Washington Policy Blog

North Thurston School District may be violating civil rights of students hoping to go to Aspire Middle School

April 20, 2010 in Blog

The Olympian reports today that the North Thurston School District is denying students placement in the new Aspire Middle School on the basis of race.  This appears to be a violation of their civil rights under RCW 49.60.400, which states:

 1) The state (which includes school districts) shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race....

Details on when tax increases take effect

April 20, 2010 in Blog

The Department of Revenue has created a website with details on all the tax increases that passed this year. Here is DOR's press release:

Several tax changes will take effect as early as May 1, assuming Governor Chris Gregoire signs into law a tax package sent to her by the Legislature.

2ESSB 6143 temporarily increases the business and occupation tax rate on services beginning May 1.  Another bill, ESHB 2493, increases cigarette and most other tobacco taxes May 1.

The legislation also extends the sales tax to candy and bottled water beginning June 1, increases the beer tax starting June 1, and imposes a carbonated beverage tax effective July 1.  All the tax changes expire on July 1, 2013, except the ones on candy and tobacco products.

While the tax changes are contingent on the governor’s action, the Department of Revenu!
e is notifying businesses ahead of time so they can prepare for them.  Detailed information on each tax measure is being posted at http://dor.wa.gov.

The service tax increase to 1.8 percent of gross income from 1.5 percent affects all service businesses except hospitals and scientific research and development activities.  The “services and other business activities” classification includes businesses such as attorneys, architects, engineers, physicians and private investigators. 

The measure includes a permanent doubling to $70 a month of the small business B&O tax credit that will allow services to gross up to about $80,000 annually without incurring any additional B&O tax liability, and in some cases paying lower taxes.  About 74,000 service businesses out of a total of 137,000 companies will benefit from the increase in the credit.

2ESSB 6143 also temporarily suspends a sales tax exemption affecting livestock nutrien!
t management, repeals a property management salary exemption, !
limits the bad debt deduction on retail sales, requires corporate boards of directors to pay tax on their fees, directs the Department to deny abusive tax avoidance schemes, addresses several court decisions affecting taxation, and sets minimum nexus standards affecting out-of -state companies doing business in Washington.

The Governor is scheduled to sign several tax bills Friday at 1:30 p.m.

Government reform commission in budget

April 20, 2010 in Blog

Not possessing the speed reading skills of our lawmakers who managed to read and digest the 344 page budget within hours before voting, I am slowly making progress reading each line of the budget bill.

There are many interesting things we'll highlight in the coming weeks but one that warrants special attention is the creation of a government reform commission. Check out Section 717 of SB 6444:

Budget snapshot

April 19, 2010 in Blog

Now that lawmakers have finally adopted a 2010 supplemental budget, is state spending going up or down?

Yes.

Near General Fund spending is decreasing while total spending is increasing.

Here are details on Near General Fund spending, total spending, and Full-Time Equivalent (FTE) employees (click image to enlarge):

Budget snapshot
Here are additional details by biennium.

Many thanks to the staff at the Legislative Evaluation and Accountability Program (LEAP) Committee for providing these details. 

For additional budget information visit fiscal.wa.gov.

Is outsourcing "anti-government?"

April 16, 2010 in Blog

Many lawmakers have started blogs to keep their constituents informed on the issues of the day. One of the more policy focused blogs is Rep. Reuven Carlyle's (D-36). Rep. Carlyle has taken heat from his party's traditional allies for using his experience as a small business owner to advocate for usually taboo policies such as competitive contracting and privatization.

Responding to this criticism, Rep. Carlyle posted this blog entry yesterday: "Is there a progressive approach to privatization?"

The full post is worth reading. Here is a snap shot of the discussion:

"But some of the deeper, more holistic and thoughtful questions at the state level follow these lines: What is the highest value role for state employees regarding service delivery? When is the profit motive (ie outsourcing or privatizing a s!
ervice) a violation of the state’s fiduciary moral obligation to citizens? When can harm come from letting oversight of service delivery take second place to cost? Can we stop paying such a high price for low cost services? Do state employee-based services that may still be commodities add intangible value that should be captured? (such as jobs!)

The philosophical and policy foundation of my policy position is that as a general statement state government should not be in the business of delivering most commodity services. For example, the state purchases billions of dollars worth of concrete, steel, wood and other commodities for construction. Yet it would make absolutely no sense for the state to be in the concrete, steel or wood business. It’s just not a core competency. Cruise ships purchase more steaks than anyone else in the world, but they don’t go into the slaughter and meatpacking businesses . . .

Can state employees perform a service for less!
cost since they don’t have the profit motive and don’t ne!
ed to constantly deliver marginal savings? Yes. But can the marketplace improve quality and lower costs due to the insatiable need for innovation? Yes.

The larger systems challenge, of course, is to get the lower price along with the quality innovation. Never easy to do. But the bottom line is that when it comes to back-end, commodity services where efficiency really matters to reduce marginal costs the marketplace of the private sector is–in my view–going to be more successful than government.

In many ways my philosophical grounding in using the private sector more forcefully for back-end commodity services is driven by a belief that I want state employees overseeing the safety of foster youth and other fiduciary obligations where a profit motive is of no meaningful value to society. I want to use those tax dollars not to pay for back-end, commodity services like hosting servers but to send students to colleges, support foster youth, improve our s!
chools and much more.

The great challenge of leading our state is to find ways to get the best of both worlds: The fiduciary oversight of dedicated public employees doing high value people-oriented work along with the innovation and cost controls of the marketplace."

Well said.

With the state once again facing a multi-billion dollar deficit in the next budget, fundamental reforms are needed. This includes the utilization of competitive contracting and privatization of commercial activities. 

State Workers' Comp Supplemental Pension Fund Bailed Out

April 16, 2010 in Blog

The Department of Labor and Industries this month announced that one of the funds that comprise our state's workers' comp system required a short-term loan in order to mete out its statutorily-required benefits to pensioners. L&I needs to borrow $15 million from the $3.2 billion Pension Fund. The Department says it will fully repay the loan within 45 days and with interest. 

However, according to a document issued by L&I, another rate increase to employers is possible in the near future; even if they acknowledge that rate increases have damaging effects:

"Q: Is there an alternative to an inter-fund transfer?
A: A mid-year SPF rate increase would have been another way to deal with this shortfall. But this could have a detrimental effect on businesse!
s and workers who pay this insurance premium
." (emphasis added)

Why did this fund dry up? According to the Department it had to do with the substantial decrease in hours worked by employees -- a 6.4% decrease from Q3 2008 to Q3 2009. Since part of the workers' comp premiums are based on the number of hours worked, and because Washington lost well over 100,000 private-sector jobs, the fund took a hit.

But that's not all. 

"Q: Did L&I raise premiums in the Supplemental Pension Fund in 2010?
A: The SPF premium rate was increased 16% in 2010, based on projected work hours and liabilities. This increase will help maintain the balance as money comes into the fund and is paid out. However, we expect to see other quarterly shortfalls in the SPF this year and in the first quarter of 2011 due to the depleted asset balance, depending on when reported h!
ours begin to increase as the state comes out of the recession!
." (emphasis added)

It is apparent that L&I is facing financial challenges, as are many state agencies. And while some will say the national economy is the cause of the fiscal problems, I would argue that the recession is actually showing the structural deficiencies in the system. Policymakers should use this crisis as an opportunity to reform the system so that the small business community will not have to fear mid-year rate increases or large future rate increases during tough economic times. 

But unfortunately, nothing was done to improve the system during the recently-concluded legislative session and so the business co!
mmunity is left to wonder, again, if another large rate increase is heading their way.

Update: Erik Smith over at Washington State Wire has a good run down on the situation from both labor and business perspectives.  

Workers' Comp fight for the ballot officially underway

April 15, 2010 in Blog

The Building Industry Association of Washington announced yesterday intentions to break up the state's monopoly of the workers comp system. The goal, according to BIAW, is to bring Washington in line with 46 other states that allow competition from private insurers in the industrial insurance market. 

In the wake of the 7.6% rate increase for 2010, the news that one of the big Workers' Comp funds stands a decent chance of becoming insolvent in the next few years, and the fact that Workers' Comp rates should have actually gone up almost 20% in order to actually p!
ay for its liabilities, BIAW will probably have some momentum behind its effort -- not to mention the fact that absolutely no reforms were even entertained during this last legislative session. 

The labor unions will come out hard and fast against this initiative, so expect a battle royale this fall.

Some background reading on Workers' Comp in Washington state:

NHTS: more people walk to work than use public transit

April 15, 2010 in Blog

The Federal Highway Administration has released its 2009 National Household Travel Survey. There is a lot of data here and the format is challenging to navigate.

I spent some time looking at person trips by mode and purpose. Specifically, mode share to work. 

Mode share

88.3% of all commute trips take place with a car or truck, while only 3.7% use transit. In fact, there are more people who walk to work than take transit. The Puget Sound region has about the same mode split, which is madness when you consider:

It is no wonder Seattle is the most congested city in America.  

Legislature Finds $15 Million For Political Poster Child While Environmental Projects Go Unfunded

April 14, 2010 in Blog

Today's Seattle Times reportsthat the state set aside $15 million from the Asarco settlement to help buy a gravel mine on Maury Island that has been a poster child for Seattle environmental activists. During the past few years, environmental activists have spent huge sums of money suing to stop the creation of a dock to move the gravel off the island. Both Lands Commissioner Peter Goldmark and King County Executive Dow Constantine made the issue a centerpiece of their campaigns, promising island residents that they would stop the project.

Politicians and environmental activists claim the dock is environmentally damaging. There's only one problem -- the scientists at the Puget Sound Partnership don't rank this project as a priority.

In their priority list for the South Central Area, the scientists at the Puget Sound Partnershp (PSP) do not mention the dock. Despite that, the state found $15 million to prevent it from being used. By way of comparison, $15 million is larger than the annual protection and restoration budgets for:

  • DOE - Local Gov't Stormwater Grants - $14
  • Washington Wildlife and Recreation Grants (WWRP) - $11
  • DOE – other direct spending - $11
  • Department of Fish and Wildlife (DFW) - $10
  • Puget Sound Partnership (PSP) - $9
  • Public Works Assistance Account (PWAA) - $5
  • Department of Natural Resources (DNR) - $4
  • State Parks - $3
  • Salmon Recovery Funding Board (SRFB) - $3
  • Conservation Commission - $2
  • Aquatic Lands Enhancement Account (ALEA) - $2

While the Maury Island dock is not a priority concern, the PSP does, however, list Quartermaster Harbor, on the other side of Maury Island, sandwiched between Vashon and Maury Islands. Quartermaster Harbor, which is part of a state aquatic reserve, is recognized as one of the most polluted places in the Sound. The Vashon/Maury Island Beachcomber reports that "Research five years ago showed that Quartermaster Harbor hosts the highest concentration in all of Puget Sound of an alga that causes paralytic shellfish poisoning."

The problem is that septic tanks surrounding the Harbor are failing, polluting the harbor. So, what has been done about this problem?

Despite working for years, there has no progress fixing the problem of septic tank failure. Last September the Beachcomber reported "After two years of effort, King County officials have made little headway in a far-reaching attempt to get homeowners along the western shore of outer Quartermaster Harbor to address failing septic systems that are fouling the wildlife-rich bay."

The County doesn't deserve all of the blame, the homeowners are not cooperating and politicians are not anxious to put pressure on voters and donors who helped them during the last campaign. This is a major reason that so much focus has been put on the gravel dock rather than a more significant environmental concern a couple miles away.

The final irony is that while $15 million has been lavished on a non-problem, a group looking to help clean Quartermaster Harbor is begging for volunteers. The Beachcomber reports that "The Puget Sound Restoration Fund, a small, highly regarded nonprofit that is undertaking the mussel research, wants volunteers. Islanders can help them collect native mussels to attach to the raft or even help build the raft."

For more information on how to help the Fund, visit www.restorationfund.org.

Not so fast on Fed plan to treat bicycles the same as auto use

April 14, 2010 in Blog

From the Washington Post:

WASHINGTON -- Transportation Secretary Ray Lahood,
a weekend bicyclist, might consider keeping his head down and his
helmet on. A backlash is brewing over his new bicycling policy.

LaHood says the government is going to give bicycling - and walking,
too - the same importance as automobiles in transportation planning and
the selection of projects for federal money. The former Republican
congressman quietly announced the "sea change" in transportation policy
last month.

"This is the end of favoring motorized transportation at the expense of non-motorized," he wrote in his government blog.

Not so fast, say some conservatives and industries dependent on
trucking. A manufacturers' blog called the policy "nonsensical." One
congressman suggested LaHood was on drugs.

Deficit déjà vu

April 14, 2010 in Blog

At her press conference yesterday Governor Gregoire was asked about the projected deficit for the 2011-13 budget. The Governor said they don't know yet what impact the budget and taxes adopted by the Legislature this weekend will have on the next budget but that another deficit is likely. Here is her exchange with reporters on this topic:

The Governor also said that future tax increases for education spending are likely, though they will probably show up as a ballot measure for the voters to approve.

As for the Back to the Future budget deficit, in February the Office of Financial Management produced this 4-year budget outlook showing a projected $2.1 billion deficit in 2011-13 assuming the Governor's smaller spending and tax package:

Budget outlook

Since the Legislature's plan spends and taxes more than the Governor proposed, OFM may update the February 4-year budget outlook in the coming weeks to get a better feel for the pending 2011-13 deficit. 

It will be interesting to see what reforms or tax increases will be proposed to solve that problem. It's unfortunate the Legislature used a full 30-day special session to enact a budget but failed to adopt policies to make it sustainable.

Sen. Brown vs. Sen. Brown

April 13, 2010 in Blog

A lot of strange things can happen when working until 1 a.m. in the morning, including the instance of arguing with yourself.

Consider the following sides of the debate Sen. Brown found herself on last night concerning whether a tax increase is permanent or temporary.

First was her floor speech on HB 2561 arguing that an amendment to describe the sales tax on bottled water as being "permanent" was misleading since there is no such thing as a permanent tax.

Then later in the evening was her floor speech on SB 6143 arguing that the job credits being passed were "permanent" but the tax increases "temporary."

In the same evening Sen. Brown argued that a change in tax policy is "permanent" when it is a tax credit but "temporary" when a tax increase.

State Auditor writes letter supporting our work

April 13, 2010 in Blog

State Auditor Brian Sonntag has long been a friend of the Washington Policy Center and supporters of accountable, effective and transparent government.

It looks like the State Auditor is also a fan of our work. Here are details from a recent letter he sent:

"I'd like to take this opportunity to thank you for all your support of our audit work and for your efforts to make state government work better for the citizens it serves. The Center for Government Reform and the Office of State Auditor share common purposes to achieve greater government transparency and accountability . . .

In my opinion, the Center for Government Reform plays and important role, monitoring, analyzing and reporting actions of the Legislature and state government agencies. This is vital in light of the diminished ability by the news media to cover activities at the Capitol. Amid current economic conditions and state government's financial challenges, both o!
f our organizations have stood at the forefront in advocating significant reforms in the way government operates . . .

We appreciate that your work is nonpartisan, constructive and solution-oriented. Again, this complements our Office's independence and objectivity as a statewide elected Office that works for and reports directly to Washington citizens.

I look forward to maintaining our strong positive relationship as we continue to work on ideas and issues of mutual interest benefitting the public. Thanks again for your help and support of our responsibilities."

You can read the rest of the State Auditor's letter here.

State unemployment rate back up to 9.5%

April 13, 2010 in Blog

Though the state saw minuscule job growth during the month of March, the unemployment rate rose to 9.5%. The national rate is 9.7%. 

Year-over-year comparison (March 2009 - 2010) saw a decrease of almost 68,000 jobs. This shows a gradual leveling off of year-over-year loss -- although March 2009's unemployment rate was only 8.5%. The last few unemployment reports saw YoY decreases of 100,000+ jobs. 

From the report:

"Nonfarm payrolls declined by 67,800 jobs between March 2009 and 2010. In addition to being the job loss leader over the month, construction led all sectors in year-over-year declines, down 26,400 jobs. While most major industries sustained job losses year-over-year, three did add to payrolls: education and health services, retail tra!
de, and mining and logging."

It will be interesting to look back a year from now, after the 2009-11 supplemental budget tax increases are enacted to gauge its impact on job creation/loss. 

Do the words permanent tax confuse you?

April 12, 2010 in Blog

It appears some Senators may have a problem with truth in advertising. This evening the Senate is poised to adopt HB 2561 which makes the temporary sales tax increase on bottled water from SB 6143 permanent to pay for "green" building bonds. Never mind the fact the bill seeks to amend a law not yet enacted.

Another interesting tidbit is the objection to changing the proposed ballot title for the measure. Section 501 (3) reads:

Pursuant to RCW 29A.72.050(6), the statement of subject and concise description for the ballot title shall read: "The legislature has passed Engrossed House Bill No. 2561 (this act), concerning job creation through energy efficiency projects in school buildings. This bill would promote job creation by authorizing bonds to construct energy efficiency savings improvements to schools, including higher education buildings."

Senator Parlette offered an amendment to change that section to read: 

Pursuant to RCW 29A.72.050(6), the statement of subject and concise
description for the ballot title shall read: "The legislature has
passed Engrossed House Bill No. 2561 (this act), concerning job
creation through energy efficiency projects in school buildings. This bill authorizes bonds in excess of the Article VIII, section 1 constitutional debt limit to construct school energy efficiency improvements, and makes permanent the sales tax on bottled water."

The amendment failed by a vote of 16-30.

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

And as we already know, honoring the will of the voters isn't high on Olympia's priority list so such a repeal could actually happen, right?

If such a repeal were to happen, Section 401 of the bill would come to the rescue:

The legislature may provide additional means for raising moneys for the payment of the principal of and interest on the bonds authorized in section 201 of this act, and section 202 of this act may not be deemed to provide an exclusive method for the payment.

There you have it, if the voters approve this bond measure and the Legislature changes the permanent bottled water tax back to being temporary, the Legislature is authorized to raise a new tax to pay back the bonds. Of course, even if the sales tax on bottled water isn't repealed, the Legislature would still have the authority for additional new taxes per Section 401.