Washington Policy Blog

Health Care Reform is Losing Steam

July 14, 2009 in Blog

A new Rasmussen national telephone survey just released shows the country is shifting to opposition of the Administration and Congressional health care reform plans. Those opposed or somewhat opposed now total 49% with 46% in favor or somewhat in favor of the proposed health care reforms currently under debate in Washington, D.C.

Two weeks ago, Rasmussen polling revealed 50% in favor and 46% opposed. This is almost a 10% shift toward opposition.

As more Americans understand the magnitude and the expense of the proposed reforms, the negative impact of government controlled health care is starting to take hold. A prolonged debate gives more people the opportunity to see these reform plans for what they really are - an attempt to move our entire health care delivery system into the control of government bureaucrats.  

Customer Service Lacking in L.A. Bureaucracy. Surprised?

July 13, 2009 in Blog

As Seattle policymakers now say they will postpone consideration of ditching the $25 per employee head tax, a column in Friday's Wall Street Journal should provide a cautionary tale on why it is important for cities and states to endorse policies that encourage entrepreneurial growth.

The column, written by Rick Newcombe, president of Creators Syndicate, is about to move his business and the jobs involved, out of Los Angeles because the city is reneging on its own tax policy. For the last 15 years Creators Syndicate has wrangled with the city over their business tax classification. Mr. Newcombe thought his business, which helps syndicate national columnists, should fall into the "wholesale and retail" classification with a lower tax rate,!
whereas the city thought the firm fit into the "occupations and professions" which would mean a higher tax rate. 

The fight over the tax classification is nothing out of the ordinary. Businesses often appeal their tax classification. Creators Syndicate took their case to court, prevailed, and the city relented and everything seemed fine (this was in 1994).

But the city started running out of money in 2007:

"Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city's decision to ignore its 1994 ruling. Their official position is that the city is not bound by past rulings -- only taxpayers are."
>

Los Angeles just said to the taxpaying public, &quot!
;do as we say, not as we do."

A bigger hypocritical statement I could not imagine. 

Cle Elum Solar Plant: Some Things to Remember

July 10, 2009 in Blog

Seattle Times science reporter Sandi Doughton wrote an excellent piece on the potential solar plant in Cle Elum, highlighting some of the opportunity but asking the right questions about potential problems. More information will come out, but there are some elements to watch as this project progresses.

The debate about reducing carbon emissions has centered around two policy directions: technology or lifestyle modification. The focus of most of Washington's climate policy has been on forcing people to change their lifestyle. We've noted repeatedly that these approaches have high cost and low success.

Technology is the approach that is most successful but is also consistent with prosperity. The problem is when politicians try to pick and choose the technologies of the future. They don't pick correctly very often (witness hydrogen or electric cars and biofuels, just to name two recent examples).

There is great initial excitement about the solar project in Cle Elum, but there are some important considerations to ensure that this is truly a successful project and not another taxpayer-subsidized eco-fad.

  • Don't be seduced by the "world's biggest."A few years back, Washington also became home to the nation's largest biodiesel plant (disclaimer: I was hired to organize media coverage announcing that deal to build the plant). That announcement highlighted the jobs that would be created, the environmental friendliness of the project and even featured a US Senator promoting the role of government support in creating the project. Today, that plant is not running at capacity and biofuels are a suspect technology when it comes to reducing CO2 emissions. Seattle just stopped buying soy-based biodiesel due to environmental concerns. What seemed sexy just a few years back is a disappointment today.
  • Taxpayers pay, profits are privatized. This project makes sense primarily due to government subsidies and regulation. The story notes that "Generous tax breaks and a citizen initiative that requires utilities to get some of their power from renewable sources also add to Washington's appeal." Put simply, Washington's laws give tax benefits for construction and require utilities to buy the energy they produce. Profiting in such a scenario is virtually guaranteed. It is hard to criticize entrepreneurs who take advantage of such an offer, but it should be clear that we are paying to build a solar plant for the right to buy high-priced energy.
  • This will likely increase energy costs. As the Times story notes, solar hasn't developed like other technologies "largely because of high costs." The cost of solar photovoltaics is much higher than other forms of energy. For instance, the Kittitas wind project cost $1,920 per installed kilowatt. Solar PV, by way of comparison, costs about $7,000. It will be hard to know what the cost of this project will be until the full financials are released. The project will involve 400,000 solar cells, producing 75MW. The cost is estimated to be "north of $100 million." At $100 million the installed cost would be $1,333 per installed kilowatt, which is much lower cost than other projects, so I'm guessing that it will be well north of $100 million. By way of comparison, the solar panels the city of Seattle wanted to put on Qwest Exhibition Hall cost about $12,500 per installed KW.
  • Creating or losing jobs? While job creation will be the highlighted talking point for this project, there is question about whether it will create good jobs. When looking at other solar PV installations, the article notes that "the biggest is a 60-megawatt plant in Spain." A study earlier this year examining Spain's effort to create a "green" economy found that the effort destroyed 2.2 jobs for every one it created. That's part of the reason Spain enjoys an 18 percent unemployment rate.
  • Logging for a green economy. Ironically, the site of the solar array is a 400-acre area that has been clear cut in the Teanaway. That is the size of about four large clear cuts. While timber harvests re-grow, however, this guarantees the forest will likely never re-grow. Timber harvesting in the Teanaway has been the target of environmental lawsuits trying to stop the very clearings that are now the location of the biggest "green" energy project in the world.

Our creative, free-market economy is the most powerful force ever conceived to promote the technological innovation that has dramatically increased well-being while reducing environmental impact. Political efforts to pick and choose technologies, however, undermine that creativity, substituting eco-fads for true innovation. As this project moves forward, we'll have a better sense in which category it belongs.

Upside down transportation policy

July 10, 2009 in Blog

This, in today's Seattle Times:

As light-rail opponent Emory Bundy and others have noted, the 36-minute
ride from Westlake Center to the airport, via Rainier Valley and
Tukwila, is longer than the 194 bus, scheduled to take 28 minutes using
freeway HOV lanes. Next year the 194 will be dropped, so transit riders
heading to the airport will have to take a train.

Tell me again, why spending dozens of billions of dollars on Light Rail is a good idea?

Happy Planet...Unhappy People

July 9, 2009 in Blog

This week the New Economics Foundation published its Happy Planet Index of countries worldwide. They note that "the index combines environmental impact with human well-being to measure the environmental efficiency with which, country by country, people live long and happy lives." Like many such analyses from the environmental left, it glorifies poverty and repression.

The Index combines "Life Satisfaction," life expectancy and "Ecological Footprint."

The Index rates Costa Rica as the #1 country in its list. The US comes in at 114. Additionally, the following countries rank ahead of the US (I've also added the country's political rights as rated by Freedom House - 1 - full rights, 7 - no rights)

  • Vietnam, 5th - 7
  • Cuba, 7th - 7
  • Bhutan, 17th - 6 (32 percent below poverty line)
  • Laos, 19th - 7
  • Mexico, 23rd - 2
  • Pakistan, 24th - 6
  • Bangladesh, 31st - 5 (42 percent below poverty line)
  • Tajikistan, 34th - 6
  • Venezuela, 36th - 4
  • Syria, 38th - 7
  • Burma, 39th - 7
  • Haiti, 42nd - 4 (Poorest country in the Western Hemisphere, 80 percent below poverty line)
  • Uzbekistan, 45th - 7
  • Yemen, 50th - 5
  • Palestine, 56th - 5
  • Iran, 90th - 6 (The 2009 ranking is due out soon, and we can reasonably expect a 7)
  • Belarus, 104th - 7
  • Malawi, 107th - 4 ($800 annual average income, 53 percent below poverty line)
  • Chad, 109th - 7 ($1,600 annual average income, 80 percent below poverty line)
  • Lebanon, 110th - 5
  • Congo, 112th - 6
  • United States, 114th - 1

The results mirror other studies showing that some believe that greenness requires poverty. Sadly, such poverty is seen too often as "quaint" by wealthy Western environmentalists. As filmmaker Phelim McAleer says "quaint may be the most evil word in the English language."

These results are not surprising since they are based on the work of Herman Daly of the University of Maryland. In his 1996 book Beyond Growth he outlines his approach to the problems of growth and development, which he describes in one chapter as "Marxian-Malthusian." In describing the economic and environmental challenges in Northeast Brazil, he writes:

A Marxian-Malthusian definition of social class, in terms of control versus non-control of both production and reproduction, fits the Northeast, and offers a possibility for integrating the valid insights of both traditions. This is important because with the current rebirth of Marxist economics in Brazilian universities, Malthusian insights are in danger of being lost or discarded... The democratization of control over reproduction is no less (and no more) important than the democratization of land ownership in the Northeast.

The "New" Economics Foundation sounds like some very old economics that led not only to vast human misery but unfathomable environmental destruction.

Public versus private health care costs

July 9, 2009 in Blog

Depending on your perspective, the decision yesterday by the Public Employees Benefits Board (PEBB) to raise premiums, deductibles, and co-pays for public employees is either a "travesty" or common sense reality.

In a 4-3 vote, the PEBB members decided:

"Due to the state’s budget shortfall, the HCA required that the medical plans meet a budget target that would keep the average employee contribution at around 12%. To do this, the plans increased the costs of certain benefits, deductibles, and out-of-pocket maximums. The employer will continue to pay 88% of the premium costs, based on enrollment across all PEBB medical plans."

This "average employee contribution at around 12%" compares very favorably to those in the private sector that still have jobs and health insurance. According to a 2008 study on state health care costs by the Washington Alliance for a Competitive Economy:

“State employee health care benefits are generous, and the 12 percent share of prem!
iums paid by employees is low. 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 (Towers Perrin 2008).”

Despite this fact, PEBB member Greg Devereux (head of the Washington Federation of State Employees) had this to say about the vote:

“This today is an absolute travesty...They (the Legislature) won’t tax anybody else, but they’ll tax state employees…I think it’s a crime. The Legislature didn’t have the guts to provide the health care funds. They are destroying the quality of the workforce in this state.”

Needless to say Devereux was among the no votes.

Meanwhile the Seattle Times reports:

"In what is becoming an annual ordeal
for policyholders, Regence BlueShield is raising premiums for 135,000
individual health-plan members in Washington by an average 17 percent
on Aug. 1.

It is the third consecutive year that the state's largest provider of
individual coverage has boosted rates by double digits. And it comes
after two other insurers, Group Health Cooperative and LifeWise Health
Plan of Washington, recently imposed similarly steep premium increases."

Considering the average public employee versus private employee health care costs, was the PEBB's decision "a crime" or instead grounded in economic reality?

It appears the only alternative would be taxes increases or additional service cuts to provide the benefits demanded by Devereux and others.

BC's Inefficient Car Trade-In Program

July 9, 2009 in Blog

Two weeks ago we looked at the Cash for Clunkers program and the high price it paid to reduce a small amount of CO2 emissions. British Columbia has a different version that is praised by the Sightline Institute in Seattle.

They praise the program because it not only applies to cars but to bikes and buses:

The Scrap It program is focused on energy efficiency and reducing CO2. The best way to do that is to incentivize better miles per gallon along with alternatives. Most people won’t trade a clunker that is the sole mode of transit for a bike, but many people would get rid of a second car in the driveway for a bike.

The question is, does it make sense as a way to reduce CO2? The answer is that it is better than the Cash for Clunkers program, but is still a poor way to reduce CO2.

The program has a calculator that measures the reduction in CO2 and then determines if you qualify to receive an incentive payment of $1,250 or $2,250. For example, I found that had I traded in the car I bought when I graduated from college, a 1993 Saturn SC, for a Prius today, I would qualify for the $2,250 and reduce CO2 emissions by 2.25 metric tons (tonnes) a year. Assuming I would have kept my Saturn for another ten years, I would reduce my total emissions by 22.5 tonnes. Under those (extremely favorable) circumstances, the program pays $99.56 per tonne of CO2, more than five times the going rate for CO2 on the European market. If the car lasts only five years, the calculation gets much worse, costing nearly 11 times the going rate for CO2 emissions reductions.

Just to test the limits of this idea, let's say I traded in my Saturn for a bike and didn't drive a car for the next 10 years. The BC government will give me $1,200 to trade a car for a bike. Even in those wholly unrealistic circumstances, the program spends $31.58 per ton of CO2, or about 66 percent more than the going rate for CO2 on the European market.

Those who truly care about the environment need to remember that waste of money is waste of resources. By ignoring the cost of projects, we spend money poorly that could be used to promote other environmental projects.

This is a problem with so many politically-picked solutions. The judgment about whether the program is worth supporting is not based on effectiveness or bang-for-the-buck but on a political calculus about whether it sounds good and rewards constituents with taxpayer money.

Status of Puget Sound Traffic Congestion

July 8, 2009 in Blog

The Texas Transportation Institute just released their newest Mobility Report. Using a Travel Time Index (TTI), the report measures and tracks congestion among the nation's biggest cities.

In Seattle,
the TTI fell from 1.30 in 2006 to 1.29 in 2007. This means during the
peak times, the average commute was 29% longer than it should have been
under free flow conditions. The report also shows that the Seattle
region ranks as the 20th most congested city (of the cities measured in
the report). This is down from 17th in 2006.

Despite a slight
fall in traffic, the cost of congestion rose to a new high, from
$1.556 billion in 2006 to $1.591 billion in 2007.

Most data
shows that Vehicle Miles Traveled (VMT) is flat or even falling in the
last couple of years. This is a result of the economy and unemployment.
Some assume that a permanent shift from driving to transit is taking
place. While others believe transit is not absorbing the majority of the shift: US Transit Increase Captures Only 2% of Road Use Decline in 2008

The Bureau of Transportation Statistics has this table that shows mode share in the most common forms of traveling to work.

I think most of the shift is captured by more people working from home. But you can decide for yourself.






Public Transportation: A Core Climate Solution?

July 8, 2009 in Blog

On Tuesday, WPC Adjunct Scholar and Senior Fellow at CATO Randal O'Toole, testified on the Senate Banking Subcommittee on Housing, Transportation and Community Development. Note the full list of witnesses and the interesting news article following.

Panel 1

  • Mr. Michael A. Replogle
    [view testimony]
    Global Policy Director
    Institute for Transportation and Development Policy
  • Mr. Clinton Andrews [view testimony]
    Professor and Director
    Urban Planning and Policy Development Program in the Bloustein School of
    Planning and Public Policy at Rutgers University
  • Honorable Christopher
    Cabaldon
    [view testimony]
    Mayor
    City of West Sacramento, California
  • Mr. Randal O'Toole
    [view testimony]
    Senior Fellow
    Cato Institute
  • Mr. Ernest Tollerson
    [view testimony]
    Director of Policy and Media Relations
    The Metropolitan Transportation Authority, State of New York

Standing in the transit bread line

By: Barbara Hollingsworth
Examiner Columnist | 7/8/09 7:13 AM

He was outnumbered four-to-one at a Senate hearing on transportation and
climate change, but nobody challenged CATO senior fellow Randall O'Toole's
claim that rather than saving energy, mass transit uses massive amounts of it
and produces copious amounts of greenhouse gas emissions to boot.

"Transit produces as much greenhouse gas emissions [per passenger mile]
as the average SUV, and consumes far more energy," O'Toole told the Senate
Banking Subcommittee on Housing, Transportation and Community Development.
"Transit is the culprit, not the savior."

Neither of the two senators there - Chairman Robert Menendez, D-NJ, and Sen.
Mark Warner, D-VA - nor any of four pro-transit witnesses who testified
alongside O'Toole directly addressed his point.

And nobody produced data proving O'Toole wrong, even though the stated
purpose of the hearing was to "chart a course towards lowering emissions
in the transportation sector" - which accounts for nearly one third of all
air pollution in the U.S.

When O'Toole noted that, besides being energy guzzlers and polluters, urban
mass transit systems are typically "in a perpetual state of financial
crisis" requiring massive taxpayer subsidies, Menendez cited the $200
billion spent on highways over the last few decades. "That's a
subsidy," he said.

No, senator, it's not. As Gabriel Roth, research fellow at the Independent
Institute who was present at the hearing, told me afterwards, gasoline taxes
and other highway user fees have paid for nearly 90 percent of all the costs of
building and maintaining the nation's highway system.

In contrast, fares cover less than half of the operating costs and none of
the capital costs associated with building and running mass transit.

A decades-long experiment in O'Toole's former hometown of Portland, Oregon,
showed transit to be the loser in cost effectiveness as well. Portland spent $2
billion on an extensive light rail system and dramatically increased operating
subsidies in inflation-adjusted dollars, yet transit still lost market share.
Forty years ago, 4 percent of Portland commuters took transit to work; today
it's a pathetic 1.6 percent.

"And what they don't tell you," O'Toole told me, "is that the
city spent another $2 billion to subsidize transit-oriented development. They
have to build huge parking garages for the developers or it's not commercially
viable."

Michael Replogle, policy and strategy consultant for the Environmental
Defense Fund, told the subcommittee that even the draconian cap-and-trade
provisions in the House-passed cap-and-trade bill will not be enough "to
bring about an efficient reduction in transportation -related greenhouse gas
emissions." But if the Senate passes a similar bill, electricity costs
will skyrocket, dramatically increasing mass transit operating costs.

Since more than 90 percent of all urban travel is done by automobile anyway,
O'Toole says, "small improvements in autos can be far more significant
than large investments in transit."

If you're really serious about lowering carbon emissions, supporting mass
transit doesn't make much sense. Neither does expanding passenger rail lines,
which slurp up large quantities of coal-generated electricity, if your major
goal is to decrease energy use.

But if you're part of the politically correct pro-transit lobby, you just
ignore such inconvenient facts. With a new administration in town ready to hand
out billions of tax dollars for prohibitively expensive rail projects that
cannot be justified on the basis of cost, energy use or even carbon emissions,
all you have to do is stand in the transit bread line and wait for your
hand-out.

Barbara F. Hollingworth is The Examiner's local opinion editor.

Al Gore channels Churchill in global warming fight!

July 7, 2009 in Blog

According to The Times Online, an England based publication, Al Gore, while speaking at Oxford's Smith School World Forum on Enterprise and the Environment, sought to invoke the words of Winston Churchill to bolster the political fight against global warming.  In his remarks Gore said:

“Winston Churchill aroused this nation in heroic fashion to save civilisation in World War II. We have everything we need except political will but political will is a renewable resource.”

Gore continued:

“The only way politicians will act is if awareness raises to a level to make them feel that it’s a necessity.”

Meanwhile, back on this side of the pond, the U.S. Senate’s Environment and Public Works Committee held the first of what is expected to be many hearings on a national cap-and-trade system.  However, the Wall Street Journal reports that, “the political climate for the cap-and-trade system remains tough in the Senate,” despite the Democrat’s 60-seat majority. The Journal wrote, “The cap-and-trade system makes even some Democrats nervous, especially those from states that extract energy and minerals and rely on heavy industry.”

The challenges in the Senate have the makings of a triumphant return for Gore to his old stomping grounds, where once again he may call up on the words of Churchill, with his own global warming twist.

Perhaps Gore will say:

“Even though large tracts of Congress and many old and famous States have fallen or may fall into the grip of their constituents and all the odious apparatus of those opposed to Cap and Trade, we shall not flag or fail. We shall go on to the end, and we shall cap them at their businesses, we shall cap them at their schools, we shall cap them at their churches, we shall cap them at their homes - we shall never stop capping until in God's good time, the global warming prophets, with all their power and might, step forth to the rescue and liberation of the Earth from its pesky human inhabitants.”

Despite Gore’s push for climate action, recent polling shows that a majority of Americans don’t want to pay to fight climate change.  In fact, some small businesses have even take exception to Congresses move toward a national cap-and-trade system.

"Best Practices"

July 7, 2009 in Blog

Researchers at Dartmouth Medical School have pointed out the disparity in health care spending and outcomes for Medicare patients throughout the country. (here) Although there are many variables that account for these differences, the health care reformers in Washington, D.C. are now using them as an argument for legislating "best practices".

The bottom line on the concept of "best practice" is a government bureaucratic committee deciding what kind of health care and how much health care each patient can receive. Since, in the current government reform plans, the government would be paying for health care,then it seems only correct that the bureaucracy should be able to dictate who gets what and how much.

There are a number of other euphemistic names, "comparative effectiveness research" and "evidence based medicine" for example, but they all boil down to faceless bureaucrats - not doctors - telling us what treatments and medicines we can receive. It is a short leap to then ration health care in the interest of what the government believes is cost effective.

England has had this type of program (The National Institute for Health and Clinical Excellence) in place for several years. It has led to delays in treatment, denial of treatments, and has served as a gatekeeper mechanism to ration new therapeutics. 

The solution to treatment and cost disparities in this country is to give the patient, as a consumer, more control over his own health care dollars. Allowing the patient, not the employer or government, to control his own health care funding would provide the incentive for the patient to work with his providers and determine the most cost effective treatment courses. Likewise, providers wouldn't be locked into cook-book medicine that may not be in patients' best interests. 

Are U.S. Businesses Over-Regulated?

July 7, 2009 in Blog

A new survey by Moore Insight says that:

"by nearly a two-to-one margin, American voters believe business and industry are over-regulated in this country. Further, the data reflect an upward trend in the percentage since 1991 of the electorate who say government regulation has gone too far."

As one might expect, respondents most likely to express concern about over-regulation are mostly Republican, men over 65 years of age, and voters within the Mountain/Plains states. Conversely, Democrats, and voters with post-secondary educations lean towards believing there is too little regulation of business.

Interestingly, when asked about specific industries, most respondents were not as likely to be concerned about over-regulation. (This sort of reminds me how everyone hates Congress but everyone likes their Congressman!
/woman). Since 2005, the "Too much regulation" has been trending upwards and I'm willing to bet we will see a continuation of that trend for the next few years at least.

I-90 Traffic Congestion

July 7, 2009 in Blog

I-90 commute into Seattle slower today, but not by much, says DOT

That's "a little longer than typical — maybe five minutes — but not huge," said transportation spokeswoman Jamie Holter.

It helps when your baseline comparison is already congested.

Teens feeling the summer unemployment heat

July 7, 2009 in Blog

Today's Everett Herald published a story about teens having trouble finding employment this summer, largely due to the fact that our state's large number of experienced unemployed workers are crowding out those with little or no work experience (more often than not teens or those in their early 20s).

From the article: "Teens are having an unusually hard time finding jobs this summer. Positions they used to fill are being scooped up by more experienced workers who have been laid off and are settling for low-wage, low-glamour jobs...In Snohomish County this May, there were 1,300 fewer retail jobs than last May, 1,000 fewer positions at restaurants and bars, and 700 fewer jobs in arts, entertainment and recreation fields..."

We've seen this before. During the last recession in the beginning of the d!
ecade, teens and inexperienced workers were largely shut out of the labor market because employers had a larger pool of experienced workers to choose from.

The fact that our state has the highest minimum wage ($8.55) in the nation plays no small part in this. If you are forced to pay at least $8.55 per hour to someone with work experience or someone without experience, you most likely will hire the person with experience. This hurts the teen because they are shut out of the labor market because employers deem that the minimum wage is too high a price to pay for someone with no experience. When the economy recovers and the unemployment rate drops back down between 4-5% (which is essentially full employment), then employers will have a smaller labor pool to choose from and be forced to hire the inexperienced worker and pay him or her at least minimum wage.

But what!
to do in the meantime? It is unfortunate policymakers did not!
take seriously a few legislative proposals this session that could have helped out the teen/inexperienced workers. HB 1928 would have essentially the lowered the minimum wage for those between 16-17 to the federal minimum wage (about to be $7.25) and for those workers 15 years old and younger the new minimum wage would have been $6.42. Likewise, HB 1603 would have kept the minimum wage at $8.55 and decoupled the yearly wage hikes from the CPI-W formula which has kept the minimum wage well above the national average for the last decade. In years past legislation has also attempted to freeze the minimum wage whenever Washington's unemployment rate reach a certain threshold or was worse than the national rate. None of these ideas have ever reached fruition, however.

A lit!
tle disturbingly, the Herald article also points out that taxpayer money was set aside in President Obama's stimulus package to fund 243 jobs for young people in Snohomish County this summer. "The workers, who are as old as 24, are guaranteed at least six weeks of employment earning the minimum wage or more..."

This type of thinking underlies a lot of folks' concerns with the stimulus package. What the feds are doing is providing a very temporary patch for some people at the expense of others (taxpayers) while setting the beneficiaries up for a fall after the program runs out of money. True, I'm sure these kids want, and will appreciate jobs for the next six weeks, but let's not delude ourselves into thinking that this type of policy patchwork will sustain longer-term economic growth. And it is only through a more sustainable and substantial growth in the private sector labor market that will bring about a lower unemployment rate and therefor!
e bring these kids and inexperienced workers back into contention for t!
hese much-needed jobs.

Update: I neglected to include a link to this press release from the Employment Policies Institute, which says that national teen unemployment numbers from this spring are the worst in 17 years.

Sneak peak at supplemental budget

July 2, 2009 in Blog

Although the new fiscal year and biennium are only 1 day old, it's not too early to start thinking about next year's supplemental budget. Based on yesterday's caseload forecast, the Governor is already hinting at what agencies can expect to be proposed.

Here are details on the caseload forecast as reported in The Olympian:

"More Washington residents will receive Medicaid and children’s health assistance in the next two years than earlier forecast, creating a $250 million shortfall in the state’s already-strained budget.

The new forecast was released Wednesday by the Caseload Forecast Council, and Gov. Chris Gregoire’s budget office released an analysis showing that $113.4 million of the expected increase is in aid to needy families that qualify for Medicaid.

An additional $69.6 million!
is for children’s health care, including some children whose families qualify for Medicaid and others whose citizenship has not been verified. General Assistance Unemployed costs also are up $12 million, and nursing-home costs are up by $6 million."

Coupled with last month's poor revenue forecast, the state's new budget is already projected to be in the red. In response, the Governor's budget office (OFM) sent a memo to agency directors yesterday detailing her strategy:

"On June 18, the Governor directed the following administrative actions by cabinet agencies:
  • Full Time Equivalent (FTE) reductions equivalent to a 2 percent reduction in 2009-11 budgeted GFS FTEs.
  • Continuation of specific GFS savings in out-of-state travel and training, personal services contracts, and equipment purchases.
  • Spending restricted to only critically necessary activities.

She also has encouraged non-Cabinet agencies to impose similar measures.

The Governor’s reductions are intended to create savings that mitigate the effect of the June revenue drop. OFM will continue to watch revenue collections and caseload/enrollment projections as we approach the September and November forecast updates for GFS revenues. Ongoing expenditure and revenue pressures will very likely require further action, including revisions in a 2010 supplemental budget. The reductions in this memo represent the first steps toward supplemental budget changes for expenditures funded by the GFS."

Included in the memo are two tables showing the projected FTE and spending reductions. These figures are a good first look at what the Governor may propose in a supplemental budget.

If enacted by agencies, the Governor's proposal would reduce FTEs below budgeted numbers by approximately 642 and spending by $374 million.

While this is a good first step, additional spending corrections by the Legislature next session will be necessary to rebuild the state's rainy day account. Otherwise we may not be able to respond effectively to any future curve balls the struggling economy may throw our way.