Open Government

WPC's Center for Government Reform's mission is to partner with stakeholders and citizens to work toward a government focused on its core functions while improving its transparency, accountability, performance, and effectiveness for taxpayers.

Open Government Blog

Lawmakers answer questions about sales tax increase

April 23, 2009 in Blog

TVW's The Impact last night had an insightful exchange between two lawmakers on the proposed sales tax increase. Here is the video:

Additional Information
"Responsible cuts" or "People will die"?
Details on sales tax increase proposal

Missouri looks to reform tax system by eliminating income taxes

April 22, 2009 in Blog

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.

WA stimulus spending: what about reducing traffic?

April 21, 2009 in Blog

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."

The governor has certified 212 transportation projects for about $622 million in federal stimulus spending.

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?

Details on sales tax increase proposal

April 21, 2009 in Blog

While the House Health & Human Services Appropriations Committee takes a break from this morning's hearing on the proposed sales tax increase (HB 2377), I'm reading the fiscal note on the bill. Here are a couple things of note:

  • 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."

Here is additional background on what the chair of the committee thinks about the tax increase and the budget.

"Responsible cuts" or "People will die"?

April 20, 2009 in Blog

Compare and contrast the following quotes about the health care priorities of the proposed House budget. Both quotes are from the same lawmaker.

The first is from the March 31 House budget release press conference:

“I really am very proud that the decisions that we made as difficult as they were, were definitely responsible cuts and also again allowed us a body to rise to the occasion to make those difficult decisions.”

The second quote is from the April 17 hearing on a proposed sales tax increase and what might happen if voters don't approve the tax increase to supplement the proposed House budget: 

“Make no doubt about it, people will die . . . If this is not in the voters' interest to pass this (tax) piece, people will die."

As for the proposed tax increase, according to these economists raising taxes during a recession will damage Washington’s economy and hamper economic recovery.

Here comes a 30-40% increase to your property taxes: HB 2261

April 17, 2009 in Blog

HB 2261, the bill which passed the Senate last night, resembles Initiatives 728 (smaller class sizes and other reforms) and Initiative 732 (teacher pay increases).  Here we have yet another expensive, unfocused education spending program without a revenue source. 

 

This time, however, legislators stand poised to expand the definition of basic education to include a variety of additional programs, costing perhaps as much as $7 to 8 billion.  The legislation provides no fiscal breakdown of the cost categories for this 50% increase to state spending on education.   

 

Why would we expand the definition of basic education, when we can't even get basic education right? 

 

HB 2261 sets the stage for shifting the blame for our failing schools to the taxpayer, even though the blame lies squarely with the legislature and with the schools themselves.

 

I can hear it now:  the schools are failing because you (the taxpayer) won’t agree to an increase of 30-40% to your property taxes. 

 

Schools can be improved within existing revenues, without HB 2261 spending formulas, without a prototype school model, without CORE 24 or full-day kindergarten.  See our "Eight Practical Ways to Reverse the Decline of Public Schools," at http://www.washingtonpolicy.org/Centers/education/policybrief/Education_Reform_Plan.html.

 

Taxpayers can instead demand that schools:

1) Put the principal in charge of his budget and staff

2) Give parents choice among public schools

3) Let teachers teach

4) Double teacher pay

5) Replace the WASL

6) Create no-excuses schools

7) Make the Superintendent of Public Instruction an appointed office

 

Tracking federal "recovery" spending

April 17, 2009 in Blog

The astronomical $787 billion federal “recovery” package was back in the news this week as thousands of Washingtonians took to the streets across the state to protest among other things taxes, spending, and the federal bailout packages. According to the Washington State Patrol, the tax and spending protest was 5,000 strong in just Olympia – the largest rally by far of the year.

Senate Ways & Means budget amendments

April 16, 2009 in Blog

Last night the Senate Ways & Means committee adopted numerous amendments to the proposed Senate budget. Since the amendments are not available online, here is a brief summary of some of those adopted:

  • Requiring a study by the Joint Legislative Audit and Review Committee (JLARC) of the state’s recreational boating programs. (This in contrast to our suggestion yesterday for JLARC to review how well the state is following the current performance-based budgeting requirements already in law.)
  • Suspending the Select Committee on Pension Policy (SCPP) during the 2009-11 biennium. (SCPP studies issues and policies affecting the state's public employee retirement systems and makes recommendations to the Legislature regarding changes. The base Senate budget proposal defers over $400 million in pension contributions.)
  • Directing the State Board of Education to develop a comprehensive accountability index and a “process for addressing performance challenges that will include the following features:
(A) An academic performance audit using peer review teams of educators that considers school and community factors in addition to other factors in developing recommend specific corrective actions that should be undertaken to improve student learning;

(B) a requirement for the local school board plan to develop and be responsible for implementation of corrective action plan taking into account the audit findings, which plan must be approved by the state board of education at which time the plan becomes binding upon the school district to implement; and

(C) monitoring of local district progress by the OSPI. The proposal shall take effect only if formally authorized by the legislature through the omnibus appropriation act or other enacted legislation. 

In coordination with the OSPI, the state board of education shall seek approval from the United States Department of education for use of the accountabilit!
y index and the state system of support, assistance, and intervention, to replace the federal accountability system under . . . the no child left behind act of 2001.”

  • Authorizing a 14 percent per year tuition increase for four-year colleges and universities to increase “budgeted enrollment levels by 3,475 full-time equivalent students each year to account for the additional $83 million of tuition revenue resulting from the higher annual increases.” (The House Ways and Means last week adopted an amendment to remove the budgeted enrollment levels from its budget proposal.)

As for those amendments that failed, The Olympian has this story about "Senate Republicans unsuccessfully propos[ing] a 2 percent cut to the amount of money used to cover health insurance costs for state employees."

Moving towards a performance-based government

April 15, 2009 in Blog

As lawmakers put the finishing touches on their 2009-11 budget proposals, there is still time to shift the focus to needed reforms to ensure the state is moving towards a performance-based government.

One way to facilitate this debate could be to review just how well the state is following the current performance-based budgeting requirements already in law.

JLARC (Joint Legislative Audit & Review Committee) is the perfect vehicle for this type of exercise. If interested, lawmakers could insert a proviso in the budget for JLARC to review current requirements in the statutes governing budget development. It could direct JLARC to:

Evaluate the executive branch’s performance measurement requirements related to budget requests and budget development (RCW 43.88.030 and RCW 43.88.090).
 
The study will focus on these statutory provisions by evaluating the extent to which:
 
(1)    State agencies establish goals for achieving results that conform to statutory direction and limitations.
 
(2)    State agencies establish quality and productivity objectives that are outcome-based, objective, and measure progress toward goals.
 
(3)    The office of financial management assists state agencies with the development of performance measures.
 
(4)    State agencies budget requests link performance measures to achievement of quality and productivity objectives.
 
(5)    The office of financial management analyzes whether the measures for state agency activities are demonstrating progress toward objectives.

(6)    Agency budget requests !
include proposals for improvement when the office of financial management identifies insufficient progress toward goals.
 
(7)    The governor’s biennial budget proposal includes indicators that demonstrate measurable progress toward priority results.

 

Although the current budget proposals reduce JLARC’s funding, lawmakers should weigh the benefits of directing JLARC to conduct this type of review to help lay the ground work for the Legislature to move towards performance-based budgeting.

Will your state tax bill go up?

April 15, 2009 in Blog

By now you’ve either closed the books on the 2008 tax year or are putting the finishing touches on your tax return. If you don't by midnight, however, you’ll be hearing soon from the IRS and becoming intimately acquainted with what it means to face federal tax penalties. 

But just because you can put last year’s taxes behind you doesn’t mean it’s too early to look ahead to what your bill may be next year. In fact, if some state House and Senate Democrats have their way your 2009 state tax bill might be much higher.

The current debate in the Legislature is whether to put a tax increase package on the ballot for voters to approve.

Senate Democrats are leaning towards an income tax for the “rich.” House Democrats are tossing around a “temporary” sales tax increase.

Meanwhile 32 state and national economists have warned that tax incre!
ases will damage Washington’s economy and hamper economic recovery.

The state's editorial boards have also weighed-in urging lawmakers to balance the budget without tax increases. Here's a sample of those pleas for tax restraint: