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.

What's New

Bill introduced to end state liquor monopoly

December 8, 2009 in Blog

Senators Tim Sheldon (D-35) and Curtis King (R-14) have introduced a bill to end the state's archaic liquor monopoly. From SB 6204 - Privatizing the sale of liquor:

"(1) The legislature intends for privatization of retail and distribution of liquor to result in a system that is more efficient than public sector retail and distribution. The legislature finds that the present system of state control includes a markup amount at distribution that generates revenue for the state and local governments, and that this markup will be eliminated when liquor sales and distribution are privatized. The legislature further intends that the privatization of liquor sales and distribution not result in revenue losses to state or local governments as compared to projected revenues assumed under state control, not including any sep!
arate licenses or franchises.

(2) Therefore, the legislature directs the liquor control board and the department of revenue, with assistance from legislative staff and the office of financial management, to present a report to the legislature no later than December 1, 2010, on a recommended method and rates of liquor taxation that would generate the same future projected revenue for the state and local jurisdictions as under the current state control system. The report may also include recommendations on tax enforcement and simplification to the current system of liquor taxation and distribution of revenues." (Sec 101)

"By July 1, 2012, the board must close all state liquor stores and state liquor distribution facilities, and must sell at auction all assets pertaining to the state sale and distribution of liquor. Funds received from these auctions shall be deposited in the state general fund." (Sec 215)

Though this reform h!
as been a perennial discussion each session, the current budge!
t climate may give it added relevance and opportunity for success.

Budget prologue

December 8, 2009 in Blog

Governor Gregoire will release her proposed fix to the state's $2.6 billion budget deficit tomorrow at 9 a.m. As required by law, it should be balanced within existing revenue though the Governor has clearly stated she plans to release a tax increase proposal prior to session. The Everett Herald has posted a list prepared by the Department of Revenue of potential tax increases (click here for list).

While everyone will be focusing on the short term $2.6 billion problem for the current budget, solutions debated this coming session must address the long term structural problem and what to do about replacing the billions in one-time fixes being used (such as the federal stimulus funds). If only the current deficit is addressed, elected officials will have this debate to look forward to again in 2011.

For those tuning in tomorrow to watch the Governor's press confere!
nce, keep these points in mind:

  • Prior to the “great recession” state spending was unsustainable and overextended. This structural problem was exacerbated by the current economic climate.
  • Last session the legislature made a small step toward correcting this past unsustainable spending but it relied too heavily on one-time solutions; this imbalance was compounded by the current reduced revenue collections.
  • Assuming the Governor used the Priorities of Government (POG) budget process, her proposal reflects what she believes to be the highest priorities that can be purchased with existing revenue meaning by definition that spending identified for reductions was determined to be the lowest priority. As noted by Gregoire, POG "looks at the most essential services provided by state agencies, and asks the question 'What do taxpayers want for their tax dollars?' It isn’t business as usual, but business driven by proven results."
  • Including the need to replace the billions in one-time federal stimulus funds, tax increases necessary to continue the current level of spending would need to be in the billions, devastating any prospect for the state’s economic recovery.
  • As noted by these economists, we will not be able to tax our way out of the “great recession,” instead state spending expectations must be reset to the new economic reality.

Though perhaps the greatest challenge our current elected officials have faced, a real balanced budget can be achieved. Here are WPC budget principles: 

  1. Budgets should fund only core functions of government;
  2. be truly balanced long term; and
  3. not result in a projected deficit in the next budget – i.e. the level of state spending should be sustainable within existing revenue.

Here are the types of questions that should be asked by elected officials before any activity receives taxpayer money:

  • Is the activity a core function of government or commercial in nature?
  • If it is a core function, can the service be provided more efficiently and effectively through competitive contracting?
  • Does it provide a broad public benefit or only serve a special interest?
  • Does it duplicate the activities of non-profits or other private initiatives?
  • Does it duplicate the efforts of other state agencies or programs?
  • Does the activity demonstrate quantifiable performance?

Tomorrow will set the next chapter of the budget debate. Let's hope it is titled "A new way" versus "Tax and spending to the next deficit."

Reform state's competitive contracting law to realize budget savings

December 7, 2009 in Blog

With the current budget crisis, lawmakers and the governor should take full advantage of every opportunity to promote the efficient delivery of routine state services, so tax money can be freed up to fund high-priority core functions of government. State elected leaders should fix weaknesses in the competitive contracting law, and direct agency managers to use competition to reduce the cost of operating state programs.

Specifically, state leaders should simplify the operation of the 2002 competitive contracting law and, like other states, create a Government Competition Council to assist managers in identifying public services that could be improved through competitive contracting. 

Before 2002, state agencies were barred by law from competitively bidding any public services that had traditionally been provided by state employees. The ban stemmed from a court ruling in the 1978 Spokane Community College case which blocked administrators from hiring a pr!
ivate company to clean newly-constructed school buildings and using the savings to augment the college’s education programs.

Union leaders sought to have the legislature make the ruling binding on all state agencies, colleges and universities. The legislature soon codified the Spokane decision, establishing a state-wide rule that any work historically performed by state workers always had to always be performed by state workers.

The ban on contracting out public services remained in place until 2002, when the legislature passed the Personnel System Reform Act. The new law provided that, beginning in July 2005, agency managers could seek competitive bids to lower the cost of delivering services to the public. Unfortunately, this reform has been seldom used.

A 2007 performance audit conducted by the Joint Legislative Audit and Review Committee (JLARC) found that:

“…few agencies have competitively c!
ontracted for services in the 16 months since receiving author!
ization to do so.  Agency managers reported two main reasons for not competitively contracting.  First, managers perceive the process itself to be complicated and confusing, providing a disincentive to pursue competitive contracting.

Second, competitive contracting is a subject of collective bargaining, which creates additional challenges by requiring labor negotiations.  Managers must bargain, at a minimum, the impacts of competitive contracting.  Additionally, some agency collective bargaining agreements include provisions which prohibit agencies from competitively contracting.”

In a 2009 update of the JLARC audit, I asked the state Office of Financial Management’s contract division how many personal service contracts have been requested or approved by agencies under the “Civil Service Competition” provision of the 2002 law. The answer was zero.

I then conducted a direct survey of twenty stat!
e agencies to determine whether and to what extent managers were using their competitive bidding authority under the 2002 law. Of all the agencies surveyed, only the Health Care Authority reported it had used competitive contracting under the 2002 law. Typical of agency responses was this answer from Washington State University:

“I have been advised that WSU has not executed any contracts under this 2002 Civil Service Reform/RCW 41.06.142 process. It’s apparently a complicated process and the administrative decision was made early on that WSU would not participate or take any action that would implicate this process (i.e., contract for purchased services that would displace classified staff).”

The primary flaw of the 2002 Civil Service reform was subjecting an agency’s ability to competitively bid services to collective bargaining. This impediment to competitive contracting must be removed for the!
goals of the 2002 law to be realized. Along with removing the current !
administrative and collective bargaining hurdles to competitive contracting, the state should provide agencies assistance in identifying services that could benefit from competitive contracting.

WPC will be publishing additional details on this issue and the needed reforms later this week.

How Competitive Contracting Can Help Balance the Budget without Raising Taxes

December 6, 2009 in Publications

Washington lawmakers again face a multi-billion dollar budget deficit, meaning they will either increase the amount of money they collect from citizens each year, or re-evaluate the way they deliver core services to the public. Increasing taxes during a recession would add economic hardship, while changing the way services are delivered offers part of the solution to closing the deficit without raising taxes.

Governor releases budget video

November 25, 2009 in Blog

Governor Gregoire will be releasing her recommendations to close the state's projected $2.6 billion budget deficit the week of December 7. Giving some insight into her thought process, the Governor and the Director of the state's budget office (Victor Moore) have teamed up to create a short video about the budget situation. Here is a link to that video (Hat tip Niki Reading of TVW).

While no new ground was broken in the video, it is disappointing that two words were never mentioned: Government Reform.

This is in contrast to the Governor's message last session that government must change the!
way it operates versus trying to find new revenues to continue the status quo. Here is what the Governor said in her state of the state address this past January:

“.
. . one thing we have to do together is reform state government to
bring it into the 21st century, and soon. At very basic levels,
businesses are struggling to reform, to change the way they do business
because they simply must to survive. And our business leaders tell me
that American companies, large and small, will emerge from this
recession forever changed.

We have to do the same. And that’s government reform.

This is our chance to reform state government to make it a more nimble and relevant partner in a new state economy.

Ladies and gentlemen, we need to reboot!

Over
the decades, state government has evolved — layer upon layer upon
layer. But too much of what served the people well in 1940 or 1960 or
1990 does not serve the people well in the 21st century. We need to
make sure we have a government for the 21st century so our workers and
businesses can compete with anyone in the world."

While the failure to mention the need for reforms in the budget video may have been unintentional, the solution to the state's structural budget problem has not changed. We need "to reform state government to make it a more nimble and relevant partner in a new state economy."

Harvard economists: Cut taxes to increase growth

November 24, 2009 in Blog

While elected officials at the state and federal level debate the need for tax increases and "fiscal stimulus spending," a recent economic study suggests instead taxes and spending should be cut to spur economic growth and reduce deficits.

Here is the abstract from an October 2009 study by Harvard economists Alberto Alesina and Silvia Ardagna (Large changes in fiscal policy: taxes versus spending):

"We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments those based upon spending cuts and no tax increases are more likely to!
reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis."

The study concludes (in-part):

"As we argued in the introduction it is unlikely that these deficits and debt will disappear simply because growth will resume at very rapid pace very soon. Primary suppresses would be needed since interest rates cannot go other than up from the close to zero actual levels. The analysis of the present paper suggests that primary spending needs to be kept under tight control otherwise increasing taxes running after ever increasing spending will not work."

Speaking of economists and the current budget debate in Olympia, earlier this year more than 30 economists warne!
d state officials

that raising taxes "during a recessionary period is contrary to
responsible economic policy and instead will thwart the state’s
economic recovery."

Budget deficit grows to $2.6 billion

November 19, 2009 in Blog

Washington's budget outlook took another hit today with forecasted revenue dropping $760 million since the September revenue forecast. The result of this is a projected $2.6 billion deficit in the 2009-11 budget adopted earlier this year. 

According to the press release issued by the state's economist, Dr. Arun Raha:

"While growth has returned to the national and state economies, consumer confidence and more critically, consumer spending remain weak. As a result, we are experiencing a revenue-less recovery."

Responding to the news the Governor said in a press release:

"I will produce a budget balance!
d to this revenue projection because I am required to by law. We all know a budget reflects the values of our state. All options must be on the table to produce a budget that works."

The Governor, however, has ruled out calling a special session of the Legislature. 

Tax increases are not the answer and should be removed from the table as an
option to help remove any distractions from making the necessary budget
reductions.

Illustrating this point, earlier this year more than 30 economists warned state officials that raising taxes "during a recessionary period is contrary to responsible economic policy and instead will thwart the state’s economic recovery."

Several state newspapers have also called on state officials to avoid tax increases:

Though lawmakers and the Governor will be tempted to address the state's $2.6 billion budget deficit with one-time fixes, doing so is a recipe for future budget pain and the potential for the state's credit rating to be downgraded. According to Moody's October 9 report on Washington's credit outlook, the following could result in a reduction to the state's credit rating:

  • Protracted structural budget imbalance.
  • Increased reliance on one-time budget solutions.
  • Failure to adopt plan to cover expenditures once federal fiscal stimulus monies are no longer available.

Instead state officials should make fundamental changes by "re-booting" state government as called for by the Governor in her state of the state address last January:

 “. . . one thing we have to do together is reform state government to bring it into the 21st century, and soon. At very basic levels, businesses are struggling to reform, to change the way they do business because they simply must to survive. And our business leaders tell me that American companies, large and small, will emerge from this recession forever changed.

We have to do the same. And that’s government reform.

This is our chance to reform state government to make it a more nimble and relevant partner in a new state economy.

Ladies and gentlemen, we need to reboot!

Over the decades, state government has evolved — layer upon layer upon layer. But too much of what served the peo!
ple well in 1940 or 1960 or 1990 does not serve the people well in the 21st century. We need to make sure we have a government for the 21st century so our workers and businesses can compete with anyone in the world."

 

Governor to Commerce Director: "This is not acceptable"

November 18, 2009 in Blog

Attendees at this morning's GMAP session were witness to a visibly disappointed Governor expressing her displeasure with an agency's lack of performance. The focus of the meeting was the state's use of the federal stimulus funds. One of the activities highlighted was Commerce's weatherization program.

Commerce Director Rogers Weed opened his presentation by asking the Governor to lower the target for the number of housing units to be weatherized since it would be unlikely for Commerce to meet the current goal. Weed indicated the problem was caused by questions concerning prevailing wage requirements and how much workers should be paid for the weatherization projects.

The original goal for the 2nd quarter was to weatherize 935 units. Commerce's actual production was 107 units.

Responding to this the Governor said she was absolutely disappointed with how many fingers wer!
e being pointed and the bureaucracy getting clogged up. She also stressed that she didn't understand why the problem surrounding the prevailing wage confusion wasn't identified sooner to allow for corrective action. She concluded her criticism by saying "this is not acceptable" and reminded those who work for government that they are the guardian of taxpayer dollars.

Beyond the Commerce fireworks there was other news of note from today's GMAP meeting:

  • The Governor commented that the accountability states are being held to for the stimulus funds is "mind boggling" and only 1/10 of what the big banks were required to do under TARP.
  • The Governor mentioned a phone call she recently had with the Vice President about the cliff states will fall off if the federal funds for social services (Medicaid, etc) are not extended for use next year and that she is actively lobbying for more federal funds.
  • The Governor stressed the need for agencies to focus on whether results were actually being achieved for expenditures not simply whether the money can be accounted for.

Also discussed was an overview of the state's stimulus funds:

  • $2 billion for program grants - 30,000 jobs (24,000 of which are in education)
  • $2 billion for federal direct expenditures - 2,900 jobs
  • $1 billion for local governments and non-profits - 3,000 jobs
  • $1 billion for assistance to individuals (Medicaid, etc)

The state was not required to keep track of how many of those jobs are new. Last month The News Tribune questioned the 24,000 education jobs reported. From the article:

New numbers released by the federal government Friday estimate that the federal stimulus package has helped create or save 34,500 total jobs in Washington, making it the state with the third-largest reported number of stimulus jobs behind California and New York.

But there’s a caveat on those job creation numbers: 24,000 of them probably weren’t in danger in the first place.

State officials used a chunk of stimulus money to cover paychecks for 24,000 teachers who were already contracted to finish out the school year. That money came from a pot of stimulus funds given to the state to hel!
p offset budget cuts.

Without that funding, the money to pay the teachers would have come out of the state general fund, said Jill Satran, Gov. Chris Gregoire’s main adviser on stimulus projects.

That would have meant cuts elsewhere, Satran said, but the job losses that would have resulted from such cuts is difficult to quantify. Few, if any, of the 24,000 teacher jobs would have been among them, Satran said.

Governor willing to wait on budget fix

November 17, 2009 in Blog

Governor Gregoire will not call a special session of the Legislature despite a budget deficit likely to exceed $2 billion after Thursday's state revenue forecast. Sen. Joe Zarelli (R-18), ranking member on the Senate Ways and Means Committee, has been calling for a special session for months. Zarelli issued this statement in a press release last week:

“The Legislature doesn’t have to sit back and wait for the governor to bring out her budget proposal next month. We can call ourselves into special session in early December, when we’re already scheduled to be at the Capitol. The budget writers already know where they can reduce spending; the sooner we act, the more can be saved to preserve important programs which otherwise would be subject to slashing later.
 
The alternative to spending reductions is tax hikes. The majority party won’t come out and say it is planning to fill the budget gap t!
hrough higher taxes, but if the taxpayers don’t see quick action in Olympia to lower spending, they will see something else: the writing on the wall that tax increases are coming in 2010, even though people can’t afford higher taxes.”

According to The Olympian, the Governor has no plans to call a special session and instead will wait to take action next year:

Gov. Chris Gregoire rejected new Republican calls for a special legislative session in early December to deal with the growing budget shortfall, despite her prediction it might hit $2.5 billion after Thursday's revenue forecast . . .

“This is not something you do overnight. It’s something you do thoughtfully,” she said, rejecting Republican Sen. Joe Zarelli’s renewed calls for a special session in early December when lawmakers !
are in town. Gregoire contended special sessions would cost mo!
ney and that budget-writers in the Legislature that she’s talked to “haven’t gone in-depth” on the budget and don’t want to do anything piecemeal.

State law prohibits a cash deficit from occurring by requiring the Governor to take action. Here is what RCW 43.88.110(7) says:

If at any time during the fiscal period the governor projects a cash deficit in a particular fund or account as defined by RCW 43.88.050, the governor shall make across-the-board reductions in allotments for that particular fund or account so as to prevent a cash deficit, unless the legislature has directed the liquidation of the cash deficit over one or more fiscal periods . . .

Since the Governor has not ordered across-the-board reductions as required by law and will not call a special session to address the $2 billion plus de!
ficit, she should veto any bills passed by the Legislature until the budget deficit is resolved.

Delay only exacerbates the budget problem and makes the needed corrections more difficult. If there isn't the will to fix the problem now the Governor and lawmakers must commit to fix the problem at the beginning of the session versus waiting until the waning days.

Tax increases, however, should be removed from the table as an option to help remove any distractions from making the necessary budget reductions.

As noted by these economists, the worst time to raise taxes is during a recession or fledgling recovery.

It appears that at least one Democrat member of the House Ways and Means Committee recognizes this. From The Everett Herald:

style="margin-left: 40px;">Rep. Mark Ericks, D-Bothell, who is vice chairman of the House Ways and Means Committee, said the Legislature tried to “spread the pain” last year by paring a little from everywhere. Now they must look at mothballing entire programs.

“From my perspective, that is what we have to do,” he said. “That won’t make some people happy but that is what is ahead for us.”

No one’s talked to Ericks about hiking taxes. Nor does he think it’s a panacea.

“Where’s that tax that people would raise that would temporarily increase our revenue to get us over the hump? I don’t see it,” he said. “The whole issue about the tax is a red herring.”

Small businesses rank top policy priorities

November 13, 2009 in Blog

Small business owners, legislators, and policymakers from all over Washington gathered in SeaTac this past Tuesday to discuss the state's business climate at WPC's 2009 Statewide Small Business Conference. During several interactive issue breakout sessions, business owners suggested and discussed solutions to improve the climate for small businesses in Washington. This was the fourth statewide small business conference hosted by WPC since 2003.