Washington Policy Blog

Cigarette Taxes to Increase in 2010?

December 28, 2009 in Blog

As the legislature gears up for session in January and with the state facing a multi-billion dollar deficit (yet again), now is the time to pay close attention to trends the legislature may take. Perusing this pre-filed bill page can be useful.

One of the bills introduced today is House Bill 2493, an act "relating to the taxation of cigarettes and other tobacco products." Sponsored by Representative Cody, the bill, if passed, would raise cigarette taxes yet again. Currently, the state charges $2.025 per pack for cigarettes. 

Reading through the bill, it looks like the taxes would amount to $1 per pack more if the legislature and the governor sign off on the bill. That's about a 50% tax increa!
se for smokers. 

If the goal is to eradicate smoking, then the tax should be hiked even more. If the goal is to raise money for education programs, health care centers, water quality, and programs to stop youth violence, then a 50% increase in taxes will most likely move people towards purchasing tobacco from non-sanctioned sellers (aka the black market). The state says it already loses over $200 million in tax revenue per year to illegal sales of untaxed cigarettes. 

If policymakers are looking for a quick buck to help shore up the $2.6 billion budget deficit, this isn't the way. If, however, policymakers want more people to live up to what is sure to be their 2010 New Year's resolution, then raise the tax even more. My hope is that whatever our elected officials end up doing, they are honest about their motivations behind the tax hike.

Mann on Climategate: Theory good, data bad

December 23, 2009 in Blog

Following in the footsteps of former Washington state climatologist Phil Mote and Stanford professor Stephen Schneider, another political-scientist is arguing that the release of the Climategate e-mails is much ado about nothing. Michael Mann, author of the "hockey stick" graph weighs in on what it means to use a "trick" to "hide the decline."

Specifically he addresses the e-mail from Phil Jones where we discusses using a "trick" to "hide the decline" in the temperatures projected by tree-ring data after 1960. Temperatures went up while the tree-ring data, on which the hockey stick projections are based, indicated that temperatures should go down. He writes in the Washington Post:

In the same e-mail, Jones uses the phrase "hide the decline" in reference to work by tree-ring expert Keith Briffa. Because tree-ring information has been found to correlate well with temperature readings, it is used to plot temperatures going back hundreds of years or more. Briffa described a phenomenon in which the density of wood exhibits an enigmatic decline in response to temperature after about 1960. This decline was the focus of Briffa's original article, and Briffa was clear that these data should not be used to represent temperatures after 1960. By saying "hide the decline," Jones meant that a diagram he was producing was not to show those data during the unreliable post-1960 period.

This is more of the semantic games we've experienced on this issue already. Mann argues that "tree-ring information has been found to correlate well with temperature readings" until about 1960. The divergence at that point is "enigmatic." What is interesting, however, is that Mann and others who parrot this line, don't explain why the data after 1960 is unreliable and should be ignored. The only indication that it is unreliable seems to be that it inconveniently deviates from what Briffa and Mann projected. Given a choice between empirical data and their theory, they chucked the data and kept the theory. This is the very antithesis of scientific inquiry.

Climate alarmists like Mote, Mann and others had two options when reacting to the Climategate e-mails. They could have expressed sincere disappointment, taken a step back and worked to ensure that there was an appropriate distance between science and politics. They chose the other option, to engage in a flurry of political and semantic contrivances in an effort to "hide the decline" of their own credibility. Those trying to understand the true meaning of the e-mails need only look at the highly political and misleading excuses made after-the-fact to determine whether the language in the documents were unfortunate misunderstandings or intentional efforts to hide and suppress inconvenient science.

Small business bankruptcies up sharply in California

December 22, 2009 in Blog

A disturbing article in the Los Angeles Times today touches on California's troubling business climate. "Small-business bankruptcies rise 81% in California," says the headline. The story goes on to relay tales of woe from small business owners in the Golden State, and it aint pretty. 

Nationally, bankruptcy filings for small businesses are up 44% from this time last year, as the article points out, and a large part is the continued lack of access to credit, stemming from the financial market meltdown in 2008. Last month, president Obama laid out a plan to increase small business lending from financial institutions -- namely by leaning on them to increase their lending (see "no such thing as no strings attached") to small businesses. But there is only so much that the President can do in that regard.

The better !
course of action that policymakers in Congress and Olympia can do, however, is to simply make it less expensive and onerous to run a business and refrain from causing such uncertainty in future tax rates and regulations with the current debate on health care and cap and trade. 

Businesses need a certain level of predictability when it comes to taxes and regulations, and higher levels of both will lead to lower levels of productivity, jobs and economic growth.

PlantBottle and the Economics of Environmental Sustainability

December 22, 2009 in Blog

PlantBottle One of the best examples of how economics and the environment go hand-in-hand is the way the free market constantly pushes to reduce use of scarce resources. Plastic bottles are a good example of this trend.

Frequently I've highlighted what Nestle calls its "eco-shape" bottle, which uses "30 percent" less plastic. The purpose is quite clear -- less plastic means less weight to transport and fewer resources to pay for. Now the Coca-Cola Company, who bottles Dasani water among a number of other products, is introducing the latest version of this trend.

Called the plantbottle, Coca-Cola uses plant-based ethylene, made from sugar cane, to replace the 30 percent of a standard PET (polyethylene terephalate) plastic bottle that comes from petroleum-based ethylene with ethanol. The bottle is the same in the end but changes the materials from which it is produced. What I found so interesting about the presentation Coke made those of us who attended their Seattle presentation was how explicit they were about the role economics plays in ensuring this works. Coke didn't simply take this step in the hopes it works out, they understand that for this to be environmentally sustainable in the long run it also needs to be economically sustainable.

For instance, it was important to them that the plastic be the same as current recyclable plastic. If the bottles were different it could contaminate current recycling systems, making it more difficult to recycle. They noted that Coke is a major recycler in their own right (Coca-Cola Recycling LLC is an actual subsidiary) and that making it more difficult to recycle is counterproductive.

Second, while they say that the bottle costs more to produce today, they expect the cost to go down as the supply chain improves. It also insulates them, to some extent, from the cost volatility of petroleum.

I asked if they saw an impact on their market share by promoting the plantbottle. They have only just launched it in Denmark and are doing so now on the West Coast and in BC for the Olympics, so they don't have any market-share numbers yet. As we've seen with other "green" products, it can be a way to reach a certain type of consumer that businesses covet -- those who have disposable income and are willing to spend it to buy ideological amenities, like greenness.

Coke did a life-cycle analysis of the effect of the bottle as well to ensure that they weren't simply trading one environmental impact (use of petroleum products and CO2 emission) for another (pollution or deforestation). They found that the bottle was no worse in any area they tested and better in a few key areas. These types of analyses can be misleading and I think it is better to put a price on environmental impact. Putting a price on impact would add an incentive to reduce impact. Their analysis, however, is thoughtful and is more than many who make environmental claims are doing.

They also indicated that some of the claims being made by others sound good but may not be good for the environment. For instance, they noted that "100% recycled" bottles may not be better for the environment due to all of the design and other compromises that need to be made to get to that level. Again, price is a better metric than arbitrary standards because price is reflective of the amount of energy and materials put into a product.

PlantBottle is a good example of the principle that businesses are more creative and effective at promoting environmental sustainability than politically-motivated policymakers and government workers. Those from government agencies who attended the event could only raise concerns about the label, the logo, etc. and finished by asking Coke for money to support their agency's efforts. It dramatized the reality that government is behind in efforts to make real environmental improvements and is primarily involved in trying to grab the coattails of those who are making real improvements.

Where to put light rail through downtown Bellevue?

December 22, 2009 in Blog


Kevin Wallace has been working behind the scenes for about a year on the light rail alignment through downtown Bellevue. In November, Kevin was elected to the city council and his effort is taking center stage in where Sound Transit will build tracks.

Sound Transit officials are mulling over several alignment options and have selected a preferred alternative to study further in an EIS. But as Kevin points out, there are many significant problems with it, including

  • Long term construction impacts
  • Increases in traffic congestion
  • Environmental impacts, especially building an elevated rail structure right through the middle of the Mercer Slough

Sound Transit's preferred alternative also requires a lot of commercial property condemnation and presents noise issues to several residential neighborhoods.

So Kevin commissioned a study to find a less intrusive and cheaper alternative. His plan is called the Vision Line and reduces and eliminates most of the issues created by Sound Transit's option. It is also much cheaper.

I had the opportunity to hear Kevin's presentation this morning and he said something that really caught my attention. Sound Transit's preferred alignment through Bellevue violates about 54 tenets of the city's Comprehensive Plan. His plan only infringes on two.

State Auditor releases update on performance audit recommendations

December 22, 2009 in Blog

State Auditor Brian Sonntag this morning issued a report highlighting the status of performance audit recommendations made to date. According to the report:

"From February 2007 through June 30, 2009, performance audits identified nearly $3.6 billion in cost savings, unnecessary expenditures and economic benefits.

Some recommendations have a financial impact, such as past costs that were questionable or avoidable, those with future cost savings and recommendations with future revenue opportunities. The figure below is focused on recommendations with future revenue opportunities or future cost savings that can be realized when the recommendations are implemented.

We made 214 recommendations with future cost savings or revenue opportunities; 67 percent of those recommendations have been fully or part!
ially implemented or are in progress, as shown below.

Most state agencies do not track the cost of their products and services or any realized cost savings from performance audits. They are, however, encouraged to track the cost of participating in performance audits.

We followed up with the following governments to obtain their estimates of the net cost savings they were able to achieve by implementing our recommendations."

Click this link to see the full report.

The Environmental Honesty of Brian Baird

December 18, 2009 in Blog

Third District Congressman Brian Baird has announced that he will retire from Congress next year. Certainly people will begin assessing his tenure on the issues of import to them. As for some key environmental issues, I appreciated his intellectual honesty.

The emblematic moment of his intellectual and scientific honesty was his willingness to take on an incomplete and misleading article about salvage logging that appeared in Science. The piece, written by a Masters candidate at Oregon State University, argued that salvage logging after a fire did more damage to the forest than leaving the area alone. The article was quickly seized upon by environmental groups, touted in Congress and used as a tool in the effort to end post-fire logging.

Despite the fact that many in his own party were breathlessly waving the report around, he challenged its science head on and even held a hearing. He demanded the data behind the study. Interestingly, the authors refused to provide it. We wrote at the time:

Despite saying their purpose was to influence the discussion of his bill, the authors refused to release their data to Congressman Baird. The authors did not say there was not enough time to collect the data, only that they were not required to. This not only violates a key tenet of scientific inquiry, but is an ironic suppression of their own data.

In the end, the authors backed off their conclusions, admitting they were incomplete and ultimately did not apply to most salvage projects.

This isn't the only time Baird expressed an intellectually honest opinion about an environmental issue that contradicted the party line. The environment will be much better off when there is more honesty about environmental issues -- highlighting those things that don't work and being willing to follow the science where it leads even when it is uncomfortable. On more than one occasion, Baird did just that.

Only 1,200 Boeing employees use transit?

December 18, 2009 in Blog

In a Seattle Times article today, reporter Mike Lindblom details some privacy concerns with the ORCA card.

ORCA stands for One Regional Card for All and replaces 300 other passes or transfers into a single system. But what really got my attention with this article is this:

Boeing, where about 1,200 people use transit or van pools in the Puget
Sound region, considers its fare cards "a company-provided benefit,
privacy-protected," said spokeswoman Kathy Spicer.

Boeing has over 70,000 employees in Washington, and I presume most of them in the Puget Sound region. Average transit mode share in the region is about 4-6% so only 1,200 Boeing employees using transit seems very low to me.

If right, it's this kind of data that challenges transit's "build it, and they will come" model. In economics, supply is a function of demand. This means a willingness to use a service must exist before a supply of that service is created. Boeing executives do not make 300 airplanes knowing they will only sell 100. Likewise, governments should not spend a disproportionate amount of taxes in low demand sectors, where the willingness to use the service does not justify the spending.

European transit systems provide a good contrasting example of how these economic concepts app!
In Switzerland, transit is successful, not because of the amount of service or infrastructure, but because the country has certain demographic and economic characteristics that induce demand.

In other words, there is an existing market with a customer base and Swiss policymakers respond with proportional infrastructure investments. As a result, mode share, ridership and fare box recovery are high.
In the United States, transit resources are distributed in just the opposite way.

Under the “build it, and they will come” theory, policymakers think that increasing the supply of transit will somehow create more public demand. This speculative model fails because most U.S. cities do not posses the economic or demographic characteristics that create enough voluntary consumers for public transit.

This doesn't mean public transit is bad. It just means using the economic principles of supply and demand shows that building excess transit capacit!
y before there is an equal amount of willingness to use it lea!
ds to an underperforming system. As a result, mode share, ridership and fare box recovery are low.

This is why I'm not surprised to see studies showing how bad traffic is in our region.
Seattle has nation’s worst traffic congestion: Study
Washington highways nation’s 15th worst

Science that Depends on Your Values

December 17, 2009 in Blog

As is often the case, the reaction to a scandal is often more illuminating than the scandal. Such is the case with Climategate. We noted recently that former Washington state climatologist Phil Mote played semantic games trying to downplay the language of some of the e-mails. Now, Dr. Stephen Schneider of Stanford demonstrates another example of this.

The clip below shows a PR person attempting to stop Dr. Schneider from answering a question about the Climategate e-mails and the UN security tossing Phelim McAleer, who asked the question, despite the fact that he has valid credentials.

What is more interesting to me is what Dr. Schneider does say. At one point he says (or rather, spits out), "I don't make comments on redacted e-mails presented to me by people whose values I don't trust." Phelim notes quickly that everyone has confirmed that the e-mails, which are not redacted, are real.

I thought it was interesting that rather than arguing the science, Dr. Schneider goes immediately to "values" and discounts anything from people he doesn't trust. He represents himself as a scientist, but clearly his position is influenced tremendously by whether he shares the values of those who disagree with him. That isn't a scientific approach. That is the very definition of politics and it actually reinforces the claim that the Climategate e-mails show that many who claim to be making scientific judgments free of political influences are quick to turn to politics when it suits their purposes.

Also, University of Washington climate scientist Cliff Mass writes an excellent piece about the Climategate e-mails. The whole thing is worth reading. He addresses the "trick" that Mote tried to dismiss, noting that the approach used by the East Anglia scientists wasn't very scientific. Mass explains this:

In the famous "trick" email the east Anglia emails talk about replacing the proxy tree ring records with instrumental records for the past several decades (because the tree ring records disagreed with what the instrumental records were saying)--instead of just showing those records and noting the difficulty. Not quite open.

An honest approach to science means highlighting uncertainty where it exists and encouraging further research. Unfortunately, too many are trying to fill the knowledge gap with politics and values.

Public option would become the only option.

December 17, 2009 in Blog

I labored over a carefully worded op-ed, "Public option would lower private insurance premiums...to zero," analyzing how a public option health plan would put private insurers out of business, and here the whole thing is explained in a 41-second cartoon.

State Auditor: "Opportunities for Washington"

December 17, 2009 in Blog

The State Auditor's Office this morning released a report titled "Opportunities for Washington." In a letter to citizens State Auditor Brian Sonntag wrote (in-part):

I am pleased to present to you "Opportunities for Washington," our performance review of state government operations. For such a time as this, state government has an opportunity and a need to significantly change how it does business. As Governor Gregoire and the Legislature deal with the state's difficult financial challenges, this review reflects our first such effort to help.

It contains ideas and recommendations to save money, to streamline government programs and functions and to provide better service to citizens. The review also identifies areas in which we can direct performance audits in the near future. Thos!
e audits are intended to identify actionable efficiencies.

Here are some of the report's conclusions:

  • Washington likely could increase revenue by several million dollars and bring unregistered businesses into the state tax system by conducting an amnesty program to collect delinquent debts.
  • The state could increase its collection of delinquent debts by more than $5 million in the first year by participating in a U.S. Treasury program in which government vendor payments are garnished to satisfy overdue tax obligations before the payments are made.
  • The Department of Social and Health Services could increase the amount of Medicaid pharmacy overpayments it recovers by expanding its small but effective audit program that consistently recovers more funds than it spends for audits.
  • State agencies could reduce printing costs and improve service by changing the Department of Printing business model to better respond to agency needs and to reflect 21st century advances in technology.
  • Washington could increase revenue from liquor sales and distribution by up to $350 million over five years beginning in fiscal year 2012 if it sold the state distribution center and auctioned licenses to sell liquor to private-sector businesses.

The report also makes several recommendations to improve and streamline the delivery of state Information Technology (IT) and lease management services.

Throughout the report, however, is this warning:

Many of the state employees whose jobs would be affected by the adoption of these options are represented by unions and covered by existing collective bargaining agreements. Management would be required to fulfill any bargaining obligations or contractual requirements if any of the options were adopted. The extent of the bargaining obligation would depend on the provisions of the option adopted. Also, the competitive contracting provisions of state law (RCW 41.06.142) could apply to any option under which the agency contracted out work that had been performed by state employees.

As we highlighted last week, the state's competitive contracting law must be simplified to facilitate many of the reforms necessary to streamline delivery of state services.

The State Auditor's Office asked these questions in developing the recommendations (questions that should guide future performance audits):

  • Is the program or service a core function of government? If not, could it be scaled back, made more efficient or eliminated?
  • Could costs be reduced or state revenue increased?
  • Could program effectiveness be improved?
  • Has the idea produced positive results elsewhere?
  • Are there opportunities to consolidate or streamline programs?
  • Could some programs be transferred to the private sector?
  • Would the reform benefit the broad public interest rather than narrow special interests?

Agencies were also asked to answer these questions:

  • How does the agency use performance data to support decision-making?
  • Are there gaps in service within agency programs or unnecessary overlaps with programs in other agencies?
  • Are opportunities being identified to transfer programs or services to the private sector or to use private-sector techniques to improve efficiency?
  • How are discretionary cost-saving opportunities identified?
  • How is technology being used to streamline agency operations, improve customer service or produce other benefits?
  • How frequently does the agency update its information technology security systems?
  • How does the agency manage its administrative functions?
  • How are best practices identified and put into practice?

Here is a link to the full report "Opportunities for Washington." 

What's in the bill?

December 16, 2009 in Blog

Earlier today, Senator Baucus explains, in response to a question from Senator Coburn, that no Senator has read or fully understands what's in the massive health care overhaul bill.

Maine, a non-charter school state, is drafting Innovation Schools legislation to win 40 points in Race to the Top competition

December 15, 2009 in Blog

Right now the governor of the state of Maine, a non-charter school state, is drafting Innovation Schools legislation to allow schools there to have more autonomy over their budgets, curriculum, staff and scheduling than traditional public schools.  States with charter schools or autonomous innovation schools are given 40 points out of 500 in the scoring system for the Race to the Top competition.  Passing such legislation will significantly boost Maine's chances to win millions of dollars in the Race to the Top competition. 

Innovation Schools, in contrast to many charter schools, retain a unionized teaching workforce. Schools applying for Innovation status must obtain the agreement of 60% of the members of a collective bargaining unit employed in the school.

Washington Policy Center has just released a Policy Note describing how Innovation School status allows a principal "to design and implement innovative practices in a wide variety of areas to improve student outcomes, and to obtain waivers from those policies that would otherwise present obstacles to such innovations" (quote from Colorado Department of Education). 

Unfortunately, due to Washington's overly restrictive regulatory environment, principals in Washington State have almost no role in creating a high-quality program tailored to the needs of students.  Instead, they are reduced to acting as regulators and enforcers. 

Washington state's leaders should consider the Innovation School model to boost its chances in winning $250 million in Race to the Top funds. 

Federal Transportation Budget analysis

December 15, 2009 in Blog

Even if you don't closely follow transportation policy, this new study by Dr. Ron Utt of the Heritage Foundation is worth a read:

Surface Transportation Authorization Act (STAA), as currently written, would
dramatically change federal transportation policy by shifting resources from
cars to trolleys and buses; requiring a huge tax increase to fund these new
commitments; centralizing transportation decisions in Washington; requiring a
substantial increase in the numbers of state, local, and federal government
employees; and discouraging the private sector from investing in surface
transportation projects.

Oberstar's Transportation Plan: A Costly Exercise in Social Engineering

SBA may redefine "small business"

December 14, 2009 in Blog

The U.S. Small Business Administration is considering revising the definition of "small business." Currently, the SBA defines a small business as a firm with fewer than 500 employees. 

The variations have changed a little in the 50+ years of the SBA, and the government agencies that predated the SBA. However, the 500 employee mark and $7 million or less in revenue hasn't changed since 1984.

The state of Washington loosely defines a small business as a firm with fewer than 20 employees or less than $3 million in annual gross revenue. 

I have often wondered at why the SBA continues to categorize businesses with up to 500 employees as a small business. I much prefer the state's definition. I realize that one of the original reasons for this was to ensure a more level playing field for smaller firms to !
compete with large businesses for government contracts. But how many businesses do you know that are truly small businesses with 499 employees? Probably not too many. 

But if you feel strongly that the SBA definition of a small business should change then make sure you chime in. They are accepting comments until December 21st.