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.

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WA policymakers should learn from South Carolina UI mistakes

February 22, 2010 in Blog

Late last year when Boeing announced its decision to open up the second 787 production line in South Carolina, many in the business community pointed to S.C.'s low cost of doing business as one of the major factors in Boeing's decision. The Governor and other labor leaders in Washington pointed that S.C.'s unemployment system was on the verge of collapse and that while Washington's system is more expensive, at least it is solvent. 

A story out of the Post and Courier today (hat tip highlights the fact that South Carolina was not alone in borrowing funds from the Federal government to shore up their unemployment insurance systems!
. States borrowed about $31 billion over the last two years -- South Carolina to the tune of $800 million. Now the trick for policymakers is to figure out how to pay that back to the feds. 

South Carolina officials don't yet have a firm plan in place to pay back the feds, but they did start the process of a head-to-toe review of their Employment Security Commission and found widespread mismanagement and waste. 

John Rainey, South Carolina's chief economic adviser, hit the nail on the head when he said that raising fees on businesses now will slow the state's economic recovery because every dollar spent in taxes is a dollar that is not available to hire more staff or expand operations.

Here in Washington, even with a solvent UI trust fund, state officials raised UI taxes an avera!
ge of 54%
(though many folks are reporting triple digit percentage increases) for 2010 and have said that future increases are inevitable as well. But rather than look at ways to decrease costs, some officials are backing benefit increases, which would only put further strain on the system. 

Yes, here in Washington we are fortunate to have a system that needs no federal government bailout. But the bad news is that the business community is shouldering the burden of a system that increa!
ses costs during a downturn
, instead of when times are good. Doing so, as Rainey says, only slows down the economic recovery this state needs. 

Bill would add $1 to auto insurance bill to combat theft

February 22, 2010 in In the News
The Daily World (Aberdeen)
The Daily World (Aberdeen)
Monday, February 22, 2010

Center to publish I-960 voters’ pamphlet

February 22, 2010 in In the News
Auburn Reporter
Auburn Reporter
Monday, February 22, 2010

Bill easing way for tax increases headed to Gregoire's desk

February 22, 2010 in In the News
The News Tribune (Tacoma)
The News Tribune (Tacoma)
Monday, February 22, 2010

HB 2658: Reorganizing Department of Commerce Activities

February 21, 2010 in Publications

In early 2009, the State Legislature passed EHB 2242, changing the Department of Community, Trade and Economic Development to the Department of Commerce. In July 2009, during the official name change ceremony, the Governor stressed that the new Department of Commerce would focus on ensuring a “successful business environment that provides good, familywage jobs,” and that “We will continue to focus on keeping the companies and jobs we have, and bringing new business to our state.”

How Public Officials Spend Our Transportation Taxes: Distribution of Road and Transit Taxes Collected in the Central Puget Sound Region

February 21, 2010 in Publications

Have you ever wondered how much of your transportation tax money pays for that Metro bus you always see on the road? Or how much of it funds light rail as opposed to roads and bridges? New research by transportation expert James W. MacIsaac, P.E. shows that if you live in the Puget Sound region, you might be surprised just how officials spend your hard earned money.

As lawmakers prepare to expand tolling and make it easier for transit agencies to raise their own taxes, it is important to understand how current revenues are distributed.

Senators propose car insurance surcharge

February 19, 2010 in Blog

Senators Hargrove and Regala introduced today SB 6871 - Supporting judicial branch and criminal justice funding. The bill would increase fees on car insurance by $1 every six months per vehicle to fight auto theft.

According to the bill:

"The legislature recognizes the importance of a robust judicial system to Washington's citizens. The legislature finds that the court system is an essential component of public safety in Washington state. During the economic crisis of the 2009-2011 fiscal biennium, !
the legislature concluded that additional resources are necessary to support the state and local courts and judicial branch agencies. The legislature finds that civil and criminal traffic infractions are the majority of cases in local courts. The legislature finds that it is imperative the state continues to prevent auto theft and that the insurance companies in Washington also benefit from preventing auto theft. Therefore, a surcharge shall be levied on all auto insurance policies in Washington. This surcharge will be used to combat auto theft and ultimately lower insurance costs for the citizens of Washington state . . .

A surcharge of one dollar every six months per insured automobile shall be charged by each insurer to each person purchasing automobile insurance, which will be in addition to any other charge authorized by law."

The funds raised would be deposited into the Auto Theft Prevention Authority Account.

Last year the Legisl!
ature raided millions from this account and changed the author!
ized use of the funds. Here are the details from the 2009-11 budget:

Section 128 (27) - $300,000 of the Washington auto theft prevention authority account--state appropriation is provided solely for a contract with a community group to build local community capacity and economic development within the state by strengthening political relationships between economically distressed communities and governmental institutions. The community group shall identify opportunities for collaboration and initiate activities and events that bring community organizations, local governments, and state agencies together to address the impacts of poverty, political disenfranchisement, and economic inequality on communities of color. These funds must be matched by other nonstate sources on an equal basis.

Section 203 (8) - $3,700,000 of the Washington auto theft prevention authority account--state appropriation is provided solely for competitive grants to community-based organizations to provide at-risk youth intervention services, including but not limited to, case management, employment services, educational services, and street outreach intervention programs. Projects funded should focus on preventing, intervening, and suppressing behavioral problems and violence while linking at-risk youth to pro-social activities. The department may not expend more than $1,850,000 per fiscal year. The costs of administration must not exceed four percent of appropriated funding for each grant recipient. Each entity receiving funds must report to the juvenile rehabilitation administration on the number and types of youth served, the services provided, and the impact of those services upon the youth and the community.

Section 945 - RCW 46.66.080 and 2007 c 199 s 27 are e!
ach amended to read as follows: (1) The Washington auto theft prevention authority account is created in the state treasury, subject to appropriation. All revenues from the traffic infraction surcharge in RCW 46.63.110(7)(b) and all receipts from gifts, grants, bequests, devises, or other funds from public and private sources to support the activities of the auto theft prevention authority must be deposited into the account. Expenditures from the account may be used only for activities relating to motor vehicle theft, including education, prevention, law enforcement, investigation, prosecution, and confinement. During the 2009-2011 fiscal biennium, the legislature may appropriate moneys from the Washington auto theft prevention authority account for criminal justice purposes and community building.

Perhaps if the Legislature hadn't raided the account the funds would be available for the use intended - preventing auto theft.

OFM projects sales tax increase would last through 2015

February 19, 2010 in Blog

The Office of Financial Management released today the required I-960 fiscal impact statement for the proposed sales tax increase in HB 3183.

HB 3183 would increase the state's sales tax rate from 6.5% to 7.5%, a 15.4% increase. The rate would drop back to 6.5% once the state's unemployment rate hit 5% for four consecutive months.

The state's current unemployment rate is 9.5%

According to OFM the sales tax increase is projected to be in effect through 2015.

Economic growth on one hand, but on the other hand...not so much

February 19, 2010 in Blog

The oft-maligned, or much-loved (depending on your viewpoint) Congressional Budget Office, or CBO for short, issued a couple of papers over the last few weeks looking at policies for increasing economic growth and employment for 2010 and 2011.

While some of the proposals in the CBO's reports deal with federal-only policies such as Social Security payroll taxes, and stimulus spending, some of the underlying themes can be refocused towards state policy. And seeing as how creating jobs seems to be the number one priority for policymakers in Olympia this Session, perhaps there are lessons to be gleaned from the various reports. And, keep in mind that the CBO isn't lobbying for any one particular course of action, they are merely laying out the economic impacts of policy proposals. 

First up, CBO analyzed the effects of giving e!
mployers a one-year credit
against their payroll tax liability for increasing their payrolls in 2010 from their 2009 levels. CBO anticipates that firms could do one or more of four things:

1) some firms would react to lower employment costs by reducing the prices they charged in order to sell more goods or services. Higher sales would in turn spur production.
2) some firms would pass the tax savings on to their employees in the form of higher wages or other types of compensation, which in turn would encourage more spending by those employees.
3) some would retain the tax savings as profits, which would be passed on to shareholders.
4) some firms would use slightly more labor during the period when it was temporarily less expensive.

CBO does point out that output (GDP) could be increased by a total of $0.40 to $1.30 per dollar of budgetary cost. This is where things get tricky, and why re!
ducing government spending is so important. CBO estimates that!
such a policy would have economic benefits in the short run, but could add to already large projected budget deficits. In other words, tax cuts are great and spur economic growth, but the benefit has to outweigh the cost or else deficits increase. A $0.40 benefit on the low end increases the deficit, a $1.30 benefit reduces the deficit and spurs further growth and tax collections. Reducing government spending levels provides more wiggle room for tax cuts. 

In Congressional testimony by CBO's director Douglas Elmendorf, he points out that, "CBO anticipates, as do most private forecasters, that the pace of the economic recovery will be slow." This is something that our state's own chief economist Dr. Ahun Raha has echoed. Therefore, it is important to look at policies that encourage hiring employees.�!

Because hiring usually lags behind economic output -- meaning the unemployment rate will be one of the last economic indicators to recover even after the economic recovers -- firms must first focus on increasing productivity among current workers. Higher production levels, and higher consumer demand will spur the need for hiring. The good news is that productivity jumped 6.7% in the later half of 2009. The concern remains that economic output is growing only slightly.