Washington Policy Blog

Technology tax creep

April 13, 2009 in Blog

A New York Post story hit the news today about how wireless phone subscribers are paying up to 33 percent in federal, state and city levies. 

But this isn't news to the 260+ million wireless subscribers in the United States. Every month we get our bill and see the "government fees and taxes" section and have no idea what, if anything, that money goes towards. We simply shrug our shoulders and write out the checks.

Which is exactly what they want you to do.

A tax analyst the Post used to look at the information hit the nail on the head:

"There's a tendency to feel no one is going to notice this little tax...[policymakers] can do this without a lot of pushback from their constitu!

A report from 2007, published by the Beacon Hill Institute and the Heartland Institute, breaks down which cities have the highest taxes and fees on communications services. Seattle ranked competitively in the "Cable Video Services," and "Wireline Telephone Service" categories. But Seattle's "Wireless Telephone Service" tax rate greatly surpassed the national average. In fact, Seattle's ranking was 5th worst in the nation at a hefty 18.29% (national average: 11.78%).

As policymakers on all levels of government look to raise revenue to deal with their overspending and down economy, watch your communications services. I know I am not the only one who notices slight upticks in taxes and fees every couple of months on my cell phone, cable TV or broadband cable bills. It's often so slight that you wo!
nder if your brain isn't playing tricks on you.


But your brain is perfectly fine. 

More and more money for education doesn't mean better education for kids

April 10, 2009 in Blog

Since 2004, lawmakers have increased spending on K-12 education by 30%, from $7.7 billion to $10.1 billion.  Lawmakers have found it easier to ride the wave of increased tax collections during the good times than to pass substantive, systemic school management reforms that produce better academic results for kids.

Students have not benefited from this 30% increase in school spending.  Today's Alliance for Excellent Education conference held in Seattle, and sponsored by the College Success Foundation, revealed that 70% of Washington 8th graders are reading below grade level, according to the National Assessment of Educational Progress.

The chart below shows that despite a 30% increase in education spending, academic outcomes for students haven't improved at all.  More spending simply doesn't help.  School administrators need to make better use of the money taxpayers are giving them now, not just ask for more.



Does switching from driving to transit really make sense?

April 10, 2009 in Blog

The American Public Transportation Association (APTA) has a new study that shows how much money a household could save by switching to public transit. For example, the APTA study estimates that if a Seattle household traded in one car and used transit they would save about $10,447 per year.

The study conveniently explains the methodology used to estimate their figures:

APTA then compares the average monthly transit fare to the average cost
of driving.  The cost of driving is calculated using the 2009 AAA
average cost of driving formula.  AAA cost of driving formula is based
on variable costs and fixed costs.  The variable costs include the cost
of gas, maintenance and tires.  The fixed costs include insurance,
license registration, depreciation and finance charges.  The comparison
also uses the average mileage of a mid-size auto at 23.4 miles per
gallon and the price for self-serve regular unleaded as recorded by AAA
on April 8 at $2.047 per gallon.  The analysis also assumes that a
person will drive an average of 15,000 miles per year.  The savings
assume a household gives up one car.

There is one variable however, the study failed to account for: the value of time. One of the most significant tradeoffs with switching from driving to using public transit is the extra time involved. For example, commuting door-to-door from south King County to downtown Seattle takes about 1 hour in a motor vehcile. (obviously, this estimate can change drastically depending on where you live. Switching to public transit would take 2 hours to make the same trip, door-to-door.

Everyone has their own opinion on how much an hour is worth to them. If I valuled my time at $35 per hour, and added two extra hours of commute time, the cost of moving to public transit would be about $19,600 per year. This means it would cost me about $9,123 per year to switch from driving to public transit.  

The following table shows how much two extra hours of commute time per day (annualized) would mean to you, depeding o!
n your personal value of time:

of 1 hour
Extra cost per day
from using Transit
Annual cost, based on
260 work days per year 
$15         $30         $7,800
$20         $40         $10,400
$35         $70         $19,600
$50         $100         $28,000
$100         $200         $56,000

Assuming your commute time would increase two hours per day, you would have to value your time at less than $20 per hour to make the switch from driving to transit make sense.

Overspending caused our $9 billion deficit

April 9, 2009 in Blog

Lawmakers in Olympia are wrestling with a $9 billion budget deficit, which raises an important question: How did we get in this mess in the first place?  The conventional answer is the lousy national economy.  But some states don't have deficits and others have shortfalls that are proportionately much more manageable than ours.  Another response is that tax revenues are "down."  But the state will collect as much money in the next budget as in the last one.  We do not have a deficit because Washington citizens pay too little in taxes.

The clear answer is overspending.  In recent years lawmakers and the governor increased permanent spending by 33%, raising the state's financial obligations to unsustainable levels.  It might have worked had the good times continued indefinitely, but when the recession hit poor judgment by state leaders had already placed Washington in a weakened financial position.  The!
chart below shows how the state's general fund spending has increased over time, especially in the 2003-05 and 2005-07 budgets.  If state leaders had not overreached we would not have a deficit today, or at least the budget crisis would not be so severe.


Who's your daddy?

April 9, 2009 in Blog

There's no question that our state legislators work very hard. And during the long session (105-day) I know that things can get a little testy. Exhaustion can lead to making poor decisions. And so I'm willing to laugh a bit at some ideas I think are done in jest. 

But that doesn't mean I am not concerned about the precedent legislators are setting.

The latest example of this comes from HB 2337, which basically takes Boeing to task for wanting a better business climate for itself and its second 787 line, otherwise it is considering leaving to greener pastures.

The bill lists several national rankings that put Washington near the top of states with the best business climate. We've largely!
debunked these rankings in the past
. And the legislation goes on to direct the soon-to-be-formed state Depart of Commerce to:

"consider the societal benefits of unleashing the innovative, creative and entrepreneurial talents of the Washington state workforce to 'innovate here' through...the aerospace industry."

That sounds all well and good, despite the fact that it assumes the private sector isn't already doing just that. The legislation also directs Commerce to conduct a worldwide search for potential aerospace investors -- specifically encouraging direct foreign investment; and to bring them here by offering the same goodies that Boeing received as a result of the 2003 legislation.

But the most amusing part comes from the bill's sponsor, Rep. Mara!
lyn Chase
, who said that 

"We should do everything we can to keep Boeing here, within reason. Boeing is a good citizen when they behave. Sometimes they need to be taken outside the woodshed and spanked." (h/t Jerry Cornfield, Everett Herald)

So, let me get this straight. When a large business complains that the business climate it functions in is unsuitable for future expansion, it's the legislature's job to apply the smack down? Or, perhaps policymakers can feel cavalier enough to make their own threats against Boeing, apparently forgetting that Boeing already moved its headquarters to Chicago.

If Boeing, and its supporting subcontractors, skip town, why would other aerospace companies m!
ove in to take its place? I highly doubt Airbus and its parent company EADS will say to themselves, "hey, we're struggling just as much as Boeing. Let's invest billions into an infrastructure Boeing couldn't make work!"

And how about including in the legislation this independent Deloitte report that says Washington's aerospace industry faces more disadvantages than advantages by staying here?

I'd say that between the spanking in this bill and HB 2316, which prohibits threatening the relocation of manufacturing jobs based on pending legislation, that we have certainly rolled out the welcome mat for any future aerospace or other manufacturing companies thi!
nking about relocating or expanding in Washington. 

iv>I guess it's all fun and games until Boeing and its 70,000+ jobs head off into the sunset.

The importance of intellectual property in today's open source world

April 9, 2009 in Blog

As governments scramble to look for ways to cut costs over the next couple of years one area that is being highlighted is information technology (I.T.). Our post-industrial society, and therefore government, rely on the rapid transfer of information. The broad, indiscriminate dissemination of information helps keep governments accountable and citizens informed. This is a good thing.

And so a movement has formed that supports open-sourced software that is largely free to the user. These are programs such as the very popular Firefox internet browser and OpenOffice, a free suite of office tools (similar to Microsoft's dominate Office). 

I use Firefox, it's a great browser, and I use a lot of other open-source programs for my computer and mobile phone. I am not a developer, but if I were, I would apprecia!
te the openness and ability to take the core building blocks of a software program and be able to customize it to my specific needs.

But this is where things get interesting. Some proponents in the open source community are baiting policymakers with promises that mandating open source software will save taxpayers millions of dollars. But this is disingenuous. As the saying goes, "there is no such thing as a free lunch," and this axiom applies here as well.

Unfortunately, many in the open source crowd are also supporters of the "anti Intellectual Property" movement. They are against patents, property protection, profit motives, or basically anything to do with making money off of your idea and work. These are also largely the same folks advocating for the utopian Network Neutrality -- asserting that Internet access is a fundamental human right.

Open source software requires a lot of work to tailor-make it to!
your, the customer, needs. This means companies can offer ope!
n source programs to your department at a very low price, but then sell the consulting services in order to actually make it work to your exact needs. Proprietary software, ala Microsoft Office, is ready to use right out of the box. You pay more for it upfront, but then spend a lot less time, if any, customizing it on the back end. This is because you are paying for their Intellectual Property, as opposed to the open source programs, where you pay for their customization skills.

Personally, I think that we need both systems. A robust IP protection system in order to encourage proprietary development, and an open source system that harnesses the power of the community (for a great example of this see Apple's iPhone SDK and App store). I like having the choice. And governments should as well. In fact, several have already looked at mandating an open source only policy and have!
rejected the notion because of the limits it puts government IT crews into (see Texas' report on the subject).

Lastly, Raymond J. Keating, Chief Economist for the Small Business & Entrepreneurship Council hits the nail right on the head:

"Providing a clear and stable intellectual property system is critical to innovation, entrepreneurship and economic growth...After all, patents spur innovation in two ways. First, they incentivize invention and innovation by assuring that inventors reap the rewards of their inventions. Second, they in way stop others from finding better ways to better serve the market."


Read more about this issue:

Allow universities to set market-based user fees

April 8, 2009 in Blog

Mark A. Emmert, president of the University of Washington, had an op-ed in The Seattle Times today requesting that lawmakers allow the state's higher education institutions to raise tuition fees. Emmert noted:

Obviously, Washington has a severe budget shortfall, and balancing
the budget requires very difficult decisions. The magnitude of the
proposed higher-education cuts, however, goes far past what can be
managed through efficiency measures and new ways of providing
high-quality education.

The leaders of our four-year colleges and universities understand
that our schools must take cuts. But we also know that we can keep
students coming to school and graduating on time if we are simply given
more flexibility on tuition. We can help our students and our state
without new state money. Moreover, we can fix much of this problem
without denying access to students because of their income or family

The UW has the lowest tuition of any of its peers and is one of the best bargains in the country. With increased financial aid and the expanded federal tax credit, we can remain an excellent value for our families, maintain our world-class quality, and not slash the number of students we admit.

To give higher education the opportunity to resolve this crisis without requiring more state money is the only responsible thing to do. To do otherwise is to deny thousands of our citizens a chance to succeed in the knowledge economy.

This echoes an editorial that ran in The News Tribune earlier this week

There's a partial remedy at hand: higher tuitions. Emmert and others have sought authority to raise tuition by as much as 14 percent. Lawmakers are ba!
lking. The House proposes 10 percent; the Senate, only 7 percent.

Olympia needs a mental adjustment. In good times, when direct appropriations are easier to come by, capping tuition might make sense. In this emergency, business as usual could be disastrous.

A 14 percent tuition hike would not be the burden it sounds like. With Congress expanding Pell grants and the federal tuition tax credit, the increase in financial assistance will more than offset another 14 percent in tuition - which would be $875 a year at the UW.

Without getting into the question of broader higher education reforms at this time, this is a reasonable request.

Lawmakers should allow the state's universities the full authority to set market-based user fees to fund their operations. The same holds true for state parks. This will allow general tax revenue to be freed for vital core functions.

The Governor wants to raise your property taxes

April 8, 2009 in Blog

In today's Seattle Times, Governor Gregoire urged lawmakers to lift local levy lids to allow 75 school districts to collect an additional $68 million more in local property taxes.  The Governor justifies lifting of levy lids by claiming that voters have previously approved these increases, but that the lids capped the amount voters approved. 

How does the Governor know what the voters intended?  Perhaps voters knew that the levy lid would cap their tax exposure.  Let's have a vote today on these property taxes to see what taxpayers intended:  would taxpayers approve a bailout for the governor or not?

Changing the levy lid rules now is like changing the rules in the middle of the game, violating all standards of fair play and responsible leadership. The Governor and legislature increased state spending on education by 30% since 2004, knowing that such a rate of increase was unsustainable for long.  Had the Governor and legislature restrained itself and saved more in the Rainy Day and other funds, some of these school districts wouldn't find themselves in financial trouble today. 

County officials can give back part of their salary to help close budget gap

April 8, 2009 in Blog

I was catching up on my reading and noticed an article from the April 2nd Everett Herald, “County workers agree to take unpaid
time to avoid layoffs.”
  Reporter Noah Haglund says Snohomish County's elected officials told him they are cutting the pay of some employees by 3% but they are frustrated because they can’t lower
their own pay to help close the county’s budget gap.  Apparently an independent commission which meets once every two years sets their salaries.  O.K., they can't increase their own pay, but what is to prevent them from lowering their pay by just voluntarily
returning part of their salary to the county? 
For example, Executive Aaron Reardon could simply write a personal check
for $4,410 (3% of his $147,000 salary) and mail it to the county treasurer.  Other elected officials could do the
same.  That way they would share equally
in the salary reduction they are suggesting for other county workers.  What could be easier?

House Ways & Means budget amendments

April 7, 2009 in Blog

Today the House Ways & Means committee adopted numerous amendments to the proposed House budget. Among those adopted:

  • 1244-PS AMH WAYS DRIV 195: "Requires the Evergreen State College to expend $200,000 in 2009-11 on the Labor Education and Research Center."
  • 1244-PS AMH WAYS DRIV 167: "Removes the state support enrollment targets for the four-year universities and colleges and the State Board for Community and Technical College system."
  • 1244-PS AMH WAYS GAVC 031: "Requires the parks and recreation commission to not close any state parks during the 2009-11 biennium, and to report to the legislature by January 10, 2010, on its budget and resources related to operating the parks for the remainder of the 2009-11 biennium."
  • 1244-PS AMH WAYS PAME 039:
    "Directs the State Auditor to conduct biennial audits of local
    governments with revenues of $10 million or less and no findings for a
    three year period." (Currently these entities are audited annually under federal grant requirements if they spend $500,000 or more of federal money)

The first two amendments are of particular note in light of this blog post we did last week highlighting the budgeted enrollment slots for higher education (the amendment removes those targets from the budget) and this audit finding calling into question the legality of the Evergreen State College's Labor Center activities.

Though K-12 school spending will increase by 4-5%, school districts may be forced to lay off teachers

April 6, 2009 in Blog

School districts are complaining about having to lay off teachers. 

If these layoffs happen, it is not due to lack of funding, but rather because school districts have little control over the way they spend their money.  Under either the House or Senate budget proposal, taxpayers will be providing increased funds to public schools.  The numbers demonstrate that under either budget proposal, total public school spending will increase.  The House budget would increase state spending on public schools by 5.3% and the Senate budget by 4.5%.  (Remember that the state provides approx 70% of all spending on public education, as local districts and the federal government provide the rest.  Total per pupil funding from all sources was $9418 in 2008.)

                                                            House Budget                        Senate Budget

                                                            Total Budgeted Funds             Total Budgeted Funds

                                                    Basic Ed and NonBasic Ed             Basic Ed and NonBasic Ed

2007-09 Estimated Expenditures            $15,167,950,000                            $15,167,950,000

2009-11 Budget                                     $15,979,517,000(5.3% increase)     $15,858,968,000(4.5%incr.)

Teacher layoffs, however, may happen despite these increases in spending because school districts are forced by funding formulas to spend their ample resources in ways dictated by the legislature.  School districts should be allowed to use increased funding to Basic Ed, the largest silo of money (which amounts to 81% of K-12 funding by the state), to offset reductions to NonBasic Ed, a smaller silo of money for programs such as Initiative 728 (class size reductions of approx one student per class statewide) and Initiative 732 (teacher pay increases).

The House and Senate budgets both increase General Apportionment (82% of Basic Ed)  as follows:

                                                        House Bill                                    Senate Bill

2007-09 Estimated Expenditures        $9,265,714,000                             $9,265,714,000

2009-11 Budgets                             $10,465,371,000(13% increase)      $10,747,319,000(16% increase)

School districts will have plenty of money with which to avoid layoffs to teachers, but may be prevented by their funding formulas from doing so.      

Our legislators continue to increase spending on public schools.  They should be giving local districts the flexibility they need over spending.   

Money (and Green Jobs) for Nothing

April 6, 2009 in Blog

Today, Rep. Hans Dunshee will announce his $3 billion spending plan for "creating jobs by funding construction of safety, health and energy-saving improvements to public facilities." The goal is apparently to provide spending similar to the federal "stimulus" package. Since the state budget must be balanced, however, the money must be bonded as future debt to be paid by taxpayers.

If the bill passes the legislature it would go to the public in November.

The sponsor claims that the bill will pay for itself. Half of the energy savings from spending on energy efficiency in public buildings will be placed into an account to pay off the bond. Further, he says that the bill would create 90,000 jobs, although he does not say how long each of those jobs would last or describe the quality of those jobs.

Several questions and challenges come to mind.

  • Past claims of energy savings have proven false. In 2005, Rep. Dunshee predicted that his legislation requiring schools to meet "green" building standards would reduce energy costs by 30 percent. Our research in the four years since the bill passed shows that green schools don't reduce energy costs and, in many cases, actually increase them. The Superintendent of Public Instruction recently admitted that the data do not support the previous energy savings claims.
  • Some energy efficiency projects are extremely expensive. When the City of Seattle looked at putting solar panels on Qwest Exhibition Hall, officials estimated that the project would break even only after 40 years. If money is spent for inefficient, but politically popular, projects the return on investment will be low or negative.
  • Most of the funding will likely come from increased taxes. Of the $3 billion budgeted, only $500 million applies to the "Washington Works"account created to capture half of the energy savings. To cover the full $3 billion, those expenditures would have to yield a more than a 12-to-1 return on investment. This is optimistic in the extreme. For a 20-year bond, excluding interest costs, this is about the pace of the growth of Google's stock price since its IPO in 2004.
  • The bill assumes school districts are mismanaging their schools. Undoubtedly school district officials will support this bill. Who can resist the temptation of free money, especially in tough times? The assumption of the legislation, however, is that there are massive energy savings to be had that are simply being ignored by school districts. Some districts may make this mistake, but my experience in speaking with facilities directors at school districts is that they know their buildings very well and identify opportunities for energy savings quickly.
  • It is unclear how energy savings would be counted. Schools and universities could come to regret taking the money if the accounting of energy savings is expansive. One-half of the energy savings will be returned to the state to pay off the bonds. Determining, however, what are actual savings may be difficult. This will involve establishing a baseline of energy expenditures for each building when energy costs can vary from year to year for a variety of reasons. It will also involve determining why any energy savings against that baseline occurred. Was it a mild weather year? Did teachers turn out the lights? These are not trivial considerations. One "green" school found that the temperature preference of the principal increased energy costs by thousands of dollars. Will they claim energy savings, and therefore payments, even if costs go up, arguing that costs would have been even higher? The City of Seattle made exactly this argument when !
    it turned out that the new "green" City Hall actually used more energy than the old one. Charging school districts in that circumstance could add insult to injury.
  • It could pit schools and universities against the state. Further, since part of the savings associated with state spending would have to be paid to the state, school districts will have an incentive to minimize the claimed savings. The state, on the other hand, trying to claw back as much as they can, will want to exaggerate the savings. Who wins this accounting tug-of-war will determine whether schools are winners or losers in this program.
  • What happens if cost-effective projects aren't found? Any effort to spend a certain amount of money is likely to breed waste. At the end of each biennium, afraid to lose remaining funds, agencies find ways to spend them. It is likely that this program will see a similar rush to spend, regardless of the utility of projects. The money offered in this program doesn't expire, so it will be used for increasingly inefficient purposes. There is no standard for return on investment, only the requirement that the money be spent. It is likely that the return on investment of some projects will be negative, spending ten dollars to save one. This is a good deal for those who receive the money. Since taxpayers, not the districts or other beneficiaries, are liable for the costs, any new savings, however meager, is found money. Thus, districts will be happy to put forward any project that saves even $1 a year because they receive at least half of the bene!
    fits and none of the costs.

We've addressed the "green jobs" ecofad in the past. Additionally, the goal of government spending should not just be to create jobs, but to create prosperity. For example, which makes more sense, 1) a project that generates 1 MW of energy and creates 10 jobs, 2) a project that creates 1 MW of energy and creates 100 jobs, or 3) a project that creates no energy but creates 500 jobs? If jobs are the goal, we could simply pay people to dig and fill in holes.

Ultimately the quality of the project is the key. We want to create productive jobs, not make-work jobs. This is especially critical since the funding for those jobs will come from businesses who are already creating jobs. An unproductive "green" job is worse for economic recovery than a productive job in another sector like health care.

We'll see how many of these questions are answered when the proposal is formally unveiled today.

House capital budget priorities

April 2, 2009 in Blog

Not to get lost in all the debate about the state's operating budget, the Legislature's capital budget proposals were also released this week. In years past the capital budget has been referred to as the "Fun Budget."

So what are some of the House capital budget priorities?

•    Apple Awards (for schools) - $250,000
•    Washington State Historical Society - $12,250,000
•    Eastern Washington State Historical Society - $1,939,000
•    Admiral Theatre-No Theatre Left Behind - $140,000
•    Artspace Everett Lofts - $1,000,000
•    Building a Foundation for Discovery - $250,000
•    Campus Consolidation (Cornish) - $375,000
•    Convert Key!
Bank To Everett's Plaza Theatre - $500,000
•    Cottage Renovation (Hedgebrook) - $20,000
•    Downstairs at the 5th - $800,000
•    Federal Way Performing Arts Center - $325,000
•    Gateway Center (Lummi) - $150,000
•    James Ctr for the Performing Arts (Sequim) - $150,000
•    Langston Hughes Performing Arts Center - $475,000
•    Legacy Project (Imagine) - $200,000
•    Modular Classrooms for Dance (Gladish) - $30,000
•    Museum Expansion (Maryhill) - $1,500,000
•    New Hands On Children's Museum  - $1,000,000
•    Phase II Renovation (Mt. Baker Theatre) - $1,000,000
•    Reconstruction of First Stage, Issaquah - $400,000
•    Seattl!
e Opera Center - Phase I Design - $650,000
• !
60;  Stage Two (Whidbey) - $450,000
•    Vashon Arts Center - $1,115,000
•    Visual Arts Education Center (Sno Co.) - $1,000,000
•    Viva Vera Capital Campaign - $70,000
•    WA Hall Acquisition and Rehab - $400,000
•    A Home for Opportunity - $325,000
•    Building the new Eastside Clinic - $1,900,000
•    Community Center for Sand Point Housing - $350,000
•    Donald G. Topping HOPE Center - $1,934,250
•    Dove House - $240,000
•    Duvall Multi-Service Center - $617,985
•    East Central Community Facilities Expansion Project - $231,500
•    El Centro de la Raza Safety & Systems Improvements -$250,031
•    Emmanuel Family Life Center - $!
•    Eritrean Community Center Expansion - $300,000
•    Family Services Center - $1,265,000
•    Ferndale Boys & Girls Club - $752,847
•    Giant Step - $520,761
•    Greenbridge Early Learning Center - $1,419,281
•    High Point Neighborhood Center - $2,000,000
•    Highline YMCA - $2,000,000
•    Milgard Work Opportunity Center - $1,850,000
•    Mt. Baker Planned Parenthood Education and Training Center - $881,847
•    Northeast Community Center Expansion - $1,800,000
•    Pierce County Therapy Center - $128,000
•    Rainier Vista & Rainier Valley Teen Center - $3,906,000
•    Repurposing Daybreak Star - $87,500
•  &!
#0160; Riverwalk Point Community Building - $79,253
• !
60;  Rotary Support Center for Families - $3,500,000
•    Technology Access Foundation Community Learning Space - $1,500,000
•    The Keller House Services Center - $600,000
•    YMCA/YWCA Central Spokane Facility - $3,500,000

Having fun yet?


About those budgeted higher education enrollment cuts

April 2, 2009 in Blog

We've all heard that the proposed state budgets reduce enrollment slots at higher education institutions. True?

Yes and no.

Consider the current budgeted enrollment figures for 2007-09 (Section 604 of HB 2687) and the proposed budgeted enrollment for 2009-11 (Section 604 of HB 1244):

State Support for Annual Full-Time Equivalent Student Enrollments 






UW – Main





UW – Bothell





UW – Tacoma





WSU – Main





WSU – Tri-Cities





WSU – Vancouver

























Community College










Budgeted enrollment, though not increasing, is not cut under the proposed House budget. So how is enrollment being reduced?

The problem is not with a budgeted reduction but the fact that higher education institutions "over-enrolled," meaning they admitted more students over the past few years than the Legislature budgeted for.

In other higher education budget news, it appears Senate Democratic budget writers were not swayed by this recent damning audit of the Evergreen State College's Labor Center; the Labor Center receives $200,000 in the Senate budget (Section 610 [3] of SB 5600).

You Can't Predict the Future. But I Can. With Your Money.

April 2, 2009 in Blog

The latest version of the state's climate change bill, E2SSB 5735, includes a number of efforts to favor the technologies politicians believe will be the key to reducing CO2 emissions in the future. The bill calls for creating an "alternative fuels corridor" using government funding and property. In building the corridor, the Department of Ecology will:

Limit renewable fuel and vehicle technology offerings to those with a forecasted demand over the next fifteen years and approved by the department;

To understand what a fool's errand this is, think back fifteen years, to 1994. California was trying to mandate all-electric vehicles, an effort they abandoned in 2007. Hybrid vehicles were unknown. Today, every car company offers hybrids and the Prius outsells the most popular SUV.

Only three years ago, legislators argued that biofuels were the carbon-free fuel of the future. Today that view seems naïve as the biofuel industry struggles and studies show significant costs and carbon emissions associated with the most popular biofuels. The pace of technological change is remarkable and predicting the future is extremely difficult.

Ironically, one of the advocates of the bill agrees.

The Sightline Institute, one of the more thoughtful environmental groups, falls into the trap of believing it can predict the future while criticizing opponents for believing the same thing. In a recent blog entry, they criticize opponents of the President's stimulus package, saying:

Everyone knows something about the bailouts, Obama's "handling" of the economy, how health care will play out, or the timing of federal climate policy. Note to everyone: shut up ... But whatever else you may know, you do not know what will happen in the future.

The irony is that while criticizing others' inability to predict the future, the climate policies they advocate expressly rely on the ability of politicians to predict what technologies will be viable in the future and spend taxpayer money on that bet. The problem is that politicians are very poor at this and fail again and again as evidenced by their support of all-electric vehicles, hydrogen vehicles and biofuels. As a result, politicians, unsure of where to place their bets, bet on every number on the roulette table. They lose large amounts of money on every spin, but can always claim to have picked the winning number. Uncertainty breeds bad decisions.

How do you address this uncertainty? Sightline argues that since the market doesn't always work perfectly, government must step in:

The only sensible thing to do when you see something that's clearly, inherently unsustainable is to do your best to stop it before someone gets hurt. ... Unsustainable things will stop, by definition.  Once we come to grips with that fact, we can start planning a smoother and more gentle transition to a set of expectations, and way of life, that can really last.

In other words, we cannot predict the future, but when politicians see something they believe to be unsustainable, they should step in and stop it, using government planning. What if politicians guess wrong? What if they can't predict the future? There are two ways to deal with this uncertainty.

We can distribute power and hold those who make poor decisions responsible for those decisions, like in the market. Or we can consolidate power and separate decisionmakers from the consequences of those decisions. If individuals make bad decisions in the first approach, they bear the burden and the consequences are distributed. If politicians make bad decisions in the second scenario, the consequences are multiplied by the consolidation of power and the burden is borne by taxpayers.If politicians choose wrong, as they almost certainly will, when it comes to climate change spending, we will find ourselves years from now with higher carbon emissions and having wasted billions.

If we create a broad incentive to reduce carbon emissions, like a stable carbon price, millions of Washingtonians will take large and small steps. Some will succeed and some will fail. The competition of the market, however, will produce the most efficient and effective solutions as it did when it favored hybrids over the government selected all-electric vehicles. Those who fail will have done so with their own money. Even if most choose wrong, those who choose correctly will benefit and spread their innovation.

The future is uncertain, and there are ups and downs. But consolidating power in the hands of politicians turns ordinary risks into all-or-nothing bets, betting taxpayer money on their ability to do something they admit they cannot – predict the future.

Distributing power limits the cost of bad decisions and increases the diversity of thought and creativity that is critical to finding the technological solutions that are at the center of all environmental solutions.