worse as baby-boomers retire and we increase high school math and science requirements under CORE 24.
Today public school principals and managers are not allowed by Washington's teacher credential laws to offer employment and training to the 240,000 individuals working in the private sector who hold college degrees or higher in math and science. Private schools are given much greater freedom to hire teachers. Private schools are allowed to hire people with "unusual competence but without [formal teacher] certification." RCW 28A.195.010 (3)(b).
Shouldn't our public schools have the same flexibility as private schools to hire and train individuals of "unusual competence" to fill shortage areas?
Instead, Washington law requires talented engineers, scientists, computer programmers, architects, accountants and others who are interested in teaching at a public school to go through a lengthy and expensive "alternate" certification process. Ugh. No wonder shortages persist.
Yesterday we posted details on the Governor's statement that she's cut taxes by approximately $900 million since 2005. According to OFM, the table it provided did not account for tax increases, only tax cuts.
Here is the follow up detail OFM provided on the General Fund tax cuts.
Since the OFM information doesn't account for tax increases I reviewed the Legislative Budget notes for 2005-08. Here is the breakdown for the General Fund net tax cut or increase:
So has the Governor been a tax cutter or tax raiser? Short answer, yes but more tax revenue has been raised than returned to taxpayers (at least for the General Fund; discussion of workers' comp tax cuts/increases here).