Washington Policy Blog

SBA Underlines Need for Small Business Expansion for True Job Growth

March 8, 2010 in Blog

A new statistical report from the U.S. Small Business Administration's Office of Advocacy underlines the link between job growth and small firm expansion. Often the conversation revolves around asking "how good is Washington state for business start-ups?" And while it is always important to lower the artificial barriers to market entry for new and aspiring entrepreneurs, the new SBA report points out that for true private sector job growth the focus should be on small businesses expanding their workforce. 

From December 2007 to December 2009, the United States lost 7 million net jobs. In that same period Washington state lost 95,950 jobs. Lawmakers on both sides of the aisle are looking at policies to recoup some of those lost jobs. So, how best to go about t!
his?

According to the SBA report, targeting growth in small business is a wise investment; even more so than in new businesses. As the report points out, "Most small firms start small, stay small, and close just a few years after opening." But this is offset by the fact that "Almost all businesses start small...over the last 20 years, 95 percent of new employer firms started with fewer than 20 employees."

There is a very strong basis for the claim that firm formation has a strong impact on overall job creation, but then again, about half of new firms survive five years or more. So, the SBA points out that, in actuality, "the bulk of job flows takes place in existing firms' expansions and contractions." In fact, depending on what data set you look at, small businesses (using the under-500 employee federal standard) account for 65% or 88% of new net jobs nationwide. 

The authors of this report echo WPC assertions that !
small businesses are a logical group to look to for job recove!
ry as they have historically carried our economy out of recessions. Looking back, during the previous recession it was firms with fewer than 20 employees that led the jobs recovery, while businesses with more than 500 employee continued to bleed jobs and firms with 20-499 also lost jobs (but to a lesser extent as the big guys). The recession prior to that, in the early 1990s, it was the firms sized 20-499 that lead employment expansion, while the very small and very large firms dragged behind. 

Because our current recession is steeped so heavily in credit market woes, the authors expect to see net job gains primarily in the 20-499 sector, as opposed to the under-20 sector.

One interesting side note, however, is the declining size of new startups. Essentially, even as more people start businesses, the number of employees in those new businesses is becoming less and less. Pure speculation on my part is that the advent of the Internet, home-based businesses, !
and the simple fact that fewer people can do more through technology has something to do with this.  

Two other good resources regarding data analysis of small firm hiring and the impact on the economy include, "Where Will the Jobs Come From," and "Jobs Created From Business Startups in the United States," both from the Kauffman Foundation. 

Most transparent Legislature ever?

March 8, 2010 in Blog

Senate Majority Leader Lisa Brown was asked by reporters last Friday if the public has been given enough opportunity to participate in the discussion on the various tax proposals now being adopted.

According to the Capitol Record Brown responded:

“We’re far from done yet,” she said, when asked whether the public was given enough chance to weigh in on some of the proposals.

“I think our processes are much more transparent than when I entered the Legislature,” she said. “I don’t think members are being somehow secluded from outside influence.”

If this is what legislative transparency l!
ooks like I'd hate to see an opaque process.

Safe to say some don't share Brown's assessment of the Legislature being transparent:

Minimum wage debate: Focus on short-term gain hurts teens' futures

March 5, 2010 in Blog

A great editorial in today's Wall Street Journal (subscription required) on the teen unemployment rate in America and how minimum wage laws are adversely affecting our future workforce. 

The editorial states,

"A higher minimum wage has the biggest impact on those with the least experience or the fewest skills."

When the feds increased the minimum wage from $5.15 to $5.85 the overall national unemployment rate was under 5% and the teen rate was at 14.9%. 

"But as the minimum wage increased even as the overall job market began to worsen, the damage to teen job seekers became more severe. By the time the third increase to $7.25 from $6.55 took effect in July 2009, the teen jobless rate was 24.3%, and by October it peaked at 27.6% before dropping to 26.4% in January."

But this sad situation is even worse for those in the African-American community.

"[Black teens'] jobless rate climbed from 38.5% before the third wage hike to 49.8% in November 2009, before falling back to 43.8% in January. For black male teens, the rate climbed to 52.2% in December from 39.2% in July."

Those are some telling and frightening numbers. Couple those jobless numbers with the fact that fewer than half of black students finish high school and you have a recipe for disaster (disaster being that black males are much more likely to end up in jail than any other ethnicity). 

So then, why does Congress continue to implement policies that contribute to teenage unemployment? For short-term publicity gains. 

Again, the Journal opines that,

"A Congress that has spent $862 billion to create jobs thus managed with its wage increase to harm tens of thousands of entry-level job seekers. And it did so in the name of "compassion" and a "living wage." In many cases that wage has since become zero."

It's unconscionable to favor short-term gains over the longer term effects here. We are sacrificing temporary wage increases for a few so that the least-skilled can get left behind. And those are the ones who truly need a chance to break into the labor force and learn valuable lessons -- lessons that a government-imposed wage hike cannot teach.

More on the minimum wage
National unemployment rate of 9.4% pales in comparison to teen rate 24%
Colorado minimum wage drops as living costs fall
Don't shut out those looking for experience in the workplace

Students at the UW and Evergreen State College are learning what tax increases feel like

March 5, 2010 in Blog

Students at the UW and Evergreen State College are attending rallies to oppose tax increases in the form of tuition increases, reports the Seattle Times today.  Tuition at UW increased 14% last year and will increase 14% this year.

Students are getting an education in what it feels like to be on the paying end of tax increases. 

Education is supposed to broaden students' understanding and appreciation of a wide array of viewpoints, and there is nothing like having skin in the game to facilitate learning.  Now that students have their own pocketbooks at stake, they demand to know where all the money they are paying is going. 

Students have started with protesting the large salaries numerous academic deans receive at the UW (over $300,000).  This is an excellent preliminary finding for inquiring minds to make, but these high salaries are only a drop in the bucket of higher education spending.

The costs of higher education have been exploding across the country.  One comprehensive analysis of higher education spending in Washington makes this observation at page 36:

It seems clear that institutions of higher education, both nationally, as the US average figures attest, and within the state of Washington, have strayed from their mission, which is to educate students through instruction. Even the best performing community colleges in this regard only spend half of their funds on their core function. Given this sad state of affairs, is should not be surprising that schools are constantly seeking more funds by rising tuition. They are treating students, their customers, as cash cows to fund a multitude of "auxiliary enterprises" and "independent operations."

As cash cows for the universities, students could do much more than demand lower salaries for administrators--- they could demand that administrators shift their priorities so as to reduce future tuition increases.  Students can start by suggesting that administrators reduce spending on these "auxiliary" and "independent" operations. 

Until this happens, tuition rates will continue to increase, and more and more students will find the cost of higher education to be prohibitively expensive. 

House Tax Package Targets Businesses, Non-profits, Venture Cap Investments

March 5, 2010 in Blog

Earlier this week the House released its smorgasbord of tax increases to help fill the $2.8 billion budget deficit. Largely lost among the 150+ pages of HB 3191 are sections 2101 and 2102, which would cap the investment income B&O deduction for non-financial institutions at $250,000 and tax any returns above that at 1.5% (the highest B&O rate).

As of now there is no cap on how much a non-financial business may deduct. According to the Department of Revenue (page 113), this deduction is "provided for interest, dividends and capital gain income earned by persons who are not engaged in banking, loan, security or other financial business." Basically, unless your business makes more than 50% of its revenue through loan income, you qual!
ify for this deduction. 

DOR also says that "The B&O tax is intended to apply for the privilege of engaging in business. This deduction reflects the perspective that investment income by nonfinancial firms is not considered as engaging in business."

Finally, DOR says that revenue could be increased through repealing this deduction but "compliance might be problematic." The Department does not elaborate on what kind of problems could be expected. 

Much of the concern revolves around "what qualifies as investment income?" For a business, non-profit, or other corporate entity, it is wise (and usually required) to have liquid assets invested in some form of interest-bearing vehicle; aka savings account. This may sound simplistic but just as most households hopefully have money stashed away for emergencies or a rainy day, businesses and non-profits similarly hold onto a reserve account as a similar precaution. This !
money is often set aside into various accounts that pay intere!
st. 

Chances are, unless you have a large business or non-profit organization, your reserves are not earning more than $250,000 in interest. Using some simple math and assuming a 4% rate of return (remember when financial analysts used to use 8%?) a business would have to have about $6.25 million in reserves to hit the $250,000 level. 

Now, you might say, "hey, $6.25 million is a lot of money," and to an individual citizen it may be. But many businesses have far far more than that on hand. Heck, over in Redmond, Microsoft has over $30 billion cash and cash equivalents on hand. They are not a business that makes money off of loans and investment income, but they probably pull in a tidy sum just from their reserves. Still in question is whether universities, most of which have substantial endowments, would continue to be exempt as well. As an aside, the a href="http://f2.washington.edu/treasury/sites/default/files/1q10bor.pdf" target="_blank">University of Washington's Consolidated Endowment Fund is a little under $2 billion. And don't forget about the mother of all non-profits, the Gates Foundation, with cash and other investments totalling over $30 billion.

Also still questionable is how Venture Capital would be affected. Washington VC firms invested over half a billion from Q3 2008 to Q2 2009. That's 7th most in the nation, but 4th most per capita. High levels of VC funding is one of the reasons why Seattle continues to attract high-tech firm startups. How would these investments in future companies be affected by this tax increase? We don't yet know that either.

House Democrats expect to raise $58 million from this proposal during the remainder of the current b!
iennium (until June 30, 2011) and $126 million during the 2011-13 bienn!
ium. The plan is to link the money raised from capping the deduction to various education expenditures such as smaller class sizes and levy equalization. 

The reality is that any tax increase, whether through repealing "loopholes" or raising rates, will have a detriment effect on somebody. This is why WPC has been advocating for reining in government spending for years, so that policymakers wouldn't have to choose winners and losers in the tax policy game. 

Senate holds sham "public" hearing on income tax

March 5, 2010 in Blog

It looks like the public weren't the only ones kept in the dark yesterday on the Senate Majority's income tax plan. Ranking member of the Senate Ways and Means Committee, Sen. Joe Zarelli, believes yesterday's hearing was in violation of Senate rules and asked for the hearing to be postponed. Here is the video exchange between Zarelli and the Committee Chair, Sen. Margarita Prentice:

Highlighting the double standard the Legislature employs in contrast with the rules placed on local governments, Tim Ford, Open Government Ombudsman for the Attorney General, wrote in an email yesterday: "It would be illegal for a local government to provide less than 24 hours notice of a special meeting."

Based on the nontransparent course the Legislature continues to pursue, voters may need to put John!
Edward
on their speed dial to help channel the details of the ghost bills haunting the Capitol.

Or lawmakers could debate the merits of constitutional transparency protections for citizens to help put the public back into the legislative process.

The Everett Herald discusses this option today in its editorial: Public input? Who cares?

Heads, tails or bad science; taxpayers pay

March 4, 2010 in Blog

Flip a coin, if its heads you pay 3 cents, tails you pay 6.  But Sightline’s Erik de Place only plays with a two headed coin.  He wants to accuse us of “cherry-picking” and then turnaround and do the very same thing for which he accuses us.

He reiterates his position that since wholesale gas prices are currently at $2.30, the new Hazardous Substance Tax would only result in a 3 cent gas tax increase.  Well he is right, at least today. 

As we explained earlier, the oil industry is extremely volatile and most, including de Place himself, predict that the current low of $2.30 wholesale prices will not last.  de Place chooses to focus only on the price today.  We, on the other hand, have chosen to look to the future and offer a range.  Certainly 6 cents/gal represents the high end of that range, one in which we certainly hope will never be reached, but based on recent history is certainly plausible. We almost reached that point in 2008.

The reality is if the Legislature adopts the hazardous substance tax, every citizen of the state will pay for it at the pump, a price that will likely increase over time.

As for the claim that we are “cherry-picking” the amounts of pollutants entering the Puget Sound via stormwater de Place refuses to address the real issue, which is that Ecology’s report on toxic loadings was found to have egregious errors.  This required them to write an addendum to the report stating that, “the improved hydrologic analysis method resulted in absolute toxic chemical loading estimates that are approximately 3 times lower than loading estimates provided in the Phase 2 study.”  Ironically, when environmental groups use the levels we cited, he calls those estimates “conservative.”  When we used them he called it “cherry-picking.”  Ultimately, he ignores the fact that Ecology revised their numbers, cutting!
projections nearly 4-fold.  If the numbers can change that much but the policy doesn’t, can it really be said that the policy relates to the science?

So which is more disturbing, our citation of the low end of a range, or de Places refusal to join with us in calling for a complete review of the way state resources are spent based on bad science?

Representative Doug Ericksen (R-Ferndale) to offer Innovation Schools to improve Washington's chances in Race to the Top competition

March 4, 2010 in Blog

Washington Policy Center recently featured a presentation on Colorado's Innovation Schools Act, as the Obama Administration allows states with innovation school legislation to win up to 40 points out of a possible 500 in the $4.35 billion competition grants program known as Race to the Top. 

Four weeks ago in Seattle, on February 5th, Rob Stein, principal of Manual High in Denver, described how Colorado's Innovation Schools Act gives him and his teachers the flexibility, autonomy and freedom to innovate that they need to successfully meet the individual learning needs of their students. To watch Mr. Stein's presentation, read his Power Point, listen to KUOW's radio interview of Mr. Stein, or to learn more about Innovation Schools, go here.

Last night a press release from Rep. Doug Ericksen's office in Olympia announced the following:

Rep. Doug Ericksen is sponsoring an amendment to Senate Bill 6696 that would enable communities to operate their schools as public innovation schools, free of restrictive regulations and traditional approaches. The amendment is modeled after Colorado's successful Innovation Schools Act of 2008, which allows school districts the control to reinvent schools, including the use of resources, time and staff if it serves the mission of the school -- rather than as required by state regulations and entrenched practices.

Senate Bill 6696, which is expected to run on the House floor, attempts to implement education reforms to make Washington state eligible for federal “Race to the Top” funds. The inclusion of innovation schools would add a reform which would improve the state’s eligibility for a share of $4 billion.

“This is the type of innovation we need for our schools -- to allow our children to succeed and move our state forward,” said Ericksen, R-Ferndale. “We are hopeful the amendment is successful because it would also improve our state’s chances of receiving ‘Race to the Top’ funding.” 

The amendment would:
• Establish a process for a local school board to create innovation schools or groups of schools called an innovation school zone. This could occur either through a grassroots effort in which the schools apply to the school board, or at the initiation of the school board in collaboration with the schools.
• Outline various elements of an innovation school or school zone plan and the state laws or rules that the school wants to have waived in order to implement the plan. The plan would be approved by the local board, and the innovation school would be designated by the State Board of Education.
• The Superintendent of Public Instruction and the State Board of Education, within their statutory authority, would waive any rules or procedures that are included in an approved plan.
• Most of the key laws in the school code would be subject to being waived, including teacher evaluation and hiring laws, !
salaries, requirements to hire only certified staff, minimum hours of instruction, length of the school year, and a myriad of others.
• Prohibit waiver of laws pertaining to: civil rights; health and safety; statewide assessments and accountability; and financial accountability.
• Provide that in the future, any collective bargaining agreement must contain a provision allowing the employees of an innovation school or an innovation school zone to opt-out of the collective bargaining agreement by a majority vote.
The amendment is also sponsored by Reps. Kevin Parker, David Taylor, Norm Johnson, Larry Haler, Barbara Bailey, Bruce Dammeier, Gary Alexander, Cary Condotta, Dan Roach, Susan Fagan, Jaime Herrera, Bill Hinkle, Terry Nealey, Charles Ross, Glenn Anderson, Shelly Short, Jan Angel and Norma Smith.

Income tax proposals to be heard at 4:30 today

March 4, 2010 in Blog

The Senate Ways and Means Committee will hold a public hearing today on SB 6250 at 4:30 p.m. The original bill would create a graduated income tax.

The hearing is to take public comment on the proposed substitute bill. As of 11:45 this morning, the amendment is not available.

Details on the hearing below:

Ways & Means -  03/04/10  4:30 pm
Full Committee
Senate Hearing Rm 4
J.A. Cherberg Building
Olympia, WA

Public Hearing:  SB 6250 - Providing fiscal reform (hearing on proposed substitute: S-5169.3 Strengthening the tax structure, tax equity, and essential government services by a voter-approved tax.)

Possible executive session on bills heard in committee. Other business.

Is hazardous substance tax on shaky legal footing?

March 4, 2010 in Blog

The latest volley in the fight to prevent a tax increase on hazardous substance has been played by opponents to the tax.

According to Washington State Wire, the Western States Petroleum Association sought the legal opinion of Phil Talmadge, a well respected former state Supreme Court Justice and lawmaker.

In his opinion regarding the legal standing of the hazardous substance tax Talmadge writes:

“Recently the Legislature has been talking about dramatically increasing it and using the money for the state general fund. Some of the early proposals talked about a near-tripling of the tax. But it is clear that this tax violates the 18th Amendment, and it has probably been a violation since 1989.”

And Talmadge is not alone in his opinion.  Washington State Wire previously reported that long-time chair of the Senate Transportation Committee, Mary Margaret Haugen, has been waiting for such a challenge.  She told the Wire:

“I'm sure that if it passes there will be a challenge, no question about that. It is in essence a three-cent gas tax increase, and I think that if we were going to raise the gas tax I think would be appropriate for it to come to the transportation committee.”

So regardless of what lawmakers do at this point, it appears that the ground work is being laid for a full blown legal challenge, and it looks like who ever brings that challenge will be serving for match point.

$9.6 million annual car insurance increase moves forward

March 4, 2010 in Blog

The Senate Ways and Means Committee took executive action yesterday on SB 6871. Along with increasing court filing fees the proposal would also add a surcharge to car insurance policies to fight auto theft. According to the I-960 fiscal impact statement, the new charge is expected to collect $9.6 million annually from auto policyholders.

State insurers testified against the bill. According to the bill report:

"Progressive Insurance recently implemented something similar to this bill in Arizo!
na and found it to be complicated and costly to administer. They had to wait until they had a significant rate revision to incorporate into the fee and they didn't see a lot of results from the program. The current auto theft program has only been in place a few years and there hasn't made a measurable decrease in auto theft. If the committee does move forward with the bill, a sunset clause should be incorporated with reports back to the Legislature on the effectiveness of the auto theft program. Also, the bill should allow for any fee to be specifically called out in the insurance premium statements and the Insurance Commissioner should not receive any portion of the funds. The insurance industry already pays into the general fund and assessments to the Insurance Commissioner. This bill could make insurance companies subject to retaliatory taxes, where they will have to pay higher taxes in other states because of this fee. This fee was looked at before to fund auto!
theft prevention and it was decided at the time that law abid!
ing citizens shouldn't have to pay for the actions of law breakers. Policy holders and insurance companies already pay taxes. Insurers have to pay a premium tax that is three times higher than the B&O tax rate. The bill is not clear regarding what policies are charged and some carriers have annual policies and the bill needs to be clarified."

Last
year the Legislature raided millions from the state's "dedicated" auto theft account and changed the
authorized use of the funds. Here are the details from the 2009-11 budget:

Section
128 (27) - $300,000 of the Washington auto theft prevention authority
account--state appropriation is provided solely for a contract with a
community group to build local community capacity and economic
development within the state by strengthening political relationships
between economically distressed communities and governmental
institutions. The community group shall identify opportunities for
collaboration and initiate activities and events that bring community
organizations, local governments, and state agencies together to
address the impacts of poverty, political disenfranchisement, and
economic inequality on communities of color. These funds must be
matched by other nonstate sources on an equal basis.

Section
203 (8) - $3,700,000 of the Washington auto theft prevention authority
account--state appropriation is provided solely for competitive grants
to community-based organizations to provide at-risk youth intervention
services, including but not limited to, case management, employment
services, educational services, and street outreach intervention
programs. Projects funded should focus on preventing, intervening, and
suppressing behavioral problems and violence while linking at-risk
youth to pro-social activities. The department may not expend more than
$1,850,000 per fiscal year. The costs of administration must not exceed
four percent of appropriated funding for each grant recipient. Each
entity receiving funds must report to the juvenile rehabilitation
administration on the number and types of youth served, the services
provided, and the impact of those services upon the youth and the
community.

Section
945 - RCW 46.66.080 and 2007 c 199 s 27 are each amended to read as
follows: (1) The Washington auto theft prevention authority account is
created in the state treasury, subject to appropriation. All revenues
from the traffic infraction surcharge in RCW 46.63.110(7)(b) and all
receipts from gifts, grants, bequests, devises, or other funds from
public and private sources to support the activities of the auto theft
prevention authority must be deposited into the account. Expenditures
from the account may be used only for activities relating to motor
vehicle theft, including education, prevention, law enforcement,
investigation, prosecution, and confinement. During the 2009-2011
fiscal biennium, the legislature may appropriate moneys from the
Washington auto theft prevention authority account for criminal justice
purposes and community building.

Perhaps if the Legislature hadn't raided the account the funds would be available for the use intended - preventing auto theft.

State's Latest Approach to Climate Change? It's Complicated.

March 3, 2010 in Blog

News out of Sacramento from an obscure California administrative office didn’t earn much attention here in Washington. Maybe it should have.

A 63-word statement on January 12 bound California to a policy known as the Low-Carbon Fuel Standard (LCFS) – the same policy that Gov. Gregoire is working to install here.

The problem is that a simplistic concept of an LCFS doesn’t quite square with the realities of fuel science. According to EPA, the carbon content of fuel isn’t subject to variation – for every gallon of gasoline our engines combust, the amount of carbon emitted is constant. So if an LCFS can’t impact the carbon content of fuel, what exactly is it equipped to do?

Peel back the layers of the LCFS onion, and it becomes clear that it’s a policy designed not to make the fuels in our tank any better or more efficient than they are today – but to make those fuels harder to find and more expensive to purchase. Achieve those two things, LCFS supporters candidly admit, and you reduce the demand for energy by making it so expensive that folks will learn to live without it. Of course, that’s not exactly how those supporters are selling it the public. But once you come to terms with how an LCFS works, it’s tough not to arrive at precisely that conclusion.

So how does an LCFS actually work? First, it attempts to render a carbon score for all the oil that Washingtonians use on a daily basis – again, not a score for how much carbon is actually in the oil, but a score for how much energy is required to bring those sources of energy to the market. Unfortunately, under the bizarre accounting methodology, Saudi Arabian oil scores significantly better than resources from Canada. Nigerian oil makes out far better than energy from Mexico. Even oil produced right here in the United States falls short of samples delivered from places like Libya.

When asked about these difficulties by legislators, the head of Washington’s Department of Ecology climate program admitted “it’s complex.” And those complexities create strange results. The system might actually encourage replacing Canadian oil with oil shipped from overseas.

So if an LCFS is setup to prevent secure, affordable Canadian oil from crossing the border and being turned into the fuels we need to run the state – how are Washingtonians supposed to make up the difference? One option is to ratchet up imports from the Middle East, currently residing at nine percent of the state’s energy consumption. And the other? We can start using hydrogen and electric plug-in cars instead – never mind that those technologies are decades, perhaps even generations, away from commercial viability.

Late last year, we released a classified memo from Gov. Gregoire’s chief of staff laying out a plan for implementing the California model here in Washington. The memo, available on our site, reveals that the ultimate objective of a Washington LCFS, and other climate policies, is to encourage support for imposing the mandate nationwide. The assumption is that the high cost of such an approach in Washington will cause people here to call for a national approach to level the playing field. Until then, the cost of our “leadership” will come out of our pockets.

There may be plenty about the state of California of which Washingtonians could be conceivably envious. An LCFS, though, is simply not one of them. Not at a time of unprecedented economic uncertainty in our state and not when there are other approaches to reducing carbon emissions that are both more effective and more efficient.

Tempered reaction to latest unemployment numbers

March 3, 2010 in Blog

A majority of yesterday's headlines proclaimed that the state had seen its first "positive job growth numbers in a year." While technically true, the increase is small relative to the overral jobs picture, down 170,000+ since the turmoil began, and the unemployment rate actually continued to climb. 

To be sure, even a faint improvement month-over-month is good news when compared to the drastic decline in private sector jobs. But we are still nowhere near out of the woods, at least jobs-wise. As we've stated before, you will see productivity and output grow before j!
obs largely recover their previous levels (which is still years away).

Over at Crosscut, Stephen H. Dunphy writes that 

Another measure shows the true problem with the economy these days: the unemployment rate that counts unemployed people as well as those working part-time for economic reasons and those who have quit looking for work because they are discouraged. That number stood at 16.2 percent statewide, the same as the national average. In Oregon, that rate is 20.7 percent; in California, 21.1 percent.

He also points out that Washington will benefit from exporting to!
surging Asian economies. That will help some of our states la!
rger businesses (Microsoft, Boeing, et. al.) as they export both manufactured goods and software overseas.

But before we begin popping champagne corks, Dunphy points out, correctly I might add, that

"An estimated 359,500 people (not seasonally adjusted) in Washington were unemployed and looking for work in January, Employment Security said. More than 305,000 people received unemployment benefits in the state in January.

A final caution from Employment Security: Remember, one month is !
not a trend, so don’t get too excited about fluctuations in the numbers from month to month."

Also, Nikki Reading over at TVW a> links to an interesting Wall Street Journal article showing average unemployment rates by state with a year-over-year comparison. Interesting to see how all the states were affected. 

Sightline's critique of new taxes gets numbers wrong

March 3, 2010 in Blog

Eric de Place over at The Sightline Institute took exception to our recent Legislative Memo, “Tripling Hazardous Substance Tax Would Boost Gas Prices.”  In particular de Place claims we were “obviously” wrong in our analysis in two specific areas; claiming that the proposed tax would increase gas prices four to six cents per gallon and in our data regarding the total amount of pollutants entering the Puget Sound through stormwater.

But a closer look shows that the criticism is a bit reckless.

Sightline claims we are wrong to say that the proposed tax “would increase gas prices by four to six cents per gallon.”  De Place writes:

“…it’s obviously false to anyone who bothers to perform some simple arithmetic. All you need to do is multiply the tax increase (1.3%) by the wholesale price of gasoline (about $2.30).... the correct answer is that the impact would be less than 3 cents per gallon." 

There are several problems with Sightline’s over-simplification of the math.  First, he conveniently ignores the recent trends in wholesale gas prices.  According to the U.S. Energy Information Administration(EIA), the average wholesale price for gasoline in 2008 was $2.69/gal on the West Coast for all gas products.  During 2008 the wholesale price topped out at $3.63, which would equate to a 4.7 cent tax increase at the pump under the current proposal. He conveniently picks the low point of recent gas prices for his estimate.

Second, while it may be true that 2008 numbers represent the current high-water mark in wholesale gas prices, it cannot be ignored that oil industry is a volatile market and most predict prices will increase in the near future. Many agree with this assessment, including, ironically, de Place.

One year ago he argued that the EIA has historically underestimated the price of gas.  In his blog post, entitled, “Future Gas Prices,” de Place bemoans the low EIA estimates of gas prices.  In late 2008 the EIA predicted that prices would top out just over a $3/gal, well under the $4/gal mark that prices actually reached in 2008.  De Place at the time wrote:

“as anyone not living under a rock is aware, the average retail price of gasoline is currently above $4 per gallon….the EIA also publishes a "high price" forecast, just in case something untoward should happen. Boy, I sure hope that high price forecast doesn't materialize because it shows future gas prices getting up almost, but not quite, to $4 a gallon by... wait for it... sometime around 2030.”

Finally, de Place points to the state’s Department of Revenue (DOR) as the definitive authority on price increases based on the proposed tax.  He notes:

 “Not surprisingly, that's also what the state's Department of Revenue says: 3 cents, at most.”

However, an email sent by Drew Shirk, DOR’s Legislative and External Affairs Liaison said, “We estimate that every one percentage point increase of the hazardous substance tax rate will likely result in about a 2.5 to 3.5 cent increase in the retail price/gal.”  That means, at least before politics took over DOR’s gas price projections, the tax proposal would raise prices at the pump by as much as 4.6 cents/gal, not the 3 cents they are now predicting.

The second point questioned by Sightline is our analysis of the Department of Ecology’s re-calculation of pollutants entering the Puget Sound through stormwater.  They claim we are guilty of “cherry-picking” our numbers and misrepresenting the actual amount of pollutants that enter the Sound.  Here too, de Place is wrong in his criticism.

Our analysis of Ecology’s re-calculation highlights that an error was found in the first two phases of the Department’s toxic loadings reports.  In our Memo we note that David Dicks, Director of the Puget Sound Partnership, wrote in July of 2009 that:

“Nearly 150,000 pounds of toxic chemicals – including petroleum, lead arsenic and fertilizers – enter the Puget Sound each day.”

In addition, this is the same claim that Director Dicks and others made when the Partnership released their Action Agenda in December of 2008.  At the time, the claim of 150,000 pounds represented the low end of the range based on phase two of the toxic reports.

However, after re-calculating the toxic loading reports, the claims regarding the amount of toxics entering the Puget Sound on an daily basis has been revised down from the 150,000 pounds to 39,000 pounds.  The re-calculation was published in January of 2010.  Our use of 39,000 lbs/day (14.2 million lbs/year) is consistent with what proponents, like Washington Conservation Voters and the House Democratic Caucus, have been using all along.

Sightline is correct that we could have better clarified our use of the table from Ecology’s re-calculation.  In our Memo we wrote, “The table below shows the change in pollutant loading to the Puget Sound after the recalculation.”  What we should have said was the table shows the re-calculation of oil and grease in the Puget Sound.  This was a minor oversight on our part, but one that should have been caught and will be corrected.

That does not change the fundamental reality, however.  Oil and grease represent more than 90 percent of pollutants, so the revision of those numbers is a dramatic and wholesale change of the data. Sightline’s critique is tantamount to saying, “yeah, but what about the other nine percent?”

None of Sightline’s claims attempt to undermine the basic argument we made.  The truth is that hundreds of millions of dollars are spent on stormwater improvements today and the state’s roadmap guiding this work was flawed and has been re-calculated, drastically reducing the amount of toxics entering the Puget Sound.

Policymakers have a choice.  Based on current funding levels and the scientific record, lawmakers should reevaluate their pursuits to increase the tax burden on citizens and business of the state, until we can be certain that the costs are appropriate to the challenge.

As for Sightline’s claims that we are in error in our analysis, we have in the past enjoyed an open dialogue and communication with them.  It is too bad they chose not to use the open dialogue to correct such a minor oversight.  Had they e-mailed their concerns or questions, we could have addressed them. Instead they shot first and missed the mark.  As a result, it looks as if it is Sightline is the one “cherry-picking” numbers and playing politics to avoid the truth.

Feds grant WA $84 million for broadband expansion

March 2, 2010 in Blog

The U.S. Department of Commerce's National Telecommunications and Information Administration announced today a grant of $84 million to the Northwest Open Access Network (NoaNet) "to deliver new and enhanced broadband capabilities to some of the more remote regions of the state by adding 830 miles of figer and eight new microwave sites to their existing high-speed network."