Washington Policy Blog

Can budget savings be found in changes to sick leave cash out?

December 30, 2009 in Blog

With Washington facing a short term $2.6 billion budget deficit, all savings opportunities should be on the table. One possibility is to change the practice of allowing state employees to carry forward and cash out unused sick and vacation leave.

According to the state's budget transparency website, Washington paid out $65.3 million in unused sick and vacation leave during the 2007-09 biennium. The state has already paid out $8.7 million since the 2009-11 budget started in July.

As illustrated by the Collective Bargaining Agreement (CBA) with the Washington Federation of State Employees, this is occurring in accordance with sections 12.6 to 12.8 of the CBA:

12.6 Carry Forward and Transfer
Employees will be allowed to carry forward, from year!
to year of service, any unused sick leave allowed under this provision, and will retain and carry forward any unused sick leave accumulated prior to the effective date of this Agreement. When an employee moves from one state agency to another, regardless of status, the employee’s accrued sick leave will be transferred to the new agency for the employee’s use.

12.7 Sick Leave Annual Cash Out
Each January, employees are eligible to receive cash on a one (1) hour for four (4) hours basis for ninety-six (96) hours or less of their accrued sick leave, if:

A. Their sick leave balance at the end of the previous calendar year exceeds four hundred and eighty (480) hours;

B. The converted sick leave hours do not reduce their previous calendar year sick leave balance below four hundred and eighty (480) hours; and

C. They notify their payroll office by January 31st that they wou!
ld like to convert their sick leave hours earned during the pr!
evious calendar year, minus any sick leave hours used during the previous year, to cash.

All converted hours will be deducted from the employee’s sick leave balance.

12.8 Sick Leave Separation Cash Out
At the time of retirement from state service or at death, an eligible employee or the employee’s estate will receive cash for his or her total sick leave balance on a one (1) hour for four (4) hours basis. For the purposes of this Section, retirement will not include “vested out of service” employees who leave funds on deposit with the retirement system.

The state's sick leave policy should be changed to a set number of days per year that can't be cashed out or carried forward. This is the benefit policy for employees at the Washington Policy Center as well as many other private employers.

Washington's annual financial report released

December 30, 2009 in Blog

The Office of Financial Management has released the state's 2009 Comprehensive Annual Financial Report (CAFR). Some of the details of note:

"Governmental activities resulted in a decrease in the state of Washington’s net assets of $2.2 billion. A number of factors contributed to the decrease:
  • Tax revenues decreased $893 million in Fiscal Year 2009 as compared to Fiscal Year 2008. While certain tax sources showed moderate increases, sales and use taxes reported a decrease of $1.0 billion. Sales and use taxes are the main tax revenue for governmental activities. Taxable sales have declined sharply due to reductions in consumer spending power as a result of job losses as well as weak consumer confidence. Real estate excise taxes also declined by $294 million reflecting the continued decline i!
    n real estate activity as home prices and housing permits continued to decline throughout Fiscal Year 2009.
  • Growth in expenses outpaced growth in revenues. The expenses for human services and education comprised 80.5 percent of the total expenses for governmental activities which is consistent with the 80 percent in Fiscal Year 2008. Human services expenses grew by $1.2 billion or 10 percent in Fiscal Year 2009 over Fiscal Year 2008 reflecting the increased number of citizens seeking assistance from state programs and services due to the economic recession. K-12 education also increased in Fiscal Year 2009 as compared to Fiscal Year 2008 due to increases in enrollment and construction grants to local school districts. Approximately 40 percent of the increased costs of human services and K-12 education were financed with federal fiscal stabilization funds.

Business-type activities decreased the state of Washington’s net assets by $932 million which included losses in both the workers’ compensation and unemployment compensation activities. Key factors contributing to the operating results of business-type activities are:

  • The operating loss in the workers’ compensation activity in Fiscal Year 2009 was $1.8 billion less than in Fiscal Year 2008. A number of factors contributed to the decreased operating loss including an increase in premium revenue of $260 million which resulted when the Fiscal Year 2008 rate holiday did not extend into Fiscal Year 2009 and a decrease in claims costs of $1.5 billion. The decrease in claims costs is attributable to lower projections of supplemental pension costs related to changes in the forecast of future wage inflation.
  • The unemployment compensation activity reported a Fiscal Year 2009 operating loss of $789 million, compared to $333 million operating income in Fiscal Year 2008. Washington’s unemployment insurance program is an experience-based system. Since Washington had relatively low unemployment until Fiscal Year 2009, unemployment premium revenue had been declining. Fiscal Year 2009 premium revenues were $146 million less than Fiscal Year 2008. While this decrease was more than offset by an increase in federal aid of $531 million, which included federal fiscal stabilization funding, costs for unemployment insurance benefits rose $1.6 billion. The increase in costs was the result of increases in the number of claims, the duration of claims and the benefit amounts. The annualized unemployment rate for the state was 7.3 percent in Fiscal Year 2009, up from 4.7 percent in Fiscal Year 2008, a 55 percent increase.
  • The higher education student services activity reported relatively proportional increases in both expenses and charges for services when compared to the prior year. Additionally, both liquor control and Washington’s lottery activities reported operating revenues and expenses consistent with the prior year."

These details are reflected in the tables below.

CAFR 1

CAFR 2

Schedule 17 of the CAFR shows that the largest employer in the state is government coming in at !
17.6% of total employment. The next largest is retail trade coming in at 10.8% of total employment. 

Below are details on the number of state government full-time equivalent employees. 

FTE

Clinging to life for tax purposes

December 30, 2009 in Blog

Harvard economist Greg Mankiw highlights a Wall Street Journal article from today in regards to the federal estate tax debate. To sum up, as part of the "Bush tax cuts" passed earlier this decade the federal estate tax was lowered from 55% down to 45% while the exemption level was slowly raised, from $1 million to $3.5 million today. If your estate totals less than $3.5 million, you don't pay the 45%. 

And then for calendar year 2010, the tax goes away. Completely. No tax. At all. (I'm re-emphasizing this because when was the last time you saw a tax disappear?)

But as part of the compromise to get the legislation through, even though the federal estate tax disappears in 2010, it comes back in 2011 with a vengeanc!
e. Unless Congress acts, the rate will go back up to 55% and the exemption level will drop back down to $1 million -- any estate valued over $1 million will be subjected to the tax.

The Wall Street Journal article points out the macabre situation in which some families are finding themselves. Individuals with terminal illnesses and families with ailing members are taking into account the date of January 1st. If their family member hangs survives until January 1st, 2010, the estate they leave behind will not be taxed. If not, the family could lose at least half the estate's value to taxes (and more when you throw in the fact that about half the states have state estate taxes, including Washington's, which tops out at 19%).

This is a very uncomfortable subject to discuss in the realm of public policy. Far be it from those families from wanting to look crass, but the article points out coherent but ill entrepreneurs who themselves are trying to hang on unti!
l 2010 because they don't want to die with the knowledge t!
hat half of what they spent their lives working towards went back to the government, which already taxed their earnings in the first place.

As Congress debates this issue early in 2010 after it returns from recess it should take these stories to heart. Another concern, to be expanded upon in a later blog post, is that one idea Congress is kicking around is to make the tax retroactive, so that estates of any well-off individual who dies between January 1st and whenever the new estate tax law kicks in (say early Spring) are still subject to the tax. This brings about a whole new set of concerns as retroactive taxation is not good public policy for a variety of reasons. 

The estate tax was created to prevent the rise of a permanent aristocracy in this country. In 2011, that sentiment will negatively impact thousands of American households; probably not the impact the original supporters of the estate tax had in mind. Nor did they have in mind the awful situat!
ion of dictating life and death decisions based upon tax policy.

States face at least $405 billion unfunded liability for retiree health benefits

December 29, 2009 in Blog

While states attempt to deal with their short term budget problems, elected officials must not lose sight of the long term obligations being placed on taxpayers. Highlighting this fact is this report from the U.S. Government Accountability Office (GAO) on state and local government retirement health benefits (OPEB - Other Post Employment Benefits):

"We found that the total reported unfunded liabilities for OPEB (which are primarily retiree health benefits) for state and select local governments exceed $530 billion. The $530 billion includes about $405 billion for states and about $129 billion for the 39 local governments we reviewed. We reported in 2008 that various studies available at that time estimated the total unfunded OPEB liability for the states and all local governments to be between $600 billion and $1.6 trillion, although the studies!
’ estimates were based on limited government data. It is not surprising that our total is on the low end of that range because we did not review data for all local governments, though we did review reported liability data for the largest local governments and all 50 states. Five-hundred and thirty billion dollars is still a large unfunded liability for governments. As variation between studies’ totals shows, totaling unfunded OPEB liabilities across states and local governments can be challenging."

To address this problem GAO noted:

"Some state and local governments have taken actions to address their liabilities associated with retiree health benefits by setting aside assets in order to prefund the liabilities and reducing these liabilities by changing the structure of retiree health benefits . . .

Another action some state and local governments have taken to address their retiree!
health liabilities has been to change the structure of the he!
alth benefits they offer retirees. While governments also make relatively routine changes to the health benefits they offer retirees (such as changing co-payments, deductibles, or covered benefits) that could affect their liability, we identified three key types of changes our selected governments have made to the structure of retiree health benefits: changing the type of retiree health benefit plan, changing the level of the government’s contribution toward retirees’ health insurance premiums, and changing the eligibility requirements employees need to meet to qualify for retiree health benefits."

According to the Office of State Actuary, Washington's unfunded OPEB liability as of 2008 was $7.9 billion (including K-12 and political subdivisions). OPEB benefits are separate from and provided in addition to pensions.

There's just no way this ends well...

December 29, 2009 in Blog

Charlie-brown-lucy-football
 In the arena of public policy, legislation that is often introduced using the reasoning of, "there ought to be a law..." is often a sure-fire way to highlight misguided policy. Combine the "there out to be a law" sentiment with government's penchant for involving itself in matters wholly outside its jurisdiction and you end up with issues like the Terry Schiavo case, et. al.

The latest version of this wayward thinking !
is happening in Indianapolis, where the previously undefeated Colts of the National Football League at 14-0, this past Sunday yanked their starters during the second half of a close game against the New York Jets. The Colt's coaching staff's thinking was more or less along the lines of "we have home field advantage wrapped up, let's use our starters for a bit and then rest them and minimize exposure to injury." Similar tactics are used in preseason games, and all major sports teams in every league do this from time to time. 

The second and third string Colts were unable to protect the lead and eventually fell to the Jets 29-15 in front of a sold-out home crowd. The fans were not pleased; and they have a right to be upset. No one is happy to pay good money only to see their beloved team lose. Most of us understand that it is simply part of the game. 

But now the Indianapolis City Council is involving itself into the mix. Why, you!
ask? Because fans and a few councilmen are so irate that the !
Colts pulled their starters from the game that a resolution is being drawn up to refund the ticket price to fans who purchased them for the game on Sunday. Seriously. 

There really is no justification for the resolution, just that fans and supporters are upset that the Colts played the strategic, long-term angle by saving their best players for the playoff run and therefore risked ending the team's 23 straight regular season win streak. Fans are so mad that they had to witness a loss that they want a full refund. Shouldn't they be happy their team is 14-1 and the number one seed going into the playoffs?

So Seattle fans have faith. If this resolution gains traction and withstands a court challenge (in actuality, neither will happen) then we can expect more than one game's worth of refunds for the NFL season that was 2009. 

Can stimulus strings be cut?

December 29, 2009 in Blog

Faced with closing a projected $2.6 billion budget deficit, lawmakers have been told that 70% of their budget options are off limits meaning reductions need to occur in only 30% of spending. Here is how Governor Gregoire describes this dilemma:

"Parts of our state’s budget, including basic education, debt service and pensions, are considered ‘protected’ because of constitutional mandates require these cost be paid. Other parts are considered protected, too, due to requirements imposed by the federal government when the state accepted funds under the American Recovery and Reinvestment Act, primarily in Medicaid and higher education."

A recent federal audit conducted by the Government Accountability Office (GAO), however, noted that states may seek a waiver from the "stimulus strings" for Education State!
Fiscal Stabilization Funds.

According to GAO:

"If states fail to meet the maintenance of effort requirements for K-12 education or IHEs [institutions of higher education], Education’s guidance directed states to certify that they will meet requirements for receiving a waiver—that is, that total state revenues used to support education would not decrease relative to total state revenues. Because the measure used to determine eligibility for a waiver from maintenance of effort requirements—state revenues used to support education—can be defined differently from the maintenance of effort measure—state support for education—states may have to track both measures to make sure they can meet their assurances. States that need a waiver are directed to submit a separate waiver application to Education . . .

Education official!
s told us that four states—Florida, New Jersey, Rhode Island!
, and South Carolina—have requested maintenance of effort waivers for fiscal year 2009. Florida has requested Education waive maintenance of effort requirements for elementary and secondary education, and New Jersey has requested Education waive maintenance of effort requirements for public IHEs. Education officials told us states will get final waiver approval in the form of a written letter of approval after the states submit final maintenance of effort amounts to Education. Education officials also told us they will work closely with states on a case–by-case basis to ensure that the information submitted complies with the waiver criteria under the Recovery Act."

The U.S. Department of Education has provided states with this waiver worksheet:

Waiver

While most of the stimulus funds are off limits, it appears states can cut the stimulus strings for federal education funds by seeking a waiver.

I have an inquiry in to the Office of Financial Management to see if Washington plans to request a waiver. I'll post an update once I hear back.

Cigarette Taxes to Increase in 2010?

December 28, 2009 in Blog

As the legislature gears up for session in January and with the state facing a multi-billion dollar deficit (yet again), now is the time to pay close attention to trends the legislature may take. Perusing this pre-filed bill page can be useful.

One of the bills introduced today is House Bill 2493, an act "relating to the taxation of cigarettes and other tobacco products." Sponsored by Representative Cody, the bill, if passed, would raise cigarette taxes yet again. Currently, the state charges $2.025 per pack for cigarettes. 

Reading through the bill, it looks like the taxes would amount to $1 per pack more if the legislature and the governor sign off on the bill. That's about a 50% tax increa!
se for smokers. 

If the goal is to eradicate smoking, then the tax should be hiked even more. If the goal is to raise money for education programs, health care centers, water quality, and programs to stop youth violence, then a 50% increase in taxes will most likely move people towards purchasing tobacco from non-sanctioned sellers (aka the black market). The state says it already loses over $200 million in tax revenue per year to illegal sales of untaxed cigarettes. 

If policymakers are looking for a quick buck to help shore up the $2.6 billion budget deficit, this isn't the way. If, however, policymakers want more people to live up to what is sure to be their 2010 New Year's resolution, then raise the tax even more. My hope is that whatever our elected officials end up doing, they are honest about their motivations behind the tax hike.

Mann on Climategate: Theory good, data bad

December 23, 2009 in Blog

Following in the footsteps of former Washington state climatologist Phil Mote and Stanford professor Stephen Schneider, another political-scientist is arguing that the release of the Climategate e-mails is much ado about nothing. Michael Mann, author of the "hockey stick" graph weighs in on what it means to use a "trick" to "hide the decline."

Specifically he addresses the e-mail from Phil Jones where we discusses using a "trick" to "hide the decline" in the temperatures projected by tree-ring data after 1960. Temperatures went up while the tree-ring data, on which the hockey stick projections are based, indicated that temperatures should go down. He writes in the Washington Post:

In the same e-mail, Jones uses the phrase "hide the decline" in reference to work by tree-ring expert Keith Briffa. Because tree-ring information has been found to correlate well with temperature readings, it is used to plot temperatures going back hundreds of years or more. Briffa described a phenomenon in which the density of wood exhibits an enigmatic decline in response to temperature after about 1960. This decline was the focus of Briffa's original article, and Briffa was clear that these data should not be used to represent temperatures after 1960. By saying "hide the decline," Jones meant that a diagram he was producing was not to show those data during the unreliable post-1960 period.

This is more of the semantic games we've experienced on this issue already. Mann argues that "tree-ring information has been found to correlate well with temperature readings" until about 1960. The divergence at that point is "enigmatic." What is interesting, however, is that Mann and others who parrot this line, don't explain why the data after 1960 is unreliable and should be ignored. The only indication that it is unreliable seems to be that it inconveniently deviates from what Briffa and Mann projected. Given a choice between empirical data and their theory, they chucked the data and kept the theory. This is the very antithesis of scientific inquiry.

Climate alarmists like Mote, Mann and others had two options when reacting to the Climategate e-mails. They could have expressed sincere disappointment, taken a step back and worked to ensure that there was an appropriate distance between science and politics. They chose the other option, to engage in a flurry of political and semantic contrivances in an effort to "hide the decline" of their own credibility. Those trying to understand the true meaning of the e-mails need only look at the highly political and misleading excuses made after-the-fact to determine whether the language in the documents were unfortunate misunderstandings or intentional efforts to hide and suppress inconvenient science.

Small business bankruptcies up sharply in California

December 22, 2009 in Blog

A disturbing article in the Los Angeles Times today touches on California's troubling business climate. "Small-business bankruptcies rise 81% in California," says the headline. The story goes on to relay tales of woe from small business owners in the Golden State, and it aint pretty. 

Nationally, bankruptcy filings for small businesses are up 44% from this time last year, as the article points out, and a large part is the continued lack of access to credit, stemming from the financial market meltdown in 2008. Last month, president Obama laid out a plan to increase small business lending from financial institutions -- namely by leaning on them to increase their lending (see "no such thing as no strings attached") to small businesses. But there is only so much that the President can do in that regard.

The better !
course of action that policymakers in Congress and Olympia can do, however, is to simply make it less expensive and onerous to run a business and refrain from causing such uncertainty in future tax rates and regulations with the current debate on health care and cap and trade. 

Businesses need a certain level of predictability when it comes to taxes and regulations, and higher levels of both will lead to lower levels of productivity, jobs and economic growth.

PlantBottle and the Economics of Environmental Sustainability

December 22, 2009 in Blog

PlantBottle One of the best examples of how economics and the environment go hand-in-hand is the way the free market constantly pushes to reduce use of scarce resources. Plastic bottles are a good example of this trend.

Frequently I've highlighted what Nestle calls its "eco-shape" bottle, which uses "30 percent" less plastic. The purpose is quite clear -- less plastic means less weight to transport and fewer resources to pay for. Now the Coca-Cola Company, who bottles Dasani water among a number of other products, is introducing the latest version of this trend.

Called the plantbottle, Coca-Cola uses plant-based ethylene, made from sugar cane, to replace the 30 percent of a standard PET (polyethylene terephalate) plastic bottle that comes from petroleum-based ethylene with ethanol. The bottle is the same in the end but changes the materials from which it is produced. What I found so interesting about the presentation Coke made those of us who attended their Seattle presentation was how explicit they were about the role economics plays in ensuring this works. Coke didn't simply take this step in the hopes it works out, they understand that for this to be environmentally sustainable in the long run it also needs to be economically sustainable.

For instance, it was important to them that the plastic be the same as current recyclable plastic. If the bottles were different it could contaminate current recycling systems, making it more difficult to recycle. They noted that Coke is a major recycler in their own right (Coca-Cola Recycling LLC is an actual subsidiary) and that making it more difficult to recycle is counterproductive.

Second, while they say that the bottle costs more to produce today, they expect the cost to go down as the supply chain improves. It also insulates them, to some extent, from the cost volatility of petroleum.

I asked if they saw an impact on their market share by promoting the plantbottle. They have only just launched it in Denmark and are doing so now on the West Coast and in BC for the Olympics, so they don't have any market-share numbers yet. As we've seen with other "green" products, it can be a way to reach a certain type of consumer that businesses covet -- those who have disposable income and are willing to spend it to buy ideological amenities, like greenness.

Coke did a life-cycle analysis of the effect of the bottle as well to ensure that they weren't simply trading one environmental impact (use of petroleum products and CO2 emission) for another (pollution or deforestation). They found that the bottle was no worse in any area they tested and better in a few key areas. These types of analyses can be misleading and I think it is better to put a price on environmental impact. Putting a price on impact would add an incentive to reduce impact. Their analysis, however, is thoughtful and is more than many who make environmental claims are doing.

They also indicated that some of the claims being made by others sound good but may not be good for the environment. For instance, they noted that "100% recycled" bottles may not be better for the environment due to all of the design and other compromises that need to be made to get to that level. Again, price is a better metric than arbitrary standards because price is reflective of the amount of energy and materials put into a product.

PlantBottle is a good example of the principle that businesses are more creative and effective at promoting environmental sustainability than politically-motivated policymakers and government workers. Those from government agencies who attended the event could only raise concerns about the label, the logo, etc. and finished by asking Coke for money to support their agency's efforts. It dramatized the reality that government is behind in efforts to make real environmental improvements and is primarily involved in trying to grab the coattails of those who are making real improvements.

Where to put light rail through downtown Bellevue?

December 22, 2009 in Blog

Untitled

Kevin Wallace has been working behind the scenes for about a year on the light rail alignment through downtown Bellevue. In November, Kevin was elected to the city council and his effort is taking center stage in where Sound Transit will build tracks.

Sound Transit officials are mulling over several alignment options and have selected a preferred alternative to study further in an EIS. But as Kevin points out, there are many significant problems with it, including

  • Long term construction impacts
  • Increases in traffic congestion
  • Environmental impacts, especially building an elevated rail structure right through the middle of the Mercer Slough

Sound Transit's preferred alternative also requires a lot of commercial property condemnation and presents noise issues to several residential neighborhoods.

So Kevin commissioned a study to find a less intrusive and cheaper alternative. His plan is called the Vision Line and reduces and eliminates most of the issues created by Sound Transit's option. It is also much cheaper.

I had the opportunity to hear Kevin's presentation this morning and he said something that really caught my attention. Sound Transit's preferred alignment through Bellevue violates about 54 tenets of the city's Comprehensive Plan. His plan only infringes on two.

State Auditor releases update on performance audit recommendations

December 22, 2009 in Blog

State Auditor Brian Sonntag this morning issued a report highlighting the status of performance audit recommendations made to date. According to the report:

"From February 2007 through June 30, 2009, performance audits identified nearly $3.6 billion in cost savings, unnecessary expenditures and economic benefits.

Some recommendations have a financial impact, such as past costs that were questionable or avoidable, those with future cost savings and recommendations with future revenue opportunities. The figure below is focused on recommendations with future revenue opportunities or future cost savings that can be realized when the recommendations are implemented.

We made 214 recommendations with future cost savings or revenue opportunities; 67 percent of those recommendations have been fully or part!
ially implemented or are in progress, as shown below.

Most state agencies do not track the cost of their products and services or any realized cost savings from performance audits. They are, however, encouraged to track the cost of participating in performance audits.

We followed up with the following governments to obtain their estimates of the net cost savings they were able to achieve by implementing our recommendations."

Audit
Click this link to see the full report.

The Environmental Honesty of Brian Baird

December 18, 2009 in Blog

Third District Congressman Brian Baird has announced that he will retire from Congress next year. Certainly people will begin assessing his tenure on the issues of import to them. As for some key environmental issues, I appreciated his intellectual honesty.

The emblematic moment of his intellectual and scientific honesty was his willingness to take on an incomplete and misleading article about salvage logging that appeared in Science. The piece, written by a Masters candidate at Oregon State University, argued that salvage logging after a fire did more damage to the forest than leaving the area alone. The article was quickly seized upon by environmental groups, touted in Congress and used as a tool in the effort to end post-fire logging.

Despite the fact that many in his own party were breathlessly waving the report around, he challenged its science head on and even held a hearing. He demanded the data behind the study. Interestingly, the authors refused to provide it. We wrote at the time:

Despite saying their purpose was to influence the discussion of his bill, the authors refused to release their data to Congressman Baird. The authors did not say there was not enough time to collect the data, only that they were not required to. This not only violates a key tenet of scientific inquiry, but is an ironic suppression of their own data.

In the end, the authors backed off their conclusions, admitting they were incomplete and ultimately did not apply to most salvage projects.

This isn't the only time Baird expressed an intellectually honest opinion about an environmental issue that contradicted the party line. The environment will be much better off when there is more honesty about environmental issues -- highlighting those things that don't work and being willing to follow the science where it leads even when it is uncomfortable. On more than one occasion, Baird did just that.

Only 1,200 Boeing employees use transit?

December 18, 2009 in Blog

In a Seattle Times article today, reporter Mike Lindblom details some privacy concerns with the ORCA card.

ORCA stands for One Regional Card for All and replaces 300 other passes or transfers into a single system. But what really got my attention with this article is this:

Boeing, where about 1,200 people use transit or van pools in the Puget
Sound region, considers its fare cards "a company-provided benefit,
privacy-protected," said spokeswoman Kathy Spicer.

Boeing has over 70,000 employees in Washington, and I presume most of them in the Puget Sound region. Average transit mode share in the region is about 4-6% so only 1,200 Boeing employees using transit seems very low to me.

If right, it's this kind of data that challenges transit's "build it, and they will come" model. 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 spending.

European transit systems provide a good contrasting example of how these economic concepts app!
ly.
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 respond 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.

This doesn't mean public transit is bad. It just means using the economic principles of supply and demand shows that building excess transit capacit!
y before there is an equal amount of willingness to use it lea!
ds to an underperforming system. As a result, mode share, ridership and fare box recovery are low.

This is why I'm not surprised to see studies showing how bad traffic is in our region.
Seattle has nation’s worst traffic congestion: Study
Washington highways nation’s 15th worst

Science that Depends on Your Values

December 17, 2009 in Blog

As is often the case, the reaction to a scandal is often more illuminating than the scandal. Such is the case with Climategate. We noted recently that former Washington state climatologist Phil Mote played semantic games trying to downplay the language of some of the e-mails. Now, Dr. Stephen Schneider of Stanford demonstrates another example of this.

The clip below shows a PR person attempting to stop Dr. Schneider from answering a question about the Climategate e-mails and the UN security tossing Phelim McAleer, who asked the question, despite the fact that he has valid credentials.

What is more interesting to me is what Dr. Schneider does say. At one point he says (or rather, spits out), "I don't make comments on redacted e-mails presented to me by people whose values I don't trust." Phelim notes quickly that everyone has confirmed that the e-mails, which are not redacted, are real.

I thought it was interesting that rather than arguing the science, Dr. Schneider goes immediately to "values" and discounts anything from people he doesn't trust. He represents himself as a scientist, but clearly his position is influenced tremendously by whether he shares the values of those who disagree with him. That isn't a scientific approach. That is the very definition of politics and it actually reinforces the claim that the Climategate e-mails show that many who claim to be making scientific judgments free of political influences are quick to turn to politics when it suits their purposes.

Also, University of Washington climate scientist Cliff Mass writes an excellent piece about the Climategate e-mails. The whole thing is worth reading. He addresses the "trick" that Mote tried to dismiss, noting that the approach used by the East Anglia scientists wasn't very scientific. Mass explains this:

In the famous "trick" email the east Anglia emails talk about replacing the proxy tree ring records with instrumental records for the past several decades (because the tree ring records disagreed with what the instrumental records were saying)--instead of just showing those records and noting the difficulty. Not quite open.

An honest approach to science means highlighting uncertainty where it exists and encouraging further research. Unfortunately, too many are trying to fill the knowledge gap with politics and values.