The Office of Financial Management just issued the I-960 tax and fee impact statement for the version of the budget that passed the Senate Ways and Means Committee.
2009-11 impact: Minimum of $270 million in tax and fee increases.
Not included are some higher education fees: "All other fees imposed by institutions of higher education are as of now indeterminate. SSB 5600 gives authority to institutions of higher education to set other fees, but any fee increases have yet to be determined and approved by governing boards of public baccalaureate institutions."
There are many problems with the new education reform bill (more on that later), but there is one little-noticed provision that can do tremendous good for improving the education of our children. Section 102 would allow school districts to hire qualified teachers who don't happen to have an approved state certificate, just like private schools do. Eighty percent of the teachers at the prestigious, private Lakeside School in Seattle do not have a state-approved certificate. The new hiring authority will go a long way toward solving the math and science teacher shortage ; for example, many of the highly trained people being laid off at Microsoft can now accept teaching positions in public schools.
The normally thoughtful Sightline Institute has a silly response to my recent piece applying the lessons of green buildings to the legislative proposal for a $3 billion tax and spending package to upgrade state buildings with "green" elements. The proposal claims that a portion of the cost of the package would be paid by energy savings.
Their first critique is that our report is off base because it doesn't address the proposal directly. This is true. The proposal was unveiled on a Monday and the first hearing was Tuesday at 8 am. So, our piece is an attempt to draw lessons from Washington's experience with spending on "green" buildings. History never repeats itself exactly, but that doesn't mean we ignore it. Ironically, in one of the author's previous posts about the "green" bonds legislation, he cites data from "green" buildings studies to support the legislation. So he argues that our methodology isn't applicable after he previously used the exact same comparison to support the legislation.
Incidentally, we did, subsequently, write a short piece directly addressing the bill itself. You can read it on our blog asking "Are Green Bonds Worth It?"
They go on to say that "There is nothing in the legislation that mandates particular kinds of retrofits or LEED certification." This isn't quite right. There is a great deal of talk about "green jobs" and "green" elements. In fact, they call the spending proposal "green" bonds. To pretend that certain types of projects won't be favored ignores all the rhetoric used to justify it. Sightline's own support of the legislation is based on that very expectation.
The next critique shows how fast-and-loose some play with facts when they want something. Advocates of green buildings produced a report saying that those buildings perform better than the "standard stock" of American buildings. Our study notes that the "standard stock" of buildings averages 40-years old. Noting that a new "green" building is more efficient than a 40-year old building is a pretty attenuated claim. But green building advocates misuse the study, implying that it shows new "green" buildings are better than simply new buildings. It shows no such thing.
Sightline, however, says I make their point since the green bonds bill would update those buildings. They say "But that’s precisely the point: many of the school buildings eligible for retrofits really are 40 years old, or are built to minimum standards, or both." Really? Show me the data. Does the author know that are are they simply saying it because they want to believe it?
That leads to the more important point. The author notes the bill "doesn’t force districts to make improvements if they don’t pencil out." No, it doesn't force but it does actively encourage districts to make improvements that don't pencil out. Since schools pay none or only a small part of the cost, virtually any energy saving pencils out. Spending $10 to save $1 makes sense as long as someone else is spending the $10. That's what this does. The sponsor himself was very clear in his testimony that the purpose of this spending is to create jobs and energy saved is a positive side effect. The primary goal, however, is to spend the money.
The next section is the most muddled. The author uses the metaphor of a pitcher throwing strikes, so it seems like he added this last part because he needed a third. I quote a piece by the Superintendent of Public Instruction's office (SPI) from last December that savings are uncertain. My comments are a response to some who claim that that report shows a 24 percent energy savings. But the report says those savings are "projected," not actual. Our research shows those projections to be inaccurate.
Sightline quotes the SPI report saying that schools weren't asked to report those savings, but that some schools had reported "immediate and anticipated future cost savings." He goes on to say:
In other words, WPC uses the SPI report to criticize Dunshee’s legislation but ignores the fact that the districts weren’t asked to report about their energy savings. What’s more, some of the districts chose to report their energy savings anyway found just what you might expect: energy efficiency investments pay for themselves over time.
It is too early to tell, on the whole, whether buildings constructed following the WSSP protocol will produce enough savings to offset the up front investment. But many schools are reporting savings -- and the lessons we learn from the program’s ongoing data collection should inform investment decisions on retrofits.
In the first sentence he says savings are uncertain because they didn't offer data. The second sentence says that some schools reported savings, although he portrays them as real when they are actually only projected. The third sentence is back to uncertain. The fourth sentence is back to saying "many" schools are reporting savings. So, the data are uncertain, except where they point to his desired conclusion. That's called cherry-picking the data and it is evidence of a lack of rigor.
Ironically, he then accuses us of cherry picking. He argues:
The only other empirical evidence WPC offers to criticize the WSSP is that they claim to have found at least one non-green building that outperformed a green building in the same district. However, they don’t share the age, location, square footage or energy use at the schools being compared, so we can’t know if WPC’s comparison is fair or not.
This critique indicates that it is unlikely that the author read our piece very carefully. Not only do I give more than one example, I name some of the schools we looked at. I wrote, in the eighth paragraph of my piece, that:
In Tacoma, where supporters touted the energy savings of Giaudrone Middle School, the building has consistently used about 30 percent more energy per square foot than another Tacoma middle school built the same year but without mandated green standards. In Spokane, none of the three “green” elementary schools are as energy efficient as Browne Elementary, built in 2002, prior to passage of the “High Performance Buildings” law.
As for the "green" bonds proposal itself, our research is demonstrating that the savings claimed by advocates are amorphous. The data only include projected savings and actual savings are rarely audited. Further, the total amount spent on the types of projects highlighted by advocates has been about $160 million over ten years. This proposal increases that to $200 million, of the total $3 billion spent, over two years. Given the lack of clear data, hoping that this dramatic increase in the program will produce the projected savings seems hopeful in the extreme.
One thing we can agree on is Sightline's call for a cost-benefit analysis of energy saving projects. Now if we could just get the legislature to consider that approach, we'd be getting somewhere.
I'm reading through the just released state budget compromise and one clear loser is the State Auditor. It appears lawmakers didn't take too kindly to his complaint about their raids on the dedicated performance audit funding authorized by voters.
Consider Section 805: It raids $29 million of the performance audit funds. The original House budget took $12 million; The original Senate budget $15 million. Looks like the compromise response to the Auditor's complaints was to combine the money raided.
Unfortunately for the State Auditor the hits in this budget just keep coming.
Section 124 (3) appears to set up a bounty for audit savings. I.E. - Auditor can have some of the money back for any savings implemented as a result of performance audits: "It is the intent of the legislature to reduce the 2009-11 legislative transfers from the performance audits of government accounts to recognize actual reductions achieved in expenditures from the state treasury as a result of these performance audits."
Section 927 (2) limits number of audits the State Auditor can do of local governments: ". . . the state auditor shall conduct audits no more often than once every two years of local governments with annual general fund revenues of ten million dollars or less and no findings of impropriety for the three-year period immediately preceding the audit period."
Section 928 reduces the amount the State Auditor can charge local governments for their audits: ". . . the state auditor shall reduce the municipal revolving account charges for financial audits performed on local governments by five percent."
I wonder if the State Auditor is now considering changing the "incomplete grade" he gave lawmakers in this TVW interview yesterday to "failing."
UPDATED: The State Auditor just sent over this letter to House Speaker Chopp expressing his disappointment with the proposed budget.
Also, according to legislative sources the raids on the I-900 funds aren't doubled by the proposed budget - the $29 million taken from the performance audit account is the same as in earlier budget versions but is occurring in a different way.
Either way the State Auditor is very unhappy with the budget proposal as evidenced by his letter.
The legislature's vote to partially replace the Viaduct with a deep bore tunnel allocates $2.4 billion in state money, with a provision that allows for an additional $400 million collected from tolling.
The state route number 99 Alaskan Way viaduct replacement project finance plan must include state funding not to exceed two billion four hundred million dollars and must also include at least four hundred million dollars in toll revenue. These funds must be used solely to build a replacement tunnel, as described in subsection (1) of this section, and to remove the existing state route number 99 Alaskan Way viaduct.
This is significant for two reasons. First, tolling would end once the debt inte!
rest on the additional $400 million is paid off. And second, the tolling revenue can only be used for construction (and demolition) purposes, not transit.
Both of these stipulations are consistent with WPC's tolling policy and consistent with how the state has used tolling in the past. With the exception of the HOT lane pilot project on HWY 167, policymakers still seem hesitant to manage demand through roadway pricing. And state policymakers also seem to resist the idea of using toll revenue for transit purposes.
For a while there Seattle Times' top Olympia reporter Andrew Garber was giving readers a more accurate view of state budget trends, explaining that the "cuts" being debated are mostly reductions in the rate of planned spending increase, and that future increases are built in to respond to expected growth of public services, but now, well...never mind. Today the Times is back to the standard template, describing "deep cuts...totaling $4 billion," and "the total budget shortfall...is about $9 billion," leaving readers with the strong impression that state government is about to get radically smaller.
Compare this to the better-informed coverage reporter Richard Roesler provides today for readers of the Spokesman-Review: "....the state is expected to have collected about $30.4 billion for the 2007-09 budget. Over the next two years, state economists think, that will rise to $30.5 billion. The $9 billion!
shortfall is based on what it would have cost to keep state services and programs as-is..."
Roesler's coverage puts the deficit in a clear context, and explains that the people of Washington will pay slightly more in taxes to Olympia in the next budget compared to the last one, news you won't learn from reading the Seattle Times.
The talk about how adopting an income tax is the answer to the state's budget woes must be news to states like California that already have high income taxes and large budget deficits.
Despite this fact you can bet that you'll hear that argument made at the hearing later this week to enact a state income tax.
I wonder what the income tax advocates think about this news coming out of Missouri. According to the Tax Foundation:
Missouri lawmakers are considering a drastic change to their tax system. A bill recently passed by the state’s House of Representatives would allow residents to vote on a Constitutional amendment that would eliminate corporate and individual income taxes in the state and replace them with a broad based sale!
s tax. The plan is essentially a state version of the national FairTax proposal popular with some grassroots groups that would replace the federal income tax with a national sales tax. If the Senate passes the bill Missouri residents would be voting on the amendment in November of 2010.
Missouri currently has a sales tax, a corporate income tax, and a personal income tax. The sales tax rate is 4.225%, and the top corporate and personal tax rates are 6.25% and 6%, respectively. The plan put forth would replace all those taxes with a single sales tax levied at a rate of 5.11%. Accompanying the sales tax rate hike would be a substantially broadened sales tax base that would include all purchases. Currently most services are tax exempt and certain goods, most notably groceries, are taxed at a reduced rate of 1.225%. These exemptions would not exist under the new tax structure.
The overhaul of the tax system is meant to be revenue neutral. In other words, t!
he revenue from the sales tax increase and broadening of the t!
ax base is meant to exactly offset the elimination of income taxes.
Regardless of how you slice up a state's taxes, there is no such thing as a recession proof tax structure. For budget peace of mind states need to use a “three-legged stool” of sound budgeting:
Meaningful spending limit;
Protected 10% reserve account (so you don’t have to resort to tax increases or deep spending cuts in the bad times); and
Limiting base expenditures to core functions within the revenue forecast when in the good times.
Each year on Earth Day, politicians announce new efforts they promise will help the environment, often at no cost or even with the promise of "green jobs." Past promises, however, have consistently fallen short. Those failures are quickly forgotten and new promises are made.
Politicians claimed corn ethanol would be the answer for transportation fuels. That didn't pan out, so they now hope wood waste will be the savior. They argued that "green" buildings would dramatically cut energy costs. When that turned out not to be true their answer has been more green buildings. And after 20 years promoting electric and hydrogen cars failed, they turned to the technology that emerged from the marketplace -- hybrids. But who knows what auto technology will be the standard ten years from now, and picking hybrids today may look as foolish then as picking hydrogen cars looks today.
Many of these technologies may have promise. The government, however, repeatedly falls for ecofads, picking and choosing individual technologies, often to the detriment of more promising technologies and, ironically, the environment. Technology is the greatest hope to improve energy efficiency and use resources sustainably and efficiently. The best decisions are made by millions of creative entrepreneurs, engineers and others who risk their own funding and time on these ideas, not politicians who care more about political credit than actual environmental sustainability.
Here are a few of the promises made today and some of the results of similar promises made in the past.
Gov. Chris Gregoire today signed House Bill 2165 to help the Washington State Department of Natural Resources (DNR) create energy from wood waste in our state’s forests. “It is fitting that Washington State takes this step forward to create clean, renewable energy and green jobs on Earth Day,” said Commissioner of Public Lands Peter Goldmark. “Turning wood waste into electricity or liquid fuels will create both energy and jobs while improving the health of our forests.” - Department of Natural Resources release, April 22, 2009
"By requiring a growing percentage of our fuel supply to be renewable biofuel that meets appropriate fuel quality standards, we will reduce our dependence on imports of foreign oil, improve the health and quality of life for Washingtonians, and stimulate the creation of a new industry in Washington that benefits our farmers and rural communities." - Preamble, Washington State ESSB 6508, 2006
"California regulators, trying to assess the true environmental cost of corn ethanol, are poised to declare that the biofuel cannot help the state reduce global warming. As they see it, corn is no better – and might be worse – than petroleum when total greenhouse gas emissions are considered." -Scientific American, April 20, 2009
"The news that biodieselmaker Imperium will be cutting 24 employees (or more than half of the staff) from its Grays Harbor plant, announced Thursday night, won’t be a big shocker to anyone who has followed the company’s yearlong downward spiral. The Seattle-based biofuel firm, which has raised more than $200 million over its lifetime, withdrew an IPO that could have raised an additional $345 million, back in January 2008, and soon after reduced staff from a high of 107 employees." - Earth2Tech, March 13, 2009
"Green" Building Promises
"The legislature finds that public buildings can be built and renovated using high-performance methods that save money, improve school performance, and make workers more productive. High-performance public buildings are proven to increase student test scores, reduce worker absenteeism, and cut energy and utility costs." - Washington State SB 5509, Passed 2005
"Green" Building Reality
"When the “green” schools law was passed four years ago, supporters argued the standards would pay for themselves, reducing energy use by up to 50 percent. Supporters claimed one school in Tacoma was already saving more than 30 percent in energy use. The data showed something different. Giaudrone Middle School, built with the “green” elements, uses about 30 percent more energy than a middle school built in the same district in the same year, but without those “green” elements. ... Adding insult to injury, buildings cost more to build than was promised. Advocates told the Legislature that green buildings would cost an additional 2 percent. Interviews with facilities directors indicate the real number is 6 percent, which is not trivial. Each year, the state and school districts spend about $450 million on school construction. A 6 percent increase is about $27 million." - Washington Policy Center Op-Ed, Spokesman-Review, February 28, 200!
Electric Car Promises
"As a necessary and desirable step to expedite the transition to transportation technologies and infrastructure with reduced emissions, the department shall implement an electric vehicle and alternative fuel vehicle infrastructure program that accelerates planning and allocation of funding for pilot projects to demonstrate the feasibility of large scale deployment of charging and alternative fuels distribution infrastructure." - Washington State SB 5735, Passed April 14, 2009
Electric Car Reality
"California air regulators on Thursday gutted rules seeking to place tens of thousands of zero-emission vehicles on the road, instead ordering automakers to produce a fleet of cleaner-burning hybrids. The decision is expected to affect 12 other states -- including Washington -- that had adopted California's target for zero-emission vehicles, defined as those powered solely by batteries or hydrogen fuel cells. ... The rules have been modified four times since they were introduced. The biggest change came in 2003, when the Air Resources Board significantly scaled back the mandate and ruled that hydrogen cars, hybrids and cleaner-burning gasoline vehicles could meet the state's goals." - Associated Press, March 27, 2008
Today's promises build upon a shoddy record of using tax dollars to pick and choose technologies politicians touted as the environmental savior of tomorrow. Why will these promises be any different than the many made in the past.
On Earth Day, we commonly hear dark predictions about the looming horrors of global warming (a typical example, “What is at stake [is] our ability to live on planet Earth,” Al Gore).
Yet not so long ago the news media issued dire warnings about global cooling and a coming Ice Age. Consider these headlines:
• “The Earth’s Cooling Climate,” Science News, November 15, 1969.
• “Colder Winters Held Dawn of New Ice Age,” Washington Post, January 11, 1970.
• “Science: Another Ice Age?” Time Magazine, June 24, 1974.
• “The Ice Age Cometh!” Science News, March 1, 1975.
• “The Cooling World,” Newsweek, April 28, 1975.
• “Scientists Ask Why World Climate is Changing; Major Cooling May Be Ahead,” New York Times, May 21, 1975.
• “In the Grip of a New Ice Age?” International Wildlife July-August, 1975.
• “A Major Cooling Widely Considered to Be Inevitable,” New York Times, September 14, 1975.
• “Variations in the Earth’s Orbit, Pacemaker of the Ice Ages,” Science magazine, December 10, 1976.
Reporters told the public about global cooling in the same confident tone used in today’s coverage about global warming, creating the strong impression that no reasonable person could disagree. Here are some examples:
“The evidence in support of these predictions [global cooling] has now begun to accumulate so massively that meteorologists are hard-pressed to keep up with it.” The Cooling World
“A study release last month by two NOAA scientists that the amount of sunshine reaching the ground in the continental U.S. diminished by 1.3% between 1964 and 1972.” The Cooling World
“Telltale signs are everywhere...the thickness of the pack ice...the southward migration of warmth-loving creatures like the armadillo...” Another Ice Age?
“Since the 1940s the mean global temperature has dropped about 2.7 degrees.” Another Ice Age?
“The threat of a new ice age must now stand alongside nuclear war as a likely source of wholesale death and misery for mankind,” The Ice Age Cometh!
Critics will say there was no scientific consensus in the 1970s that the world was cooling, but that’s not how the media reported it to the public. Similarly, today some scientists want to debate global warming and its possible causes, but the media presents global warming as a settled issue, not to be questioned. Since the reporting today about world climate is the opposite of what it was 30 years ago, it’s ok to be skeptical about the worst predictions surrounding global warming.
"As states and school districts across American begin drawing down the first $44 billion in education funds under the American Recovery and Reinvestment Act, they should bear in mind the core levers of change under the law. In order to drive reform, we will require an honest assessment by states of key issues like teacher quality, student performance, college-readiness and the number of charter schools."
Arne, let me tell you something you already know: the number of charter schools in Washington State is ZERO. Only eight other states have banned charter schools from their borders.
And let me also tell you that the big new education reform plan which just passed by the legislature, HB 2261, is not a charter school bill, but just the opposite. It adopts a one-size-fits all prototype school model and promises that work groups formed by the bill will address issues of teacher quality and student performance at some future time.
The only way to get charter schools in Washington State, Arne, is to withhold federal funding. Then, perhaps, the legislature will sit up and enact real reform.
If you care about reducing traffic, then you may question how Washington policymakers propose to spend our portion of the $5 billion in stimulus funding.
In order for the various state and local agencies to receive funds, the governor must "certify" the project. In the process, the governor says each project "has received the full review and vetting required by law and that [she] accept[s] responsibility that such investment is an appropriate use of taxpayer dollars."
We could argue all day long about the appropriateness of some of these projects. But ever since the governor's Blue Ribbon Commission on Transportation identified about $150 bill!
ion in unmet transportation infrastructure needs, some of these certified projects may raise your eyebrows.
Island Co Bicycle Touring Enhancement Produce a map identifying bicycle touring routes on both Whidbey and Camano Islands. Improve shoulders along approximately 1400' of Crescent Harbor Road in front of Crescent Harbor Elementary School. Sign the route from Deception Pass Bridge to the City of Oak Harbor as a "Bike Route". $53,329
Lummi Nation Pedestrian Path Construct approximately 9000 LF of a shared bicycle pedestrian trail between Kwina road and Slater road east of Haxton way. $250,000
West Dayton Street Beautification This enhancement project will add vegetation and an irrigation system to the West entrance into the City of Dayton along US 12. $149,000!
Beards Hollow Overlook Design an!
d construct beach/ocean overlook at Beards Hollow on SR Loop 100. $100,000
LINK Transit Upgrade shop lighting Upgrade shop lighting. $50,000
In fact, I went through the list and found about $9.8 million dedicated to sidewalks, $4.7 million for trails, and whopping $77.7 million earmarked for vehicle replacement. Funding is the single largest obstacle in building/maintaining transportation projects, especially at the local level. With population projections expected to reach an additional 1.2 million people and traffic congestion expected to double over the next twenty years, could we not have found more important projects?
The Department of Revenue will have to dedicate 44 full-time equivalent employees to implement the policies.
General Fund B&O tax receipts will be REDUCED by $3 million and the Performance Audit account will be REDUCED by $67,000 due to reduced sales.
"The decrease in the Business and Occupation Tax, Performance Audit Account and Local Government Revenues is due to reduction in taxable sales due to the higher tax rate (elasticity). Elasticities were calculated based on Department of Revenue data."
"As a result of elasticity this bill will decrease local government revenues by $12.4 million in the 2010-2011 Biennium and $15.4 million in the 2012-2013 Biennium. In addition there may be negative impacts to local lodging taxes if their combined state and local tax rates will be above their statutory limits."
"The Department assumes, based on IRS information that approximately 370,000 persons in Washington who file for the Earned Income Tax Credit (EITC) will apply for a rebate under this legislation in Fiscal Year 2010."
"After consultation with the Department of Social and Health Services, the Department assumes that a high proportion of claimants will not have English as their primary language. This requires additional advertising outreach, forms translation, and additional language scripts for the automated phone application system to work most efficiently."
"Review of IRS information indicates that there is a higher than average error rate for EITC claims. This higher error rate will require added collection effort for claims paid in error. The Department has assumed that denied claims can be settled with minimal formal appeals. Should experience show otherwise, additional FTEs may be added in later fiscal years to handle the appeals caseload."
"It is estimated that costs of approximately $1,515,000 may be incurred in Fiscal Year 2012 as the Department continues to respond to taxpayers questions and submission of applications. No costs have been included in the fiscal note to administer the Working Families' Tax Rebate after Fiscal Year 2011. Current law requires specific legislative appropriations in each biennial budget for the program to continue beyond the 2009-2011 biennium."