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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Green Bonds - are they worth it?

April 14, 2009 in Blog

Today the House Capital Budget Committee will consider HB 2334, asking voters to approve a $3 billion package to fund capital improvement projects that promise increased health, safety and energy efficiency in public facilities.

Supporters of the legislation claim the bonds would be repaid in part from cost savings of improved energy efficiency.  In addition, proponents highlight requirements to use performance based contracting to achieve the savings.

Unfortunately, these claims are misleading and could potentially threaten the bond ratings of other investments.

Proponents of HB 2334 are wrong to tie promises of energy savings to cost repayments through performance based contracting.  Performance based contracting was established as a tool to ensure that, when a contractor makes promises through a contract, results are achieved.

The State's General Administration (GA) website provides a good explanation of how the State has used performance based contracts on a variety of projects, with promising results.

According to the site about 100 projects have used this system.  These projects have cost taxpayers more than $150 million to complete with a claimed savings of roughly $11.5 million annually.  At this rate of return it would take more than thirteen years to pay back the costs of all of these projects.  These numbers, however, have several flaws.

For instance, they are not audited and it is difficult to promise actual energy savings.  When a building uses the performance based contract process, an inspection will identify what systems can be changed to achieve greater efficiency.  If the agency chooses to change light fixtures, a contractor can promise savings from changing each fixture because they are essentially changing light bulbs for more energy efficient bulbs.  The contractor, however, does not guarantee that the light fixture will be utilized or operated in the same manner as the previous fixture, and, according to the GA, is unlikely to promise a return on investment through cost repayment.

The "annual savings" identified by the GA's spreadsheet are snapshots in time and are not meant to predict actual savings.  The GA is honest that these numbers do not represent actual, audited energy savings.  Given the difficulty they are having identifying those savings in the current, modest program, how likely is it that they will do better when the program spends thirteen times as much in a two year period over what was spend during the past 10 year period?

Given the amorphous nature of the energy savings estimates, is it wise to base the State's bond payments on hoped-for, but hard to recover, energy savings?

While it may be true that the money spent will provide greater health or safety improvements, there is no data available to suggest that this results in cost savings.  In fact, as our research shows (What Washington's "Green" Schools Tell Us about HB 2334's $3 Billion Spendnig Plan), such modifications to systems that would improve air quality, like an HVAC system run more frequently to bring in fresh air, often results in higher energy cost.  Savings have yet to be realized as was promised in previous energy saving packages.  The performance data available thus far for "green" schools provides legislators with a valuable tool for better understanding the promises of cost savings and energy efficiencies in HB 2334.

In addition, the proposal to increase the indebtedness of the State has caught the attention of Democrat State Treasurer Jim McIntire.  In a statement regarding the $3 billion bond package he noted that, "added debt called for in HB 2334 is too much" and that, "It would threaten our credit rating and would affect the rest of our investments in transportation and public infrastructure."  Harming the credit rating could lead to an increase in rates and additional cost to the taxpayers, minimizing further any potential benefits from the proposed projects.

Finally, if these projects will truly deliver the claimed savings, one has to wonder why they were not funded when the state had surpluses.  The State's 2007-09 biennial Capital Budget is $4.6 billion and the 2009-11 proposed biennial Capital Budget before the House is $2.9 billion with the bonds making up approximately half of these budgets.  Increasing the debt to fund projects that have not met priorities when funding was available makes the return on investment even more unlikely.

As the House Capital Budget Committee considers HB 2334 it is important to understand that the proposal before them over promises on what it can deliver.

Allow universities to set market-based user fees

April 8, 2009 in Blog

Mark A. Emmert, president of the University of Washington, had an op-ed in The Seattle Times today requesting that lawmakers allow the state's higher education institutions to raise tuition fees. Emmert noted:

Obviously, Washington has a severe budget shortfall, and balancing
the budget requires very difficult decisions. The magnitude of the
proposed higher-education cuts, however, goes far past what can be
managed through efficiency measures and new ways of providing
high-quality education.

The leaders of our four-year colleges and universities understand
that our schools must take cuts. But we also know that we can keep
students coming to school and graduating on time if we are simply given
more flexibility on tuition. We can help our students and our state
without new state money. Moreover, we can fix much of this problem
without denying access to students because of their income or family
background.

The UW has the lowest tuition of any of its peers and is one of the best bargains in the country. With increased financial aid and the expanded federal tax credit, we can remain an excellent value for our families, maintain our world-class quality, and not slash the number of students we admit.

To give higher education the opportunity to resolve this crisis without requiring more state money is the only responsible thing to do. To do otherwise is to deny thousands of our citizens a chance to succeed in the knowledge economy.

This echoes an editorial that ran in The News Tribune earlier this week

There's a partial remedy at hand: higher tuitions. Emmert and others have sought authority to raise tuition by as much as 14 percent. Lawmakers are ba!
lking. The House proposes 10 percent; the Senate, only 7 percent.

Olympia needs a mental adjustment. In good times, when direct appropriations are easier to come by, capping tuition might make sense. In this emergency, business as usual could be disastrous.

A 14 percent tuition hike would not be the burden it sounds like. With Congress expanding Pell grants and the federal tuition tax credit, the increase in financial assistance will more than offset another 14 percent in tuition - which would be $875 a year at the UW.

Without getting into the question of broader higher education reforms at this time, this is a reasonable request.

Lawmakers should allow the state's universities the full authority to set market-based user fees to fund their operations. The same holds true for state parks. This will allow general tax revenue to be freed for vital core functions.

House Ways & Means budget amendments

April 7, 2009 in Blog

Today the House Ways & Means committee adopted numerous amendments to the proposed House budget. Among those adopted:

  • 1244-PS AMH WAYS DRIV 195: "Requires the Evergreen State College to expend $200,000 in 2009-11 on the Labor Education and Research Center."
  • 1244-PS AMH WAYS DRIV 167: "Removes the state support enrollment targets for the four-year universities and colleges and the State Board for Community and Technical College system."
  • 1244-PS AMH WAYS GAVC 031: "Requires the parks and recreation commission to not close any state parks during the 2009-11 biennium, and to report to the legislature by January 10, 2010, on its budget and resources related to operating the parks for the remainder of the 2009-11 biennium."
  • 1244-PS AMH WAYS PAME 039:
    "Directs the State Auditor to conduct biennial audits of local
    governments with revenues of $10 million or less and no findings for a
    three year period." (Currently these entities are audited annually under federal grant requirements if they spend $500,000 or more of federal money)

The first two amendments are of particular note in light of this blog post we did last week highlighting the budgeted enrollment slots for higher education (the amendment removes those targets from the budget) and this audit finding calling into question the legality of the Evergreen State College's Labor Center activities.

Economists Warn Raising Taxes Will Hurt Our State's Economy

in Press releases

Olympia - 32 economists have signed an open letter to state elected officials warning that tax increases will damage Washington’s economy and hamper economic recovery. This comes as lawmakers are grappling with a large budget shortfall and are considering tax and fee increases rather than prioritizing spending, which families all across Washington are doing now.

House capital budget priorities

April 2, 2009 in Blog

Not to get lost in all the debate about the state's operating budget, the Legislature's capital budget proposals were also released this week. In years past the capital budget has been referred to as the "Fun Budget."

So what are some of the House capital budget priorities?

•    Apple Awards (for schools) - $250,000
•    Washington State Historical Society - $12,250,000
•    Eastern Washington State Historical Society - $1,939,000
•    Admiral Theatre-No Theatre Left Behind - $140,000
•    Artspace Everett Lofts - $1,000,000
•    Building a Foundation for Discovery - $250,000
•    Campus Consolidation (Cornish) - $375,000
•    Convert Key!
Bank To Everett's Plaza Theatre - $500,000
•    Cottage Renovation (Hedgebrook) - $20,000
•    Downstairs at the 5th - $800,000
•    Federal Way Performing Arts Center - $325,000
•    Gateway Center (Lummi) - $150,000
•    James Ctr for the Performing Arts (Sequim) - $150,000
•    Langston Hughes Performing Arts Center - $475,000
•    Legacy Project (Imagine) - $200,000
•    Modular Classrooms for Dance (Gladish) - $30,000
•    Museum Expansion (Maryhill) - $1,500,000
•    New Hands On Children's Museum  - $1,000,000
•    Phase II Renovation (Mt. Baker Theatre) - $1,000,000
•    Reconstruction of First Stage, Issaquah - $400,000
•    Seattl!
e Opera Center - Phase I Design - $650,000
• !
60;  Stage Two (Whidbey) - $450,000
•    Vashon Arts Center - $1,115,000
•    Visual Arts Education Center (Sno Co.) - $1,000,000
•    Viva Vera Capital Campaign - $70,000
•    WA Hall Acquisition and Rehab - $400,000
•    A Home for Opportunity - $325,000
•    Building the new Eastside Clinic - $1,900,000
•    Community Center for Sand Point Housing - $350,000
•    Donald G. Topping HOPE Center - $1,934,250
•    Dove House - $240,000
•    Duvall Multi-Service Center - $617,985
•    East Central Community Facilities Expansion Project - $231,500
•    El Centro de la Raza Safety & Systems Improvements -$250,031
•    Emmanuel Family Life Center - $!
400,594
•    Eritrean Community Center Expansion - $300,000
•    Family Services Center - $1,265,000
•    Ferndale Boys & Girls Club - $752,847
•    Giant Step - $520,761
•    Greenbridge Early Learning Center - $1,419,281
•    High Point Neighborhood Center - $2,000,000
•    Highline YMCA - $2,000,000
•    Milgard Work Opportunity Center - $1,850,000
•    Mt. Baker Planned Parenthood Education and Training Center - $881,847
•    Northeast Community Center Expansion - $1,800,000
•    Pierce County Therapy Center - $128,000
•    Rainier Vista & Rainier Valley Teen Center - $3,906,000
•    Repurposing Daybreak Star - $87,500
•  &!
#0160; Riverwalk Point Community Building - $79,253
• !
60;  Rotary Support Center for Families - $3,500,000
•    Technology Access Foundation Community Learning Space - $1,500,000
•    The Keller House Services Center - $600,000
•    YMCA/YWCA Central Spokane Facility - $3,500,000

Having fun yet?

(NOTE: CAPITAL SPENDING DOES NOT CORRELATE DIRECTLY TO SPENDING IN OPERATING BUDGET)

About those budgeted higher education enrollment cuts

April 2, 2009 in Blog

We've all heard that the proposed state budgets reduce enrollment slots at higher education institutions. True?

Yes and no.

Consider the current budgeted enrollment figures for 2007-09 (Section 604 of HB 2687) and the proposed budgeted enrollment for 2009-11 (Section 604 of HB 1244):

State Support for Annual Full-Time Equivalent Student Enrollments 

School

2007-08

2008-09

2009-10

2010-11

UW – Main

33,782

34,197

34,197

34,197

UW – Bothell

1,760

1,980

1,980

1,980

UW – Tacoma

2,109

2,349

2,349

2,349

WSU – Main

19,112

19,272

19,272

19,272

WSU – Tri-Cities

800

865

865

865

WSU – Vancouver

1,888

2,113

2,113

2,113

CWU

8,952

9,322

9,322

9,322

EWU

8,996

9,184

9,184

9,184

Evergreen

4,165

4,213

4,213

4,213

WWU

12,022

12,175

12,175

12,175

Community College

136,102

139,237

139,237

139,237

Total

229,688

234,907

234,907

234,907

Budgeted enrollment, though not increasing, is not cut under the proposed House budget. So how is enrollment being reduced?

The problem is not with a budgeted reduction but the fact that higher education institutions "over-enrolled," meaning they admitted more students over the past few years than the Legislature budgeted for.

In other higher education budget news, it appears Senate Democratic budget writers were not swayed by this recent damning audit of the Evergreen State College's Labor Center; the Labor Center receives $200,000 in the Senate budget (Section 610 [3] of SB 5600).

Overview of House and Senate Democrats’ 2009-11 Budget Proposals

April 2, 2009 in Publications

Each person’s analysis of the 2009-11 state budget offered by House and Senate Democrats will be influenced by his budget principles.

State income tax: deja vu all over again

April 1, 2009 in Blog

State Senator Jeanne Kohl-Welles (D-Seattle) would like to create what she calls a "millionaire's tax" on high-income people living in Washington. This is exactly what happened in 1913 when the federal government created the income tax. The first income tax started at 1% and it applied only to the wealthiest people. Back then supporters of the tax said that most people would never have to pay it. As we know, within a short time paying the federal income tax became an all too common experience for Americans.  Even if Sen. Kohl-Welles' "millionaire's tax" at first applied only to Bill Gates, you can be sure that in no time we would all be paying it.

State Auditor fights performance audit cuts

March 31, 2009 in Blog

State Auditor Brian Sonntag testified today against the Senate's proposed raid of dedicated I-900 performance audit funds. The House budget also raids I-900 funds. From the House budget summary:

Performance Audit Account Program Funding (-$13.5 million General Fund-State; $13.5 million Performance Audits of Government-State)

Funding for JLARC, GMAP, WSIPP, K-12 budget driver audits and conservation district audits is provided from the Performance Audits of Government Account for the 2009-11 biennium rather than with General Fund-State.

Here is a copy of the State Auditor's testimony:

Brian Sonntag
Testimony on Proposed 2009-2011 Budget
Senate Ways and Means Committee
March 31, 2009

Thank you for giving me an opportunity t!
o explain the consequences of this proposed budget on the Office of State Auditor.

Certainly, this budget period is extraordinarily difficult. I respect and value the responsibilities you have and the tough decisions you must make.

I recognize that our Office along with every other state agency must share in the pain of those decisions.     

But the budget you have proposed goes beyond funding reductions or a one-time sweep of our cash balance. To take more than half of the revenue that voters permanently designated for performance audits and use it to fund other programs undercuts the performance audit authority that citizens directly gave to their independent State Auditor.

That change contained in Section 927 of the budget and the precedent it sets is absolutely unacceptable.    

It is unacceptable to me. It is unacceptable to citizens who in such a time as this!
look to us more than ever to ensure that government is accoun!
table and transparent. They recognize this Office is uniquely positioned to be part of the reform the governance change that everybody talks about and wants.      

What particularly disappoints me is that the effects of this budget come at a time when our Office is looked upon to be part of the solution. Every discussion we’ve had with legislative leadership and the Governor centered on how we can help bring about meaningful, cost-saving government reform. 

We’ve already got several performance audits underway with the intent to identify immediate cost savings as well as long-term efficiencies.

We also have launched a statewide performance review, which we were called upon to do by the Governor. It will focus exclusively on state government, its governance structure and back-office functions such as information technology and leasing office space. Many in the Legislature recognize its potential!

Just like successful performance reviews in other states and nationally, we’re going into it with the full intention of finding and recommending significant spending reductions and proposed ways to reshape and recreate what state government does and how state government does it.

We will settle for nothing less than true, meaningful reform.

The time for thinking outside the box is over. There is no box.

I’m disappointed in another respect. This budget does not recognize the value our performance audits have produced so far.

To date, we have completed 15 performance audits of state and local governments that have produced a ratio of 10 dollars saved to one dollar spent. That’s a wise investment.

For state government alone, our audits have recommended nearly $500 million in potential savings.

One audit concluded that four of the largest state agencies could collect $320 million in del!
inquent debt owed to the state simply by following industry best practi!
ces. That’s an additional $320 million that should be in the state’s pocket. 

Our audit of Department of Health transformed how the state licenses and disciplines health care professionals keeping vulnerable patients safe from predatory practitioners. While it did not identify a nickel of specific cost savings, it certainly minimized the risk of potentially costly tort claims against the state.
 
Let’s be clear, our audits have proven their worth. They have real value, and they are meeting the expectations of citizens. 

We worked diligently and constructively with the Governor to reduce our budget – both in our state financial audit work and in performance audits. The budget proposed by the Governor reflects a reduction of 20 percent in our state appropriation.

I view the diversion of revenue designated for performance audits as nothing short of an assault on what citizens expect the state to do when t!
hey gave us that authority and the funding stream to carry it out.

We need accountability now more than ever and citizens demand and deserve it. We’ve seen the consequences of no oversight and no accountability in our free-falling economy.  State government accountability is what’s at stake and it’s absent in your budget proposal.

Thank you very much.

The Senate Ways and Means Committee members had no questions for the Auditor after his testimony.

What's in the Senate budget?

March 31, 2009 in Blog

A lot of attention is being provided to what isn't in the Senate budget. Since those activities are already receiving scrutiny, what did the Senate decide to include in its spending plan? Here are some examples of those priorities that apparently are recession proof:

  • Asian-Pacific-American Affairs - $315 thousand

  • Commission on Hispanic Affairs - $371 thousand

  • African-American Affairs Commission - $343 thousand

  • Arts Commission - $6.7 million (all funds)

  • State Historical Society - $7.8 million (all funds)

  • East Wash State Historical Society - $6.4 million (all funds)

  • Liquor Control Board - $245 million (all funds)

  • Archaeology & Historic Preservation - $4.7 million (all funds)

  • Convention and Trade Center - $117 million (all funds)

  • Funding is provided to Star USA to assist hosting the U.S. Figure Skating Championships in Spokane, scheduled for Jan. 14-24, 2010 - $200 thousand

  • One-time funding is provided for a grant to KCTS Public Television to offer Spanish language programming. The programming will be offered through "V-me", a program service modeled on public television, with children's, arts, history, science, biography, nature, movies, pop culture, and public affairs genres - $40 thousand

  • Funding is provided to implement ESSB 6035 (rating plans). The legislation requires the department to make changes to the retrospective rating program requirements for how sponsoring entities or associations use retrospective rating refunds - $788 thousand (all funds)

  • Higher Education Coordinating Board - $551 million (all funds)

Slow going so far but hope to finish reviewing the Senate budget today and start on the House proposal next.