Washington Policy Blog

Senate votes for temporary employee compensation savings

January 22, 2010 in Blog

The Senate today adopted SB 6503: Closing state agencies on specified dates. The bill passed 27 to 17. According to the bill report:

"State agencies are directed to achieve a $69.154 million reduction in employee compensation costs from the near General Fund through mandatory and voluntary furloughs, leave without pay, reduced work hours, voluntary retirements and separations, layoffs, and other methods. Agency compensation reduction plans must be submitted by May 15 and approved by the Office of Financial Management by June 1. Agencies that fail to submit an approved compensation reduction plan will be subject to 13 specified agency closure dates beginning in June 2010."

An amendment to extend and increase the savings through 2013 was rejected. The amendment failed on a voice vote.

State employee unions bitterly oppose the temporary compensation reductions. The Washington Federation of State Employees told its members to lobby against the bill saying

  • "This is not about making state employees shoulder their fair share. They already have, giving up $1 billion in pay, health benefits, pension contributions and some 4,700 layoffs. No other jurisdiction in this state has taken both health care and wage cuts on top of furloughs."
  • "Instead of closing state offices and temporarily laying off staff, the Legislature instead should close some of the $14 billion in accessible tax breaks. What is more important, a tax break for condominium maintenance or keeping quality services for taxpayers?"

According to the Office of Financial Management (OFM), the average total compensation for a state full-time equivalent (FTE) employee was $72,504 in 2009. This is an increase of $12,909 since 2005 (22 percent increase).

In related news, I asked OFM how much could be saved if state employee contributions for health care was increased from 12 percent to 20 percent. Here is the answer:

"If we did nothing else to solve the projected fund balance deficit in PEBB of $220 - $240 million, and moved the average employee contribution from 12% to 20%, we would generate approximately $48 million, which would reduce the projected deficit to $172 -$192 million. That amount would be for the 6 months beginning Jan.1, 2011, since that is likely the next time a premium change could be implemented. Some or all of !
that could be used to save General Fund money, but that would be up to the Legislature."

The average state employee health care contribution of 12 percent is far below the average private sector share.

According to the Washington Research Council, "A recent Towers Perrin survey of 200 large employers found that the average employee’s share of health care premiums was 22.6 percent in 2008, up from 20.1 percent in 2003."

Emergence of Cloud Computing = Government Regulation Can’t Be Far Behind

January 22, 2010 in Blog

Cloud-computingBrad Smith, Microsoft’s Senior Vice President and General Counsel address! ed the Brookings Institution earlier this week calling for government to get involved to enhance the safety, security and privacy of the "

Gregoire: No guarantee of federal bailout money

January 21, 2010 in Blog

Governor Chris Gregoire was the keynote speaker at today's Association of Washington Business Lobby lunch. The Governor spoke about the budget, green-jobs bond bill, government reform, education reform and tax exemptions. Here are some of the highlights:

Budget

  • She doesn't know what the state can expect now from the federal government in light of Tuesday's election in Massachusetts. She said there is the potential for nothing from the feds but she is waiting to see if anything might still be passed before sine die.
  • She is stressing with lawmakers that the state's budget problems are at a minimum for three-years and they shouldn't approach this year as merely a supplemental budget. Long-term reforms are not discretionary.
  • She is open to tax increases that "won't hurt the economy."

Green-jobs bond bill

  • The Governor was asked whether she supports EHB 2561 adopted yesterday by the House. She said that she wants to find a way to stimulate jobs but we can't continue to focus on stimulating public sector jobs; we need to stimulate private sector jobs.
  • She also said that until the State Treasurer tells her this proposal will not jeopardize the state's credit rating she cannot support it. Yesterday the Treasurer warned that the bill "would threaten the state’s bond rating and increase debt service obligations on the general fund by $126 million a biennium once fully implemented."
  • Gregoire then reiterated instead, "It's time for us to stimulate private sector jobs that will continue in the future."

Government reform

  • Discussing legislative concerns with her reform proposals the Governor said that if "we keep the attitude going of not in my backyard, nothing will get done." Lawmakers need to get things in perspective and not put their heads in the sand. She closed by saying that the state must re-boot and called on the business community to encourage lawmakers to enact meaningful reforms since they are "losing their stomach" for the changes needed.

Education reform and Race to the Top

  • The Governor was asked if the education reforms she's proposing will guarantee the state will qualify for the Race to the Top funds. Gregoire said she can't guarantee we'll be eligible if her education package is enacted but she can guarantee we won't be if the legislature doesn't act on it. She was also asked about charter schools but said she has no plan to pursue them since the voters have consistently rejected them.

Tax exemptions

  • The other noteworthy comment the Governor made was in regard to efforts to close business tax exemptions. She said that getting rid of exemptions is a nice thing to say but you can't get rid of a lot of them without hurting our economy. This comment appeared to throw cold water on some of the efforts for large scale repeal of tax exemptions.

Budget transparency bill scheduled for hearing

January 21, 2010 in Blog

It looks like the state budget may receive a little more sunlight. The bipartisan 72 hour budget timeout bill is scheduled for a public hearing next Monday and may receive executive action later in the week. Here are additional details:

Sponsors: Representatives Alexander, Seaquist, Bailey, Ericks, Dammeier, Schmick, Wallace, Morrell, Simpson, Smith

2010 REGULAR SESSION
    Jan 15  First reading, referred to Ways & Means. (View Original Bill)
    Jan 25  Scheduled for pu!
blic hearing in the House Committee on Ways & Means at 3:30 PM. (Subject to change) (Committee Materials)
    Jan 26  Scheduled for executive session in the House Committee on Ways & Means at 3:30 PM. (Subject to change) (Committee Materials)
    Jan 27  Scheduled for executive ses!
sion in the House Committee on Ways & Means at 3:30 PM. (Subject to!
change) (Committee Materials)

Will sun set on Sunshine Committee?

January 21, 2010 in Blog

The House Committee on State Government & Tribal Affairs heard public testimony this morning on HB 2617: Eliminating certain boards and commissions. Among the boards targeted for elimination is the Public Records Exemptions Accountability Committee (a.k.a. Sunshine Committee).

This is not the first time the Sunshine Committee has been in the legislature's crosshairs. Last year Sen. Darlene Fairley (D-32) introduced SB 5119: Eliminating the public exemptions accountability committee.

The bill was not brought up for a vote.

According to the Attorney General's Office, the cost to operate the Sunshine Committee has been $32,323!
since 2007. The majority of that was during the 2007-09 budget. The cost for the current budget has been $5,563.

Perhaps more troubling than the proposal to eliminate the Sunshine Committee is the fact that none of its recommendations from 2009 have been introduced for consideration this session. This includes the sense of the Committee that the legislature's exemption from the public records act should be repealed.

Although none of the Sunshine Committee's 2009 recommendations have been introduced, lawmakers have found time to propose several c!
hanges to the public records act that concern open government advocates.

U.S. losing ground in global competitiveness

January 20, 2010 in Blog

A new report out today from The Heritage Foundation reports that the United States is losing ground to its major competitors in the global marketplace. The 2010 Index of Economic Freedom, co-published with The Wall Street Journal, reports that out of the top 20 world economies, the U.S. suffered the largest drop in overall economic freedom. 

"Scores declined in seven of the 10 categories of economic freedom. Losses were particularly significant in the areas of financial freedom, monetary freedom and property rights. Driving it all were the federal government's interventionist responses to the financial and economic crises of the last two years, which have included politically influenced regulatory changes, protectionist trade restrictions, massive stimulus spending and bailouts !
of financial and automotive firms deemed "too big to fail." These policies have resulted in job losses, discouraged entrepreneurship and saddled American with unprecedented government deficits."

The U.S. was previously ranked at 6th most free and now occupies the 8th place. Canada now ranks higher and boasts the highest North American ranking. Hong Kong continues to lead the rankings, for the 16th consecutive year, followed by Singapore, Australia and New Zealand. 

Why is economic freedom important? Because it leads to innovation, risk-taking, entrepreneurship and ultimately, a higher standard of living. This helps alleviate poverty and leads to higher levels of education. Not only that, but successful economies churn out product and profit and tax revenue, which is used to help pay for vital infrastructure such as roads, schools, police, a cleaner environment and social safety nets. 

It's no coincidence that gro!
ups like Washington Policy Center advocate for freer economies!
and streamlined, accountable government. The smaller the tax and regulatory burden on our businesses and entrepreneurs, the more successful they will become. This results in a win-win for folks in the private and public sectors. 

Only 67 passengers ride new Amtrak train between Seattle and Vancouver

January 19, 2010 in Blog

Last August, Amtrak opened a second train between Seattle and Vancouver B.C. The line is meant to be a pilot project ahead of the Winter Olympic games due to begin in February. Both the WSDOT and the Canadian government are waiting to see how high passenger demand is before deciding whether to make the second train permanent.

The new train makes one additional round trip between Seattle and Vancouver, everyday. According to the WSDOT, the average number of passengers on each leg is about 67.

The National Railroad Passenger Corporation presented a re!
port to Congress
in October 2009 that estimated the second line would lose about $1 million in operating costs (paid by taxpayers) and it would serve about 60,000 trips per year. The 60,000 trips per year translates to about 82 people per leg between Seattle and Vancouver.

Olympic service begins on February 12, 2009 and as Jared Paben points out on his Bellingham Traffic Blog, officials plan to make a decision on whether to make the second train permanent within the month. I'm still trying to find out how many passengers are required to justify permanent service (I've seen numbers between 60-100). But the current 67 passengers-per-leg is data collected between August 19 and December 31. I found that State and Amtrak officials offered a 25 percent discount on all fares to and from Vancouver over the same time period!
. Lowering prices during a time in which you're measuring !
demand (in the hopes of justifying permanent service) doesn't seem very objective to me but that's exactly what happened.

Either way, spending a million dollars per year in public taxes to move 67 people per day between Seattle and Vancouver is laughable. Supporters say instead of measuring mobility, we should look at the economic benefits of adding a second train. They point to a WSDOT study that shows Amtrak passengers spend about $13-$26 million a year in the Vancouver area

Are you kidding? Its reasonable to expect passengers to spend a couple of hundred dollars in the Vancouver area. But if the WSDOT finding is correct, then those 67 passengers would have to spend between $36,000 to $71,000 everyday they crossed into Vancouver. That is simply unrealistic.

The study also mistakenly assumes this economic activity would not !
occur otherwise. People who choose to visit Vancouver would do so with or without a second Amtrak train. They would just find a different way to get there.

Adding a second train between Seattle and Vancouver makes sense during the Winter Olympics. But continuing permanent service beyond March stretches the support of even the most liberal of economic interpretations.

Senator wants changes to 17th amendment

January 18, 2010 in Blog

Senator Val Stevens (R-39) has introduced a resolution calling on Congress to initiate a constitutional amendment that would restore the selection of U.S. Senators by state legislatures instead of by direct elections. Here are details from SJM 8020 - Requesting that Congress amend the 17th amendment of the United States Constitution:

Your Memorialists respectfully pray:

(1) That the Legislature of the State of Washington find and declare to be defective the current process of electing United States Senators, which fails to represent the interests of the individual states;

(2) That Congress, in accordance with Article V of the Constitution of the United States, immediately transmit to the several states for ratification an amendment to the 17th amendment of the United States Constitution, as described!
in subsection (3) of this memorial, resolving the procedural problems, particularly the problem of the deadlocked State Legislature, inherent in the original concept; and

(3) That the amendment read as follows: "Section 1. The Senate of the United States shall be composed of two Senators from each State, selected by the legislature of each State. Each Senator shall serve a six-year term and may be reappointed. Each Senator shall have one vote.

Section 2. Senators are subject to removal by the State  Legislature. Removal of a Senator requires a majority of each House of the State Legislature.

Section 3. Congress is precluded from enacting any legislation affecting the senatorial selection process. Each State Legislature shall enact rules and procedures, consistent with this amendment, related to the selection and removal of Senators. A State Legislature may implement a selection procedure whereby the State Legislature selects a !
Senator by a plurality vote rather than a majority. If a State!
Legislature fails to enact a selection procedure, the State Legislature shall sit as a single body and shall select a Senator by a plurality vote. Irrespective of the procedures followed by the State Legislature, if the State Legislature does not choose a Senator within thirty days after a vacancy, the Governor of the State shall select the Senator.

The resolution argues the 17 amendment (ratified in 1913) changed the balance of power envisioned by the founding fathers, stripping state legislatures of their power to control against congressional encroachment of state sovereignty.

Legislature prepares to pour millions of dollars into union bank accounts, reducing subsidy payments for the care of poor children

January 16, 2010 in Blog

Follow the money, they say.  Several sources report that the Speaker of the House, Frank Chopp, is bringing forward HB 1329, which would force the unionization of day care center providers who take poor children on state subsidy into care.

We wrote a comprehensive research analysis about this bill, which is accessible here.

If this bill passes, the state will deduct union dues from subsidies paid to day care providers caring for poor children.

These dues amount to real money.  In response to a FOIA request, the Deparment of Social and Health Services sent me a spreadsheet of monthly dues paid to the union of family home providers between February 2008 and November 2009.  They amount to an average of $232,603 per month, a total of $2.67 million a year. 

Workers' Comp Reform and Straw Man Arguments

January 15, 2010 in Blog

Despite the fact that the budget woes and looming tax increases continue to dominate discussion about the legislative session, there are other topics on the table as well. As previously mentioned in this blog (several times), the business community is focused on some cost-containment measures in workers' compensation and unemployment insurance. 

Yesterday we reported that policymakers introduced HB 2879, a bill to privatize the workers' comp system, the "nuclear option" as at least one media outlet describes. 

How does Speaker Frank Chopp feel about these cost containment measures, especially privatizing the system? He equated the potential move to letting AIG run the system. No joke, see this TVW clip from Inside Olympia:

This is one of those straw man arguments that is brought out for scare tactics and little else. Is there any evidence to support the supposedly scary proposition that a private sector insurance company may participate in providing competition in a government-run monopoly? It's easy to pick on insurance companies because, let's face it, they're easy targets just like cell phone companies, cable companies, utility providers, retail stores, etc. Everyone has had a bad experience with one of those kinds of companies. And you know what? Everyone has had a bad experience with government entities such as the DMV, or IRS, or DOR, or L&I, or city hall. 

Simply stating that you don't want to open up a system to competition because there have been bad actors (even though Chopp states no evidence of bad actors in industrial insurance, just other insurance companies) is an insult to the good actors; those who have been responsib!
le stewards of their policy holders. 

In other words, it's easier to knock down a straw man such as AIG then it is to refute the position that responsible companies can bring real reform that lowers costs, increases customer satisfaction and brings choice to the marketplace while still protecting injured workers. 

Details from liquor privatization hearing

January 15, 2010 in Blog

Yesterday the Senate Labor, Commerce & Consumer Protection Committee heard public testimony on SB 6204 - Privatizing the sale of liquor. Prime sponsor Sen. Tim Sheldon (D-35) said this was the first time one of his proposals to break up the state's liquor monopoly has received a public hearing.

Here is the audio of Sen. Sheldon's testimony:

The Governor's office was skeptical of the proposal and expressed concern about the consequences of increased liquor sales (audio below).

The state Liquor Control Board shared the Governor's concerns (audio below).

The Governor has previously authorized increased liquor sales on multiple occasions since taking office. Here are some examples:

2009-11 state budget
Liquor Control Board Enhancement – $9.1 Million Near General Fund-State Increase
Several revenue-enhancing measures were i!
mplemented in the budget including opening five new state stores and te!
n new contract stores. Additionally, appropriations are provided for new retail strategies, including opening nine state stores on Sunday, opening state liquor stores on seven holidays, and opening six mall locations during the holiday season. Also, included in the total are other minor policy level changes impacting revenues.

2007-09 state budget
Sunday Sales – $3.9 Million General Fund-State Increase
Funds are provided to the Liquor Control Board to open 29 additional stores on Sundays. The Board shall report back to the Legislature in January 2009 on the effect these additional store openings have made on sales. In addition, these activities increase revenues for the Health Services Account and the Violence Reduction and Drug Enforcement (VRDE) Account.

(2005) HB 1379:
Requiring the liquor control board to implement a retail business plan to improve efficiency and increase revenue
The Board is required to expand store operations to include the Sunday opening of at least 20 state-operated liquor stores by September 1, 2005. The Board must select stores expected to gross the most revenues on Sunday. The stores must be open a minimum of five hours on Sundays. Contract liquor stores are permitted, but not required to open on Sunday . . .

The Board must implement an in-store liquor merchandising plan, including point-of-sale advertising and promotional displays. The Board is also directed to implement a plan for instore merchandising of brands, which may not include provisions for selling liquor-related items not previously authorized.

Washington is not alone in looking at privatizing state liquor monopolies. According to Stateline.org: !

Eyeing the potential for saving money, officials in North Carolina, Virginia and Washington are considering eliminating state-run liquor stores, turning over the sale of booze to the private sector. Nineteen states control their liquor sales.

Republican Robert McDonnell, who will be sworn in as Virginia’s governor on Saturday (Jan. 16), made privatization of the state’s 300 liquor stores a central theme of his winning campaign last fall. He said it would raise about $500 million in one-time money for transportation, but critics say it will never pass the General Assembly because the state would have to give up about $100 million a year in revenue that helps pay for public schools, human services, prisons and other services.

Washington lawmakers held a hearing Thursday (Jan. 14) on a bipartisan bill privatizing liquor sales. Scrapping the current system would cost the state $322 million a year, !
but the money would be recouped through taxes collected from the privately-run liquor stores. “Is it a core function of the state to be selling alcohol? I don’t think so,” Washington state auditor Brian Sonntag told KING 5 news. Sonntag issued a report in December saying Washington could increase revenue from liquor sales by up to $350 million over five years with a privately operated system.

In North Carolina, privatization is as much a matter of accountability as it is a fiscal issue. Gov. Beverly Perdue (D) named a budget reform panel to examine the state-run liquor system after ordering North Carolina’s 163 local Alcoholic Beverage Control boards to go along with a ban on gifts and other ethics rules she imposed on other state agencies, according to the Charlotte Observer. Of the 19 states that control their liquor sales, North Carolina is the only one with local boards instead of a single state board.

Pennsylvania lawmakers considered priv!
atizing the 619 state-owned liquor stores in 2008, but the legislation !
never came up for a vote.

"Link after link we broke those chains," says Schwarzenegger, as California allows parents to escape and reform failing public schools

January 15, 2010 in Blog

Under the leadership of Governor Schwarzenegger, the California Legislature just propelled itself to the front of the Race to the Top competition.  The Governor and the Legislature have been working since last summer.  They just passed SB 4, which gains significant freedoms for parents stuck in underperforming schools.  As the Governor said, until now, the exit doors of underperforming schools have been blocked by chains.  Now, as a result of SB 4, and the Race to the Top competition, parents with students in underperforming schools will be able to:

1) take their student out and send them to another school and even to another district;

2) dismiss ineffective low-performing school principals;

3) turn their schools into charter schools;

4) close the doors of an underperforming school.

The California Legislature also passed SB 1, which breaks down the data firewall barrier which prevented the linking of student performance to the evaluation of a teacher.

The Governor celebrated the many legislators, who, he said, despite being pushed by many, many special interest groups pushing their own adult agenda, focused and stayed focused on doing what is right for kids.  "Link after link we broke those chains," said the Governor. 

Next week, Governor Gregoire's Race to the Top bill will be filed with the Legislature.  All indications are that the bill will break not one link in the chain that binds 70,500 students to their chronically underperforming schools in Washington, or give parents any power to remove ineffective principals or create charter schools. 

The culture of the Washington education establishment badly needs to change.  It is smug and self-satisfied, seriously "progress-resistant" (thanks to David Brooks for this term and his insights).  We need a new culture for education here:   one that is constantly striving for improvement, which is highly demanding and highly intensive, a culture which demands and celebrates hard work and achievement. 

Part and parcel of a new culture for education would hold individual principals and teachers responsible for educating children, and reject the plethora of excuses for failure so common to the discussion.  We need a new education culture in Washington State: a culture like the culture created by Geoffrey Canada in Harlem Children's Zone, like the one in KIPP charter schools, like the one in No-Excuses schools, and like the new one that has formed under the leadership of the Terminator, Schwarzenegger in Sacramento, California. 

Governor: "40,000 new jobs"

January 15, 2010 in Blog

In her state of the state address and subsequent address to the Annual Economic Forecast Conference, Governor Christine Gregoire laid out her plans to create 40,000 new jobs. The main strategy? She wants to stimulate $2 billion capital investment in the fields of biotech, software development, health care, clean tech, renewable energy and aerospace. She also proposed a new employee small business tax credit; in essence small businesses would enjoy a tax break for every new hire. The tax credit program would be capped at $100 million. The Governor also wants to implement the Rural County Tax Credit Program

In her address the Governor also hinted at r!
egulatory reform through a new "One Front Door" program, aimed at improving customer service and streamlining the permit process, saying she will "expand our multi-agency permitting teams to help businesses break through the red tape and to quickly move from planning to job-producing construction." Whether this means expanding the Office of Regulatory Assistance and moving it to the Department of Commerce, or if she has another track in mind, remains to be seen. We have seen regulatory reform attempted before. Here's hoping that regulatory reduction is a part of the plan, not just reform. 

It's good to see that tax breaks for small and rural businesses are on the agenda this year. Last year, everyone seemed to be caught up in >"economic stimulus" that really didn't stimulat!
e anything
(except higher deficits).  

But it's not just about tax breaks for the little guys. Over at AWB's blog, President Don Brunell correctly points out that the plan is a decent start, but other reforms are also needed, 

"Even though her plan is just a proposal right now, it is a good starting point and deserves our support. Combine that with much needed workers comp reforms, reduced unemployment taxes, holding the line on taxes and fees, regulatory streamlining, and reducing the costs of compliance with state mandates.....and, Washington will be ahead of the rest of the country as we all struggle to recover trom this deep recession."

State government closures proposed

January 15, 2010 in Blog

The Chair of the Senate Ways and Means Committee, Sen. Margarita Prentice (D-11), has introduced a bill to close state government for 16 days over the next two years. Here are details from SB 6503 - Closing state agencies on specified dates:

From the effective date of this section until June 30, 2011, state agencies of the legislative, executive, and judicial branches shall be closed on the following dates in addition to the legal holidays specified in RCW 1.16.050:
(a) Friday, March 12, 2010;
(b) Friday, April 9, 2010;
(c) Friday, May 28, 2010;
(d) Monday, June 14, 2010;
(e) Friday, July 2, 2010;
(f) Friday, August 6, 2010;
(g) Friday, September 3, 2010;
(h) Monday, October 11, 2010;
(i) Friday, November 12, 2010;
!
(j) Monday, December 27, 2010;
(k) Friday, January 14, 2011;
(l) Friday, February 18, 2011;
(m) Friday, March 11, 2011;
(n) Friday, April 15, 2011;
(o) Friday, May 27, 2011; and
(p) Friday, June 10, 2011.

(2) If the closure of an office of an agency of the state under this section prevents the performance of any action, the action shall be considered timely if performed on the next business day . . .

(4) The closure of an office of a state agency under this section shall result in the temporary layoff of the employees of the agency. The compensation of the employees shall be reduced proportionately to the duration of the temporary layoff. Temporary layoffs under this section shall not affect the employees' vacation leave accrual, seniority, or sick leave credits. For the purposes of chapter 430, Laws of 2009, the compensation reductions under this section are deemed to be an integral part of an employer's exp!
enditure reduction efforts.

Section 3 of the bil!
l lists the exemptions to the ordered closures.