Washington Policy Blog

State's curious legal strategy on Canadian sales tax deduction

June 18, 2010 in Blog

The Washington State Wire is reporting an odd legal strategy the Department of Revenue is considering to help northern Washington communities avoid giving Canadians a sales tax deduction. The strategy: We'll help you sue us. 

According to the article

Maybe there’s a way out of the Canadian sales-tax mess after all.

It’s the kind of creative legal thinking you don’t hear every day in state government. It’s going to require the state Department of Revenue to say – please sue us.

Revenue Director Cindi Holmstrom said Thursday the idea, hatched by alarmed Whatcom County officials, seems to have some merit. It may be the only way to keep an enormous sales-tax exemption for all residents of British Columbia from taking effect on July 1.

But it’s going to take some !
quick legal maneuvering and close cooperation between state and local-government officials to make it work . . .

It works like this: The Department of Revenue needs to issue some sort of a formal ruling regarding the British Columbia tax exemption. That will give local governments a target and allow them to sue. They can obtain a temporary restraining order preventing it from taking effect. And whether they win isn’t important, because the legal wheels turn so slowly that the Legislature will have time to reconvene in January and rewrite the law.

Holmstrom said it just might work.

“It’s possible that we will issue a declaratory order,” she said. “It’s never been done before, but the statute allows us to do that. And then a lawsuit can be filed under the Administrative Procedures Act.”

Holmstrom said the department is working closely with attorneys in the Whatcom County prosecutor’s office to coordinate efforts. The lawy!
ers are going to have to work fast – the deadline is near. p>

There’s an interesting legal facet to the argument – courts don’t issue injunctions unless plaintiffs have a chance of winning, and the Department of Revenue has insisted up to this point that its legal interpretation is bulletproof.
Whatcom County says the state is wrong about that. “We’ve had a number of conversations with them,” said prosecuting attorney Dave McEachran. “They have a view and we have a view.”
Not that he wants to comment on the strength of the county’s argument. But he says the county is eager to test it in court.
Meanwhile, for the strategy to work, the state has to cooperate so that Whatcom County can file a lawsuit. But it can’t put up such a strong legal defense that it!
throws a knockout punch in the first round.

I wonder what the Governor and Attorney General think about the sue us so we can help you legal strategy?

Of course, this is probably a better strategy than the South Park solution (Blame Canada).

Now the real budget work begins

June 17, 2010 in Blog

Today's state revenue forecast shows the state is even more at the mercy of Congress than before to approve a state budget bailout as well as facing at least a $3 billion budget gap for 2011-13.

Though revenues are projected to increase in 2011-13, they are down $203 million for this biennium. This means the state's new ending fund balance of $253 million is less than the $480 million in one-time federal Medicaid funds assumed to help balance
the budget.

A test vote in the U.S. Senate yesterday to approve these funds was rejected by a vote of 45-52. The U.S. Senate may vote again on this issue as early as today. The U.S. House rejected the Medicaid funding last month meaning if it passes the Senate the House will have to vote again to approve.

While the focus remains on the current budget and Congress, the building blocks to address the 2011-13 problem are already being laid. As we noted last week, the state's budget instructions i!
nform agencies the Office of Financial Management's "assumption is that all state activities must re-qualify for inclusion in the budget."

Lawmakers are also getting a head start rethinking how they budget. Consider agenda items 3-5 for next week's House Ways and Means Committee work session:

3. Update on selected state agency efforts to improve quality and efficiency.

4. Update on selected reform efforts.
5. Discussion of possible budget reform ideas.

The voters may also have a big role to play in helping to focus the budget debate on restructuring government versus additional tax increases. Should Initiative 1053 qualify for the ballot and be adopted by voters, lawmakers will once again be required to secure a 2/3 vote to increase taxes.

If the prospect for passing tax increases is diminished, the odds for balancing the budget based on resetting state government spending will be greatly increased. 

Additional Information
OFM Budget Overview PowerPoint (May)
Building a balanced budget

Then What's the Point?

June 16, 2010 in Blog

A "funny until you realize it's real" story out of San Francisco today (courtesy of the NY Times) where the city will soon require cell phone retailers to display the amount of radiation in each phone that is for sale on their shelves. 

State budget bailout on the ropes

June 16, 2010 in Blog

Despite intense lobbying from President Obama and Governor Gregoire, the U.S. Senate has rejected an effort to increase one-time federal Medicaid funds that states across the nation gambled would be approved. As reported by Open Congress:

After two weeks of solid debate — and two weeks of p!
eople having their unemployment insurance cut off because of congressional inaction — the Senate this morning took their first test vote on passing H.R. 4213, the “American Jobs and Closing Tax Loopholes Act of 2010.” They failed miserably. The final vote count was 45-52. Sixty votes were needed to proceed.

Washington Senators Murray and Cantwell voted for the bill though eleven of their fellow Democrats did not. Here is the full roll call

At issue was whether the projected $80 billion in deficit spending, that would result by passing the bill, had to be paid for under Pay As You Go rules previously adopted by Congress.

Last month we highlighted how Washington was putting its faith in Congress to
deliver $480 million in one-time federal Medicaid funds to help balance
the budget. By leaving only $452 million in reserves, should Congress
not come
through with the assumed $480 million, the Governor said she will be
forced to issue across-the-board cuts as required by law or call a special session.

It will be interesting to see if this development is discussed at tomorrow's state revenue forecast and how it may impact the projected $3 billion deficit for 2011-13.

Everett Herald calls for more legislative transparency

June 15, 2010 in Blog

The Everett Herald today called on the Legislature to follow our recommendations to improve legislative transparency. From the editorial:

" If it’s true, as state Senate Majority Leader Lisa Brown opined, that the Legislature now does its business more transparently than it used to, then we offer a corollary:

When it comes to keeping secrets, lawmakers of the past had nothing on the CIA.

The closing days of this year’s session in Olympia, which is when Brown made her rather amazing statement, were closer to an exercise in covert deal-making than of an open public process . . .

Jason Mercier, director of the WPC’s Center for Go!
vernment Reform, tracked the Legislature’s various abuses of openness as closely as any non-legislator could, and has drafted some simple, sensible changes to keep them from happening in the future. They’re in the form of amendments to the state Constitution, in order to force lawmakers to follow them.

  • Give the public 72 hours notice of any public hearing on a bill.
  • Prohibit title-only bills — in other words, require that a proposal actually exist before it gets a hearing or a vote.
  • No votes on passage of a bill’s final version until the public has had at least 24 hours to review it.

For the sake of the Legislature’s credibility, this year’s candidates should vow to support such amendments, so the public can vote on them next year. Voters deserve to know whether candidates really believe in the public’s right to know."

The Columbian, The Olympian and The Seattle Times have also endorsed our proposed transparency reforms.

Seattle Times endorses WPC's legislative transparency reform recommendations

June 14, 2010 in Blog

The Seattle Times today called on the Legislature to follow our recommendations to improve legislative transparency. From the editorial:

"The Seattle-based Washington Policy Center has a common-sense proposal to prohibit several practices used by legislators to ram through bills in a hurry. These practices were much in evidence in the recent session.

Because the proposal would bind lawmakers, it would have to be a state constitutional amendment. It would require that no bill be passed without a public hearing, no hearing be held on a bill until it has been introduced for 72 hours and no title-only bill be introduced . . .

Analysts need time to read the bills !
so that interested parties, the press and the public can find out what is in them. This is a simple matter. It is not too much to ask, even if it takes a constitutional amendment to do it."

The Columbian and The Olympian have also endorsed our proposed transparency reforms.

Judge removes "job creation" from R-52 ballot title

June 11, 2010 in Blog

Thurston County Superior Court Judge Carol Murphy issued a ruling today in the Association of Washington Business (AWB) challenge to R-52's (bonds bill) ballot title. 

Opening the hearing Judge Murphy said, “This is a unique case even in the world of ballot titles.”

Murphy was clearly skeptical of including the claim of job creation in the ballot title.

In a question to the counsel for Yes on Schools and Jobs, Murphy asked, "Would you agree that there is no language in the bill itself with regard to benchmarks or requirements for job creation?"

Counsel responded, "Yes I would agree there are no benchmarks in there but that is not needed – implied."

Later Murphy asked the state's attorney Jeff Even, "The actual language!
of the bill doesn’t have any teeth with the concept of job creation; is a job actually created or is it maintained?”  

Todd Myers, Environmental Director at WPC, was encouraged by the judge's skepticism of the claim of job creation.

“The judge recognized that there is a difference between the promise of job creation and the reality. Countries like Spain who have followed this approach have seen more jobs killed than created, so assuming that it will ‘create jobs’ is not appropriate,” said Myers.

Issuing her ruling Murphy said "it is inappropriate" to include the phrase promote job creation or create jobs in the ballot title.

Along with striking the job creation sections, Murphy added the language proposed by the Attorney General to reference the sales tax on bottled water being continued.

All parties agreed some reference to the bottled water tax was necessary to avoid constitutional issues.

Here !
is the new R-52 ballot title as ordered by Judge Murphy:

Statement of Subject (adopted as proposed by Attorney General)

"The legislature has passed Engrossed
House Bill No. 2561, concerning authorizing and funding bonds for
energy efficiency projects in schools."

Concise Description (written by Murphy)

“This bill would authorize bonds to finance construction and
repair projects increasing energy efficiency in public schools and
higher education buildings, and continue the sales tax on bottled water
otherwise expiring in 2013.”

So why does any of this matter?

As noted by Even, “It’s often true the only thing a voter sees about a measure is the ballot title itself.”

Lands Commissioner Goldmark Wants to Sue - Just Don't Ask Him Why

June 11, 2010 in Blog

Earlier this week, Lands Commissioner Peter Goldmark attacked Attorney General Rob McKennafor McKenna's decision not to appeal a case involving state trust lands and the Okanogan PUD. The PUD wanted to lease a corridor on state lands for a new power line. Through press releases and media interviews, Goldmark was quick to argue McKenna's decision was about politics. He has yet to explain what politics he thinks are involved.

Interestingly, he also has yet to explain why he thinks this case is worth appealing. When asked key questions about the case, Goldmark's and his spokesman's consistent answers are "I don't know."

After Goldmark sent out his press release on Tuesday, his spokesman was asked about McKenna's legal reasoning for deciding not to appeal. The Wenatchee World reported Goldmark's office "said he doesn’t know why the agency refused to appeal. 'I haven’t seen the letter yet,' he said." In other words, Goldmark launched his attack before he had read the letter and knew the facts.

Earlier this week, Goldmark's office also admitted they didn't know how much it would cost the school trusts, despite arguing that protection of the trust is their motivation for the lawsuit. In response to our piece on Tuesday, Goldmark's spokesman wrote on our blog that "no one knows that answer in totality because the costs will unfold over generations."

Ironically, Goldmark actually turned down school revenue being offered by the Okanogan PUD. The PUD offered to pay $31,000 a year in lease revenue for using the right of way. Currently, the state receives $3,500 a year from a grazing lease on the land. The PUD would even allow the grazing to continue. Goldmark turned down funding for schools while admitting he doesn't know what other revenue might be availablein the future. Apparently Goldmark's Department of Natural Resources biologists haven't told him that a bird in the hand is worth two (imaginary birds) in the bush.

When an elected official consistently answers "I don't know" to questions about why they are advocating a particular policy, there is something else going on. Goldmark's accusations that McKenna is playing politics sound a lot like transference -- claiming others are doing what you are actually doing yourself.

Until Goldmark can answer the key questions about this case with something other than "I don't know," the public should be skeptical of what they are hearing from his office.

WPC responds to King County Councilwoman Jan Drago’s column in the Seattle Times

June 11, 2010 in Blog

In a guest column in today’s Seattle Times, Jan Drago, King County Councilmember and chair of the King County Ferry District, uses false claims, factual errors and misleading statements to defend the poor performance of King County since taking over the West Seattle Ferry from a private operator.

Greens vs. Science - Toxic Troglodytes Edition

June 10, 2010 in Blog

This week, the Washington Toxics Coalition sent out a link on Twitter, highlighting a "New blog post! Study: One in Two Children Have Chronic Health Issues." The Toxics Coalition has too frequently set aside science in favor of scare tactics to achieve its goals (for instance read the exchange from our blog here: Greens vs. Science - BPA Edition).

Ironically, the Toxics Coalition often attacks its opponents over the use of similar tactics, recently touting a debate where it argued for a ban on bisphenol A (BPA) as "Science vs troglodytes." Calling its opponents troglodytes demonstrates the Toxics Coalition's commitment to science.

The blog the Toxics Coalition links to regarding the study on children's chronic health issues shows how clearly divorced the organization is from science.

The blog post notes the study found that half of American children have some form of "chronic" disease in their youth. The blog goes on to note, "Children are not 'little adults' – their developing brains and bodies, their metabolism and behaviors make them uniquely vulnerable to harm from toxic chemicals such as those released by the polyvinyl chloride (PVC) plastic lifecycle."

There is, however, a problem with this assessment: the study never discusses PVC or any other compounds. By discussing the study, and then mentioning PVC, the blog hopes readers will be mislead into connecting the two even though the science does not.

Additionally, the study itself casts a wide net in its definition of "chronic disease." The press release for the study notes:

Some of the conditions included asthma, type 1 diabetes, type 2 diabetes, epilepsy, cystic fibrosis, heart problems, allergic conditions, learning disabilities, hyperactivity, sinus infections, ear infections and more. Obesity was defined as a body-mass index in the 95th percentile or higher for the child's gender and age.

Some of these are legitimate chronic diseases, others are subjective. I'm not sure I'd call an ear infection "chronic." Nor is there any indication that PVC or any other chemical causes diabetes.

Finally, while grasping at the study for evidence that children are unhealthy due to PVC or whatever other targeted toxic of the day, the conclusion of the scientists is exactly the opposite. In the press release the authors say:

What surprised the authors, however, was that the chronic conditions weren't always lasting. Overall, only 7.4 percent of the children who had a chronic condition at the start of the study still had that same condition at the end of the research period. "We've always thought of chronic conditions as quite permanent, so these findings give a lot of hope for kids with chronic conditions and obesity," said Van Cleave.

The authors were actually surprised the children's maladies were so transient. This directly contradicts the insinuations we are poisoning our children with toxics. The study finds kids have illnesses, but recover quickly.

As far as the cause of the diseases, the authors also contradict the Washington Toxic Coalition's insinuations:

"It's likely that a lot of these conditions resolved because families made lifestyle changes, such as eating healthier foods, reducing screen time and becoming more physically active."

This is certainly sound advice. For the Washington Toxics Coalition to claim this study helps their cause, as opposed to the cause of the Florida Orange Growers or Little Leagues, is to ignore the science altogether. It is clear why the Toxics Coalition likes to label its opponents "troglodytes." When the science isn't on your side, what other tactics are available?

All sides agree: Change R-52's ballot title

June 10, 2010 in Blog

Tomorrow morning a ballot title challenge to R-52 ($505 million bonds bill) will be heard in Thurston County Superior Court. Based on the legal fillings, I put the chances of the judge changing the Legislature's proposed ballot title at 100%.

What the change will be is a different story.

First some background. Per HB 2561, the current ballot title reads:

"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."

During the Senate floor debate on the bill Republicans argued that this ballot title was inaccurate and would invite a legal challenge since it omitted the fact voters were being asked to make the temporary tax on bottled water permanent.

Thus Senator Parlette offered an amendment to change it to read:

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

The amendment failed by a vote of 16-30.

Zogby confirms: Econ 101 review needed

June 9, 2010 in Blog

Based on a recent Zogby International survey, policymakers in Washington are not alone at failing to understand the basics of economics.

The survey conducted by Zogby was used to determine, “Who is better informed about the policy choices facing the country – liberal, conservatives or libertarians?”  According to Zogby, many of the respondents, especially those that identified themselves as liberal or progressive, answered basic economic questions incorrectly.

Consider one of the questions from the survey conducted in December 2008 in which survey participants were given the following statement:

“Restrictions on housing development make housing less affordable.”

Participants were asked to respond stating if they strongly agree, somewhat agree, somewhat disagree, strongly disagree or are not sure.

In commenting on the statement and respondent’s answers, Zogby wrote:

“Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of the production and exchange, making goods and services less affordable.  There may be exceptions to the general case, but they would be atypical.

Therefore, we counted as incorrect responses of “somewhat disagree” and strongly disagree.”

In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%.  But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%.  The pattern was not an anomaly.”

So what does this mean for Washington?

Earlier this year, in our study “How Government Officials Increase Home Prices,” we highlighted several ways in which policymakers increase the overall cost of living for Washingtonians.  We wrote:

“Policies that increase tax revenues and regulate the growth of communities have a direct impact on the cost of construction in our state.  Lawmakers use a variety of tools to control growth and manipulate revenues, such as building, utility and impact fees, land use regulations and business taxes.  The increased costs effect businesses ability to remain competitive, as well as the price that consumers must pay for the goods and services provided.”

As policymakers across Washington continue to consider new policies and regulations, they may first want to dust-off their Economics 101 books.

OFM asks agencies: Are your activities core services; can they be contracted?

June 9, 2010 in Blog

The Office of Financial Management (OFM) released the state's 2011-13 budget instructions yesterday to help focus the information agencies are required to use for their budget requests. Included are details on the "new" budget process the Governor plans to unveil this summer. From OFM's cover memo:

"It will be important for you to recognize the following aspects of our budget approach when you are considering your budget requests:

  • The Priorities of Government process will continue to be the framework for a zero-base budget approach. Although Carry-Forward and Maintenance Level remain meaningful benchmarks, the assumption is that all state activities must re-qualify for inclusion in the budget.
  • The POG process will focus on six high-level value statements listed in Section 1.1 of the Budget Instructions. These values help define our statewide outcomes.
  • The Governor will be asking more questions about existing services, as well as alternative forms of service delivery or financial support, including:
  • Is the activity a core service? (Challenge this assumption thoroughly.)
  • Does state government have to perform the activity, or can it be provided by means other than state government?
  • Can the activity be eliminated or delayed in recessionary times?
  • Are there more cost-effective, efficient ways to do the activity? Why not?
  • Does the activity need to be paid for with state funds? Should user fees be charged or raised?
  • Are there federal funds or other fund sources available to support this activity?
  • Can the activity be the subject of a performance contract?
  • Can the activity be the subject of a performance incentive?
  • Performance will play a significant role in budget choices. Not only are we looking at program outcomes as a means of relating agency functions to statewide objectives, but we are seeking more opportunities to tie funding to performance.
  • Budget requests should include innovative ways to drive down the costs of essential services, so critical needs can continue to be met while using less of our resources."

It is very encouraging to see agencies being asked to answer these questions, especially with the state once again facing a multi-billion dollar budget deficit.

Olympian calls for more legislative transparency

June 9, 2010 in Blog

The Olympian today called on the Legislature to follow our recommendations to improve legislative transparency. From the editorial:

In the waning days of the regular legislative session, Senate Majority Leader Lisa Brown attempted to justify the indefensible. When questioned on Senate procedures that were squeezing the public out of the lawmaking process, Brown said, "I think our processes are much more transparent than when I entered the Legislature."

Brown is wrong and the proof comes in a recently released report by the Washington Policy Center that details a series of abuses by majority Democrats as they rushed sometimes flawed bills through the legislative process — often withou!
t giving the public time to read the bills, let alone react to them.

Granted, lawmakers faced a huge hurdle this year — a $2.8 billion budget deficit and the need to raise taxes to fill part of that hole. Tax increase votes are not something lawmakers want to do in an election year.

But the magnitude of the task in front of them did not warrant the Democrats’ tactics to deny public input. Their secretive and obstructive tactics are a violation of the public’s trust . . .

The policy center offered three recommendations to remedy the abuses:

  •  Require 72-hour public notification before any bill could receive a public hearing.
  • Prohibit title only bills. No public hearing or vote should occur on a ghost bill.
  • Prohibit votes on final passage until the final version of the bill to be approved has been publicly available for at least 24 hours.

Those are reasonable recommendations that would put the public back in the public policy-setting process.

Despite claims to the contrary by Senator Brown, transparency and openness were absent from the 2010 legislative sessions.

The Columbian has also called on the Legislature to adopt our proposed transparency reforms.

Politics before Schools: Goldmark Release Ignores $35 Million in School Cuts

June 8, 2010 in Blog

Lands Commissioner Peter Goldmark sent out a press release today attacking Attorney General Rob McKenna regarding an issue of eminent domain in Eastern Washington. The headline screams "McKenna refuses to stand up for Washington's schools, Goldmark is forced to seek other options."

Goldmark said he was concerned that the value of trust land would be diminished, leading to lower revenue for school construction since schools are the primary beneficiaries of revenue from trust land leases. The release quotes Goldmark saying:

"We have a fiduciary responsibility to manage the trusts for current and future generations. I believe that Okanogan PUD’s proposal will have unacceptable negative impacts, including increased fire risk and higher management costs for the trusts."

This is the strongest statement Goldmark has made supporting the state's obligations to manage trust lands for the benefit of schools. In the past, he has minimized this obligation, advocating policies that would reduce the value of state lands and harming schools.

What precipitated the change? Perhaps the cost is very high, significantly reducing funding needed at a difficult budget time. How much will this decision cost the state's schools? Here's what Goldmark's spokesman Aaron Toso had to say in an e-mail to me today:

"It is difficult to put a fine point on the dollar amount that schools would lose from this eminent domain action into the future. ... It is also impossible to see into the future and guess where the market for commodities may be for our grandchildren’s children—or even what the commodities may be (i.e. forest biomass, carbon sequestration, habitat credits or clean energy)."

Toso's e-mail can be shortened to: "I don't know."

This concern is especially ironic since many of the policies Goldmark advocates will have significant costs to taxpayers and the schools. For instance, Goldmark is advocating increasing the amount of state forest certified under the Forest Stewardship Council, a regulatory scheme favored by environmental activists. Such a move would reduce the amount of timber harvested, and revenue to the schools, by an estimated 25 percent. The Department of Natural Resources own numbers show that using this standard would reduce the revenue in the South Puget Sound region by 30 percent.

Statewide, timber harvests yielded $145 million for schools and other state programs in 2009. Using FSC statewide could cost taxpayers more than $35 million a year in lost revenue.

Sadly, this is a consistent trend with Commissioner Goldmark. Substitute politics for science and data. While claiming to be concerned about the impact this ruling will have on the schools, his own policies will cost schools tens of millions each year by the Department's own estimates.