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

No minimum wage increase for 2010 in Washington

September 30, 2009 in Blog

The state's Department of Labor and Industries announced yesterday that there will be no minimum wage increase for 2010. The minimum wage for workers in this state will remain at $8.55 per hour. This is the first time since Initiative 688, the initiative that coupled the minimum wage to the Consumer Price Index passed in 1998, that the wage has remained static. For several years, Washington had the highest minimum wage in the nation, this move may knock us down a spot or two.

The reason behind the move isn't a policy decision or politics, it's economic. The Consumer Price Index actually fell 1.9 percent during the 12-month period that ended in August. The Department said that the previous wage hike, $0.48 for 2009 wages, was because of a 5.9 percent increase in the CPI during the 12-month period that ended in August 2008. That!
is a very substantial change, due to many factors, but the price of oil probably being the largest ($147 a barrel in the summer of 2008 vs. $70 this summer).

Colorado experienced a similar fate when voters linked their state's minimum wage to the cost of living (CPI) but with the stipulation that the wage could actually decrease if the cost of living did as well. No one really thought it would, so Colorado policymakers where caught a little off-guard (even if their wage rate will only decrease $0.04 per hour). Washington's Initiative makes no provision for a reduction in rates, so the 2009 wage will remain unchanged for 2010, as opposed to decreasing, even though the CPI dropped.

Undoubtedly, there will be outcry from organizations that advocate for the working poor -- that no increase in the worki!
ng poor's hourly wages will keep more workers struggling t!
o pay their bills. But I would ask them to reevaluate their stance that the CPI should maintain control over how much a worker makes. What incentive is there for someone to do more or less in their job if their wage is determined by economic conditions, and not merit?

If someone supported Initiative 688 in 1998 because they thought it was only fair to couple cost-of-living increases to determine the minimum wage, then that same person cannot turn around 11 years later and say it is not fair when that same economic indicator does not produce statistics they don't like.

Colorado economics professor defends I-1033

September 30, 2009 in Blog

With the Initiative 1033 debate focusing on the impact of a similar law in Colorado, the Taxpayer Bill of Rights (TABOR), one of TABOR's biggest supporters is coming to the defense of I-1033. Dr. Barry Poulson, Professor of Economics at the University of Colorado at Boulder, wrote an article for the Bellingham Herald this week countering the attacks opponents of I-1033 have made against TABOR.

According to Dr. Poulson:

Opponents of Washington's Initiative 1033 are woefully uninformed about the Colorado's Taxpayer's Bill of Rights (TABOR) passed by voters in 1992. Critics of Washington's ballot measure say I-1033 !
is similar to our TABOR, which they claim is a disaster for our state. Nothing could be further from the truth . . .

The TABOR Amendment has worked much the way it was intended, allowing Colorado citizens to decide how much government they want and are willing to pay for. If any jurisdiction wants to spend surplus revenue, or increase taxes or debt, it must have voter approval.

Many statewide ballot measures have been presented to Colorado voters since TABOR was enacted. Two of the six ballot measures seeking approval to spend surplus revenue were passed, and four were defeated. Eight ballot measures proposing tax increases were introduced, but only one of these measures passed. Of the four property tax measures introduced, two providing property tax relief to specific groups passed; two measures proposing property tax increases were defeated.

At the local level, however, many more spending or tax increases have been approved, usually becau!
se they were tied to specific local government programs to whi!
ch the voters decided to give extra funds.

Critics often argue that TABOR forced the state to cut spending. The empirical record for state spending in Colorado refutes this claim. In contrast to California, state spending in Colorado has grown at roughly the rate in the private economy. From 1993 to 2007 real per capita state spending grew 28 percent, while per capita GDP grew 30 percent.

With an effective tax and spending limit in place Colorado has been able to lower tax burdens, creating one of the best business tax climates in the country. Colorado has attracted more business investment and jobs than most other states. Over the period since TABOR was passed Colorado has experienced one of the highest rates of economic growth in the nation, while California has experienced retardation in economic growth . . .

Polls reveal that Colorado citizens support the TABOR Amendment by a greater majority today than when it was enacted. Citizens supp!
ort each of the TABOR provisions by a large majority: the cap on the growth of revenue and spending; the requirement for voter approval to spend surplus revenue; and the requirement for voter approval to increase taxes and debt.

Despite this success, politicians and special interest groups routinely attack TABOR because it doesn't give them carte blanche authority to tax and spend. Washington residents would be lucky to have our TABOR amendment. It strengthens fiscal rules and policies conducive to economic growth and prosperity, and prevents the kind of fiscal debacle occurring in California.

Speaking of polls, Tim Eyman (sponsor of I-1033) highlighted yesterday a recent poll indicating 61% support for I-1033.

Adding a new wrinkle to the tax and spending debate I-1033 is presenting voters is the announcement by Governor!
Gregoire that she is willing to consider tax increases next year. As r!
eported by The Olympian:

Gov. Chris Gregoire made clear in a meeting with reporters this morning that she is not as hostile to tax hikes as she was a year ago. And she will entertain proposals if lawmakers or interest groups bring them to her.

"I didn't want revenue last year because I couldn't figure out how you could do a revenue package that wouldn't hurt the economy, either individuals or businesses. We're still stuck in that rut but I've told the leadership, 'Come make your case. My door's open, you can make your case.' But I don't want to do anything that adversely impacts our economic recovery," Gregoire said.

It's a clear shift from last December when she discouraged tax proposals. At that time, she said it was the wrong time to put a burden on busi!
nesses and individuals in a recession. But Gregoire said last year's cuts were painful and she doesn't know how another $1 billion can be trimmed.

It is unclear if the Governor would support a suspension of I-960's requirement for tax increases to receive a 2/3 vote of the Legislature to take effect. I-960 can be suspended with a simple majority vote next session.

For additional information on I-1033, check out this debate on KING 5 News Up Front and WPC's review of the measure.

New Policy Note Addresses Spokane's Community Bill of Rights Proposal

September 28, 2009 in Blog

Washington Policy Center today released a Policy Note that dives into Spokane's Proposition 4 -- the Community Bill of Rights. Voters inside Spokane city limits will vote on whether to amend the city's charter to include several new or expanded "rights" for citizens.

These rights include:

  • Residents have the right to a locally-based economy,
  • Residents have the right to affordable preventative health care,
  • Residents have the right to affordable and safe housing,
  • Residents have the right to affordable and renewable energy,
  • The natural environment has the right to exist and flourish,
  • Residents have the right to determine the future of their neighborhoods, 
  • Workers have the right to be paid the prevailing wage, and the right to work as apprentices, on certain construction projects,
  • Workers have the right to employer neutrality when unionizing, and the right to constitutional protections within the workplace.

The Policy Note points out:

  • The Community Bill of Rights will expand government entitlement programs, not individual rights,
  • Taxpayers could be on the hook to pay for proposed programs that have no funding mechanism in place,
  • The broad policy agenda is not affordable under the city's current budget,
  • The measure will likely face scrutiny in courts under the state's "single subject law."

The Policy Note also highlights potential costs associated with some of the measure's mandates, such as mandating affordable, renewable energy and the potential cost of insuring affordable, preventative care for Spokane citizens.

Finally, we also point out that many of the rights enumerated in the Community Bill of Rights proposal contradict each other, such as heightened environmental regulations increasing the cost of affordable housing, which would also be required for the city to provide. The Community Bill of Rights would also strip businesses from possessing any legal rights if a citizen were to file claim against a business in violation of the rights laid out in this proposal.

Papers chime in on Workers' Comp Rate Hike

September 25, 2009 in Blog

Some excerpts from the media regarding the Department of L&I's announcement that 2010 Workers' Comp rates will go up an average of 7.6%:

Yakima Herald Republic: "Let's review L&I operations before allowing tax increase."

"When economic times get tough, the moment to reform business
operations becomes the most opportune. It's a time to question past
assumptions and arrive at a more rigorously disciplined enterprise.

Somehow the state's Department of Labor & Industries doesn't
believe in that philosophy. The guiding principle there seems to be to
keep adding revenues and charge ahead, no matter what the cost is to
others."

Wenatchee World: "We pay more to keep working."

"In a state that just saw its unemployment rate bubble up to 9.2
percent, where jobs are easily lost, where economic recovery is
excruciatingly slow, you would think it would not be a good time for
the state to increase its tax on employment...

...The debate goes on, among Olympia’s hardy perennials. Someday it may
change, but for workers it will be as it is with all creeping payroll
taxes — close your eyes and pretend you’re not the one who pays."

Spokane's Spokesman-Review: "Lawmakers must reform workplace insurance."

"When the Washington Department of Labor and Industries proposed a 7.6
percent increase in industrial insurance premiums this week, several
business organizations told the agency something its officials already
knew. This is a rotten time to heap another $117 million burden on the
state’s struggling employers."

Tax Foundation Ranks Washington the 9th Best Business Tax Climate

September 24, 2009 in Blog

Earlier this week the Tax Foundation issued its 2010 State Business Tax Climate Index. Washington moved up a few spots, from 12th to 9th best. However, our overall score actually declined. The reason for this? Other states hurt their ranking by making bad moves more than Washington took steps in improving its system. Good news in a relative sense I suppose.

A few interesting finds from the 60-page study:

  • WA ranks 33rd (1st is best) in the Corporate Tax Index
  • WA ranks 1st in the Individual Income  Tax Index
  • WA ranks 50th in the Sales Tax Index
  • WA ranks 26th in the Unemployment Insurance Tax Index
  • WA ranks 21st in the Property Tax Index
  • There is a disturbing trend of states proposing or imposing a "millionaires tax" to cope with budget shortfalls
  • WA has the highest tax on spirits, Oregon is 2nd highest
  • WA has the highest taxable wage base for Unemployment Insurance

The methodology the Tax Foundation uses puts the most weight on the Individual Income Tax Index (30%), then the Sales Tax Index (24%), Corporate Tax (20%), Property Tax (15%), and finally Unemployment Insurance Tax (11%) -- see pages 33-34.

So, as in other tax rankings, Washington ranks the best in the category for which we contribute no data. That's not to say this ranking is bunk -- the Tax Foundation does great work. But readers should know that each Index is weighted differently and the index that carries the biggest impact is one Washington decided not to tax. The takeaway? Any move towards adding an individual income tax will surely knock us down quite a bit.

The other issue I am always asked about regarding business tax rankings is how these institutions (or media outlets) treat our much-maligned Business & Occupation tax. A simple reading of just about any of the numerous tax rankings out there will show little or no acknowledgment of our wha!
cky home-grown system and therefore either underweight or completely ignore it. Obviously, simply ignoring the B&O tax is a mistake, and the Tax Foundation does try and compensate for our gross receipts system. In fact, it has some not-so-nice things to say:

"Such economic imbalance from this (gross receipts tax) often leads lawmakers to enact separate rates for each industry, an inevitably unfair and inefficient process... Delaware, Ohio and Washington score the worst for gross receipts tax deductions because they do not offer full deductions for either cost of goods sold or employee compensation." (page 13)

There is a lot of data to play around with in this study. And the conversations that arise from debating our state's tax structure can play a role in determining policy priorities we want to see in Washington. The Tax Foundation hits the nail on the head when it says,

"The ideal tax system, !
whether at the local, state or federal level, is simple, trans!
parent, stable, neutral to business activity, and pro-growth. In such an ideal system, individuals and businesses would spend a minimum amount of resources to comply with the tax system, understand the true cost of the tax system, base their economic decisions solely on the merits of the transactions, without regard to tax implications, and not have the tax system impede their growth and prosperity."

Relying solely on ranking systems works only in a relative sense; what good is to be said of a tax system that ranks well to others if the model for our imitation is flawed? Let's use these established tax principles as a gauge as to whether or not our state is living up to these ideals, which have proven to lead to economic growth and prosperity.

Read more responses to the study at WashACE, the Everett Herald, Vancouver Columbian, and Puget Sound Business Journal.

Federal transparency bill moves step closer to floor vote

September 23, 2009 in Blog

Earlier this year Washington Congressman Brian Baird (D) introduced a
resolution calling for a 72-hour review period on
legislation before a vote could be taken. Baird's House Resolution 554 is co-sponsored by Rep. John
Culberson of Texas (R). Since House leadership has not scheduled the bill for a vote, Baird has joined with other Representatives to try to force floor action on the transparency proposal. According to The Hill:

"Democratic Rep. Brian Baird (Wash) has signed on to a discharge petition intended to force a floor vote on transparency legislation backed by Republicans.

If the petition wins 218 signatures, it would pave the way for a vote on legislation that would change House rules to require that bills are posted online for 72 hours before the House votes on them.

It is rare for a lawmaker to sign on to a discharge petition intended to force the leaders of his party to hold a floor vote. It is also considered to be a slap in the face of leaders.

Rep. Greg Wal!
den (R-Ore.) on Wednesday announced that Baird had signed on to the petition in comments on the House floor.

Baird was a cosponsor of the transparency legislation with Rep. John Culberson (R-Texas). The two introduced their bill in June, arguing it was intended to ensure that members have enough time to read through complicated bills before they vote.

The bill has 98 cosponsors, including many Democrats."

This type of transparency reform is one of WPC priorities for Washington state. From our Policy Guide:

To
facilitate public involvement, the legislature should adopt a 72-hour
timeout period in the legislative process once a budget, tax or
spending bill is introduced or amended. This would allow lawmakers and
the public a three-day period to calmly consider the two-year budget,
new taxes or new spending before legislative hearings or final voting
occurs.

A bill was introduced in Olympia this past session by Rep. Alexander (HB 1654) to create a five day review period for appropriation bills. Although a work session was held, no public hearing or vote occurred.

In other federal transparency news, the Senate Finance Committee rejected an amendment to post legislative language and cost estimates for the health care reform bill on line for 72-hours before the committee votes on the bill. As reported by Politico:

"The Finance Committee voted against an am!
endment that would have required legislative language and a cost estimate be posted on the Internet three-day before the committee votes on the bill. The change, offered by Republican Sen. Jim Bunning, failed 11-12, with Democratic Sen. Blanche Lincoln crossing party lines and voting with Republicans.

The committee did pass a Baucus amendment that requires a cost estimate and a plain-English explanation of the bill to be posted online before voting. The amendment passed on a party line vote.

The committee spent more than two hours debating the issue, not a good sign for those who want to make it home for dinner. There are dozens more amendments still to be debated."

DOR releases annual property tax report

September 21, 2009 in Blog

The Department of Revenue (DOR) today released its annual property tax report. DOR's "Property Tax Statistics 2009" provides details on property tax collections, assessments, legislation, history of significant changes and tax levies. According to DOR's press release:

Property tax revenue increased 5.4 percent to $8.6 billion in 2009, with nearly 70 percent of the increase stemming from new construction added to the tax rolls and higher voter-approved levies, the Washington State Department of Revenue reported today. 

About 1.6 percent -- $128 million of the $439 million in additional taxes over 2008 -- was due to regular tax increases on existing properties. The rest resulted from taxes on new construction and vote!
r-approved tax increases for schools and other taxing districts.

Revenues for schools, through local school levies and the state school levy, increased 5.7 percent to $4.7 billion, while county levies increased 3.6 percent to $1.4 billion, city levies rose 6.3 percent to $1.2 billion and junior taxing districts went up 5.3 percent to $1.4 billion.

Local voter-approved school levies and the state school levy accounted for 54 percent of property taxes, while counties received 16.6 percent and cities got 13.4 percent. Junior taxing districts, such as fire districts, hospitals, emergency medical services, ports and libraries, shared the remaining 15.9 percent.

The percentage share of taxes going to junior taxing districts has increased 51 percent over the past five years, from $915 million to $1.4 billion, due mainly to vot!
er-approval of higher taxes for fire districts, and the creati!
on of new taxing districts such as the King County ferry and flood districts.

Governor calls for spending cuts in response to revenue forecast

September 17, 2009 in Blog

Washington's budget outlook worsened by an additional $238 million today according to the state's Economic and Revenue Forecast Council.

According to the state's top economist, Dr. Arun Raha:

  • As stated in the economic review, the recession is almost certainly over, although risks remain
  • Commercial real estate, regional banks, and consumer spending pose the major threats to the recovery
  • Washington will recover faster than the nation thanks to the global recovery underway that will help our exports
  • The economy is very close to where we had predicted in June, and the outlook now is mildly more optimistic than both the June and September preliminary forecasts
  • Revenue collections lag the economic recovery, and are lower than the last forecast
  • Won’t feel like a recovery until at least the middle of 2010
  • We risk a double dip recession if consumer spending doesn’t improve 

In response to this news, Governor Gregoire said in a press release:

“Although we believe the recession has bottomed out, it will take some time for revenues to recover. I am preparing a supplemental budget request that accounts for the revenue shortfall we have experience since May.”

“The budget I signed in May was built on tough decisions that I made together with the Legislature. The shortfalls in the last two forecasts necessitate more spending cuts, as do the lawsuits that have restricted our ability to implement reductions.”

Victor Moore, Director of the Office of Financial Management, noted:

"Given the reductions we have seen this year, further cuts will be necessary to keep the budget in balance. We have reached a point where we have to !
consider eliminating discretionary programs in our supplemental budget.”

The focus on spending reductions versus tax increases is commendable. Earlier this year when the Legislature was considering tax increases, state and national economists warned that such action would further damage Washington’s economy and hamper economic recovery.

Review of Initiative 1033

September 17, 2009 in Blog

In November the people of Washington will vote on
Initiative 1033. The measure is sponsored by Tim Eyman and would create
a new revenue limit for the state, counties and cities with the goal of
annually reducing property taxes. Eyman calls Initiative 1033 the
“Lower Property Tax Act of 2009.” Initiative 1033 is the latest in a
series of initiatives considered by voters which seek to control the
growth of state government, though it is the first to include local
governments under its requirements, and it is the first to focus
primarily on providing ongoing tax rebates to property owners.

According to the state’s Office of Financial Management, passage of
Initiative 1033 would result in approximately $5.9 billion in state
property tax rebates and $2.8 billion in local property tax rebates
going to citizens by 2015. At the same time state and local revenue
available for spending increases would grow each year by an amount
based on population growth plus inflation. Eyman argues that Initiative
1033 attempts to close loopholes created by the legislature to an
earlier voter approved initiative, Initiative 601. Enacted by voters in
1993, Initiative 601 sought to improve on the shortcomings of
Initiative 62 adopted in 1979.

Here is WPC's brief review of the
previous state revenue and spending limits, a similar law in Colorado,
and of Initiative 1033: Citizens’ Guide to Initiative 1033

Appeals Court rules against GA contracting rules

September 15, 2009 in Blog

The state Appeals Court Division II ruled this morning to invalidate three of the Department of General Administration's (GA) rules for implementing the competitive contracting provisions of the 2002 Civil Service Reform. The ruling affirms a May 23, 2008, decision by Thurston County Superior Court Judge Chris Wickham. The Washington Federation of State Employees (WFSE) sued to have the rules thrown out.

At issue are WAC 236-51-006, 236-51-010(11) and 236-51-225. The controversy focuses on what it means to be a "displaced employee" due to an agency competitively contracting work.

The state noted in its href="http://www.washingtonpolicy.org/Centers/government/WFSEvGAbrief.pdf" target="_blank">legal brief:

Under General Administration’s rules, a fair bidding process is established allowing an agency to determine with relative ease and certainty which civil service employees would be entitled to the opportunities offered under RCW 41.06.142.  In contrast, the Federation’s approach would result in practical problems in agencies being able to identify which employees may access the opportunities set out in RCW 41.06.142(1)(b) and (c), i.e., to receive notice that the agency is  considering contracting, to offer alternatives, to form an employee business unit, to bid on the contract, and to be considered for employment if the contract is awarded to a non-employee business unit.  As discussed earlier, these are not theoretical problems.  If an agency fails to properly identify employees and ful!
fill the requirements under RCW 41.06.142 and General Administ!
ration’s rules, the agency might well have to begin the entire contract solicitation process over, resulting in a loss of money, time, and efficiency.

The Federation’s approach would also lead to absurd results if an employee business unit did win the contract.  Under the Federation’s approach, an agency could propose a contract that would cover some of the duties of one or more civil service employees but not result in the employees being laid off or reclassified.  The employees would continue to be fully employed by the agency, at the same salary, in the same job classifications.  However, the employees would be entitled to form an employee business unit and bid on the contract.  Assuming the employee business unit won the contract, when would the employee business unit members, who remain employed full time by the agency doing their normal duties, perform the contract?  On weekends?  At night?  Neither of these t!
imes may meet the agency’s need to be in communication with or have oversight over those performing the contract.  Or would such employees seek to cut back on their normal duties for the agency?  However, civil service employees have no right to unilaterally cut back on their hours . . .

The legislative history of the Personnel System Reform Act of 2002 does not show that General Administration’s rules defining displaced employee are inconsistent with RCW 41.06.142.  In its challenge below, the Federation argued that RCW 41.06.142 was intended to continue in place the statutory and judicial restrictions against contracting out that were in place prior to the 2002 act.  The Federation is incorrect in this assertion.

As discussed above, the 2002 reform act rested on three “legs”:  Granting greater collective bargaining rights to state employees; removing the general restriction against state agencies to contracting f!
or services customarily and historically performed by civil service emp!
loyees; and making various changes to the civil service system.  The Federation’s view that the 2002 reform act essentially retained the severe limitations on contracting out that were in existence prior to 2002 fails to acknowledge the political trade-offs that made passage of the 2002 act possible.  In exchange for full-scope collective bargaining, which some unions had been seeking for decades, state agencies got most of the restrictions lifted on contracting out civil service work.  The legislature did not retain the general prohibition against agencies contracting for services customarily and historically performed by civil service employees.  On the contrary, it repealed the statute (former RCW 41.06.380) that had embodied that general prohibition.

Even before today's ruling, the use of competitive contracting by state agencies under the 2002 reform has been less than stellar. A performance audit conducted by the Joint Legis!
lative Audit and Review Committee (JLARC) in January 2007 found:

“…few agencies have competitively contracted for services in the 16 months since receiving authorization 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.”

Regardless of whether the state appeals today's ruling on the GA rul!
es, Washington policymakers should simplify the bidding process to make!
it easier for agencies to use competition to improve services. Lawmakers should also shield contracting out from union and political influence by removing it from the collective bargaining process. Improving service to the public is too important to be a bargaining chip in government labor negotiations.