"After much thought and in light of our nation's economic struggles, I have decided the cost of living raise, which you were scheduled to receive on September 1, 2008, is not appropriate at this time. My decision affects all agency directors under my control in addition to the Senior Staff of the Governor's Office . . . I take this step because I believe you and I should make a clear statement to the people of Washington: we understand that many families are not rece!
iving pay raises while coping with high food and fuel prices, and other financial challenges."
So what "statement" are Bellevue teachers sending taxpayers and students by breaking the law?
On Crosscut, David Brewster questioned whether Sound Transit's first phase, which won voter approval in 1996, is one of the "word's biggest boondoggles?" He compares the agency's initial promises to voters with the fact they are now billions of dollars over budget and many years late.
While Sound Transit's troubles are well documented, the philosophy that led to the agency's woes is even more outrageous. Brewster says:
Are you shocked? If so, consider that most of these projects are in
fact wildly popular, even if the public had to be gulled to go along
with building them. It's standard practice to low-ball cost estimates,
in order to get the bond issue passed, and then to add on costs as
politics requires and the public demands more than the bare-bones model.
So basically, the publisher of Crosscut is saying that taxpayers shouldn't be "shocked" when large public works transportation projects run late and over budget. In fact, according to Brewster, voters and taxpayers should somehow expect and appreciate being misled:
Meanwhile, voters confronted with bond issues for such
mighty plans might keep in mind the same rule of thumb that works when
you call an architect to remodel your house: Double the budget and
double the estimated time. And remember, it's usually worth it, if you
somehow get it built.
Ummm, this is not entirely analogous....unlike a homeowner hiring an architect, taxpayers do not have the option to stop the flow of money when things go wrong.
Nevertheless, according to Brewster, deliberately underestimating costs and overestimating revenues to sweeten the appearance of a large public works transportation project is ok and we should be thankful for not being told the truth because the means will always justify the ends....right???
The PI reports ST2 will cost $22.8 billion and be completed by 2023. Applying Brewster's new methodology means that voters should expect ST2 to cost $45.6 billion and not be completed until 2038.
So do you still think moving less than one percent of all trips by the year 2038 is worth $45.6 billion?
An interesting tid-bit from the Financial Times yesterday. Apparently, one of Europe's largest investment managers, Henderson Group, is considering moving its corporate headquarters, and tax base, to Ireland. Why? Taxation policy.
Ireland's corporate tax rate is 12.5%, compared to the UK's 28%. That is a substantial difference.
According to the Tax Foundation, if Henderson Group relocates to the Celtic Tiger, it will join pharmaceutical firm Shire and a large media firm, United Business International, among others, to make the jump across the Irish Sea to a more business-friendly environment.
Interestingly enough, three years ago the Henderson Group issued a statement to shareholders saying in regards to tax planning that they would "...[perform] the delicate balancing act of paying neither too much nor too little tax to serve shareholders' interests while also demonstrating broader social responsibility."
Assuming the Henderson Group still has the goal of "broader social responsibility" in mind perhaps UK policymakers should take a look at the nation's corporate tax policies because apparently the cost of doing business is outweighing the social benefit from paying such high taxes.
Oh, and the United States' combined federal-state corporate tax rate? A robust 39.3%. Good thing Ireland is more than just a stones throw away.
Earlier this week I asked spokespeople for both Governor Gregoire and Senator Rossi if they support a 2/3 vote requirement for tax increases and if yes, would they support placing them in the constitution like was done with the rainy day reserve from I-601.
Though I haven't received an official response yet from the candidates, Governor Gregoire was on the Dori Monson show today (KIRO 710) and was asked the same question.
Here was the tail end of their exchange on this issue:
Dori: "Yes or no, do you support the 2/3 legislative majority for tax increases?"
Gregoire: “I think it’s a moot issue because I think it [tax increases] ought to go to a vote of the people.”
The full interview is worth listening to. Discussion about the budget deficit starts at 12:50 of the interview (audio here). The exchange on the 2/3 requirement for tax increases starts at 21:22 on the audio link.
I'll post the official responses from Governor Gregoire and Senator Rossi once I receive them.
The State Auditor's recent performance audit of state debt collection practices received numerous kudos today at a public hearing. Along with receiving congratulations from legislative members of the Joint Legislative Audit and Review Committee, the Director of the Office of Financial Management also thanked the auditors for their work.
". . . eight programs that need to improve their collection practices. If the eight programs reduce their delinquent account balances by a modest 5 percent, the state will collect approximately $15.6 million more per year. If they reduce delinquent account balances by 50 percent, they can collect an additional $159.7 million."
Rep. Gary Alexander and Sen. Phil Rockefeller encouraged the State Auditor's Office to expand this effort to review the practices of the state's higher education schools. The auditors agreed to look in that direction.
The Department of Revenue (DOR) received special recognition for not have any findings in the audit. It looks like DOR is really on the ball. Last year it received its 15th straight clean state audit.
On the ballot this
November will be Initiative 985 (I‐985), the Reduce Traffic Congestion Act of
2008. The measure is sponsored by Tim Eyman and is an effort to implement some of
the recommendations made in a recent performance audit conducted by the
Washington State Auditor’s Office (SAO).
·I‐985 would not
raise taxes and would generate about $1.7 billion for transportation
infrastructure every ten years.
increase the projected statewide budget deficit by about $290 million during the
next two year budget cycle and about $284 million in the 2011‐13 biennium.
reduce the state’s reliance on the fuel tax for transportation infrastructure.
·I‐985 would shift
the state’s current policy back toward one that ties public spending to traffic
·I‐985 would open HOV
lanes during non‐peak hours, which would reduce overall delay, because more
drivers would be able to pass through the system. It may also increase
congestion on sensitive direct access lanes and ramps.
·Opening HOV lanes
during non‐peak hours would also increase travel times for buses and cost
transit agencies higher fuel and labor expenses and the loss of up to $20
million in federal grant money.
expand the emergency roadside assistance program and could reduce minor
accident clearance times by nearly 10 percent.
synchronize most traffic signals and reduce travel times up to 20 percent on
major arterials and up to 7 percent overall.
protect toll revenues in the same way the Washington State Constitution
protects gas tax revenues.
A good in-depth article by Washington CEO magazine this month on the business-friendliness rankings being thrown around during this political season. The article touches on the list of rankings I cited in a blog post soon after Forbes Magazine released its updated rankings and placed Washington state as the 3rd best state for businesses.
Again, the point of all these different rankings should center on how to improve Washington's business climate, no matter what ranking we achieve from any of the dozen of rankings available.
"Gov. Chris Gregoire, locked in a close race for re-election, has repeatedly declined to say if she supports Brown's case. She says she's not familiar with the specifics.
'I know that everybody thinks that's surprising. I have not studied it,' Gregoire said in a recent interview."
With the State Supreme Court set to hear arguments about the case on September 9, there is still time for the Governor to study this issue and form an opinion.
This morning I asked spokespeople for both Governor Gregoire and Senator Rossi if they support a 2/3 vote requirement for tax increases and if yes, would they support placing them in the constitution like was done with the rainy day reserve from I-601. I'll post any responses I receive.
Perhaps this is a question that should also be asked at one of the upcoming gubernatorial debates.
The Washington Public Employees Association has reached an agreement with Gov. Chris Gregoire's bargaining team for a 1.6 percent general pay raise in 2009, followed by 1.7 percent in 2010. Union members must approve the deal.
The union closed bargaining on the contract primary election night, Aug. 19, said Diane Leigh, Gregoire's lead negotiator.
It's news to me. I didn't hear from the WPEA about it (no news on their Website, either), and hadn’t been able to connect with Leigh until today. The largest general government union, the Washington Federation of State Employees, is still at the bargaining table, but if past experience is any indication, all pay raises will follow a very similar scale.
I called the Senate Ways and Means Committee to see what impact, if any, this news has on its projection of a $2.7 billion budget deficit.
Although the committee didn’t breakdown its projection based on a particular COLA assumption (instead used functional areas – page 3), I was told today's news shouldn’t make a big change one way or another on the budget outlook.
A new report from Washington Policy Center released yesterday addresses several of the systemic problems inherent in the Business and Occupation tax -- Washington's gross receipts tax.
Implemented as a temporary tax during the Great Depression, the B&O tax raised $2.7 billion for the state government in fiscal year 2007, approximately 16% of the state's revenue for that year. For years the business community, small and unprofitable businesses in particular, have pointed to the B&O tax as a draconian tax that punishes new or struggling businesses.
The new report finds that:
Washington’s Business and Occupation tax results in pyramiding -- a process that taxes the production of a product multiple times before it reaches the consumer, thereby raising the retail price,
The B&O tax, when converted into the more commonly-used corporate income tax, ranks second-highest in the nation at 13%,
The Business and Occupation Tax is an inherently non-transparent tax. Consumers rarely see the amount of B&O tax they pay on a product,
Businesses are incentivized to bring in out-of-state material during production to cut costs,
Larger businesses with more resources are able to vertically integrate operations to cut costs but smaller firms are not able to take similar measures.
The B&O tax has also resulted in a complicated system that rewards some industries with tax breaks where other industries do not qualify. Policymakers should take to heart that simply more tax breaks for specific industries does not get at the root of the problems (stated above) and that more creative thinking will be required when addressing the issue of how to best tax the business community.
Yesterday's Seattle Times has a national AP story about a national movement that targets state legislatures and encourages them to enact mandatory employer-provided paid sick days for the private sector. In Washington state, legislation was introduced several years ago to enact such a mandate. It did not pass. But expect more legislation on the subject during the 2009 Session that begins in January.
This is one of those ideas that might sound great until you stop and think about the consequences of such a mandate. Personally, I think it makes sense for most employers to provide paid sick time. It can help reduce absenteeism and keep other employees from contracting a contagious bug. It can have a positive effect on employee morale and reduce rates of employee turnover.
The problem with the idea of mandated paid sick days isn't the idea of employers providing sick days, but that employers would be forced to provide paid sick days while conforming to state regulations. This is where the problem lies. Some companies provide paid time off (PTO), which does not differentiate paid sick time from paid vacation. It's simply paid time off -- use it how you will.
Such a regulation could also harm small businesses in that mandates are often extremely inflexible. Small businesses are often extremely flexible. That's one of the things that makes small businesses great.
According to a Washington state government report, almost 80% of large companies (500+ employees) offer paid sick days, whereas only 42% of firms with 2-9 employees offer paid sick days. Any mandate coming down from the legislature will disproportionately harm the small firms.
Rather than a one-size-fits-all mandate, perhaps policymakers should put more focus on freeing up the health care market in order to provide more choices in health insurance, or providing some sort of incentive to employers (particularly small-sized firms) that give paid sick days as part of a compensation package. The well-meaning idea of mandatory paid sick days will have a profound and detrimental effect on many of the 200,000 small businesses in Washington state.
The Department of Revenue (DOR) has responded favorably to our proposal for creation of an online searchable database of all tax rates in the state. According to a spokesperson for DOR (in-part):
"The Department of Revenue considers the web to be a great way to communicate with taxpayers and the public, and it supports the concept of a searchable database of state and local taxes by location. In fact, it already has been moving toward that goal as resources permit."
Along with DOR, we've already heard from other state policymakers interested in moving forward with this reform. Hopefully understanding your state and local tax burden will soon be a click away.
This past weekend the City of Seattle and surrounding areas violated the Federal Clean Air Act and if you read today’s coverage by the Seattle Times, found here, you might be alarmed by some of the claims that were made by Reporter Isaac Arnsdorf.In his article, Arnsdorf writes:
Now that the region failed to meet the stricter standard, Washington's governor will have to report to the EPA in 2009 which areas of the state are too polluted. The EPA will then evaluate the governor's recommendation and finalize the designat!
ion in 2010, at which time local officials will have three years to develop and present a plan to clean up the air…The details of such a plan could range from tightening auto inspections to canceling Mariners' games on hot days.
In an email response to Arnsdorf, Puget Sound Clean Air Agency Executive Director Dennis McLerran wrote:
I don't think anyone would consider cancellation of baseball games to be an effective strategy for reducing ozone precursors in the region.
Additionally, the violation should come as no surprise based on reports last week from the Puget Sound Clean Air Agency that cautioned Puget Sound area residents that ozone levels, commonly referred to as smog, could reach levels that would require the State to be considered a “nonattainment area”.The term “nonattainment area” is a fancy way to say that there is too much smog in the air.
What may be a surprise to most is that the Seattle is in violation not simply as a result of increased pollution, but instead because of increased standards that were issued earlier this year by the Environmental Protection Agency (EPA).In March the EPA lowered standards of acceptable smog particles per million (ppm) from .08 to .075 ppm.For their part the Seattle PI, seen here, wrote a fair article that expressed this point, unfortunately the Times article did not.
In 1992, the last time the State had a “nonattainment area”, the standard set by EPA was .12 ppm.The three year average that put Seattle over the top this time was .077 ppm, barely breaking the allowable standard today, but nevertheless this shows the vast improvements made in our overall air quality since 1992.
In order to respond to critics of the new ST2 plan, Sound Transit officials have created a Quick Reaction Webpage. It's called, "Setting the Record Straight." (This seems to cross the line of what a public agency can do once their issue is on the ballot but...)
Currently, there are only three entries, but it's the one that responds to the light rail impact on I-90 that really needs to be highlighted.
During the run up to Prop. 1 last November, WPC released this policy note that shows replacing the center lanes on the I-90 bridge will increase traffic congestion by 27 percent during the morning peak commute and 24 percent during the afternoon peak commute. This negative impact has made others, including state lawmakers and FHWA officials, wonder whether reconfiguring the center lanes on I-90 is worth it or even legal.
Sound Transit's response:
There will be no loss of lanes on I-90 between Seattle and Bellevue to accommodate Link light rail service.
This is not entirely accurate. During the morning peak commute drivers
have a total of five westbound lanes (three general purpose and two HOV
lanes). With Sound Transit’s reconfiguration, capacity would fall to
only four westbound lanes. The same reduction would occur during the
eastbound commute in the afternoon. This is a 20% reduction in lane
capacity during the morning and afternoon peak commute hour. And as our report shows, Sound Transit's plan on I-90 will significantly increase congestion.
Instead of trying to sneak a major policy change past voters, Sound Transit must be honest with light rail's impact on one of the most travelled corridors through the Puget Sound.
"The Legislature and the governor recently moved the state into a new era of budget transparency with a law creating a searchable Web site detailing state spending. The state should advance its impressive digital empowerment of the public by giving everyone access to the same type of information about his or her state and local taxes.
The Washington Policy Center last week unveiled a proposal to create 'a tax transparency Web site' allowing individuals and businesses to figure out just how much they are paying in all local and state taxes . . .
The center's Jason Mercier, who wrote the new proposal and helped inspire the spending Web site, called complete, searchable online taxing a 'natural next step' for the state in its efforts to be more transparent about financial issues. Like the spending idea, this plan ought to have bipartisan appeal. Whether one tends to think we have too few services or too many taxes, there is broad common ground on the value of accurate information for making good decisions . . .
Lawmakers and the governor should move quickly next year to take another big step forward in our high-tech state's use of technology to improve public understanding of the public's business."