WashACE Blog

States Respond to Financial Turbulence

Stateline.org provides a nice roundup of stories on how state governments are responding to the financial mess. (Irrelevant query: What's the difference between a roundup and a rundown?)

This puts it in context.

?The feeling in the states is that this is going to be a tough fiscal 2009, and 2010 is looking difficult,�� said Scott Pattison, executive director of the National Association of State Budget Officers.

 

The tidal wave of bad news comes on the heels of an already brutal budget year that forced states to dip into rainy day funds, implement hiring freezes and put off projects to collectively plug deficits of more than $40 billion in their fiscal 2009 budgets? triple the $13 billion shortfall they weathered the previous year.

The helpful overview may also be a preview of our next legislative session.

Some bleak Medicaid news adds to spending pressure.

After two years of flat Medicaid enrollment? the same two years which also saw the smallest spending increases for the federal-state health insurance program for the poor? the failing economy has led to a dramatic growth both in enrollment and spending, according to a new report.

And this from our state.

Doug Porter, Washington state?s Medicaid director, said he has been given a goal of reducing expenses by 15 percent over the next two years. He said he will first cut new services provided by the state, such as interpreters for clients. After that, he would consider cutting payments to doctors, like the 48 percent hike to pediatricians the state enacted last year after years of increasing payments only by 1 or 2 percent. The last resort would be tightening eligibility for Medicaid, he said.

 

?We?re in survival mode here, trying to protect the core part of our program rather than improving our standards,�� he said.

And here's my column on the budget shortfall.

Putting the Financial Crisis in Political Context

Michael Barone places the "financial ructions" of the day in historical and political context in a brilliant and brief column published yesterday, before the debacle on the House floor.

You can sum up much of 20th century history by saying that in the 1930s Americans decided that markets didn't work and government did, and that in the 1970s Americans decided that government didn't work and markets did.

The protracted and painful experiences of those decades changed basic public attitudes on the balance between government and markets, between regulation and enterprise, between government aid programs and self-reliance. The breadlines and depression of the 1930s moved Americans in one direction; the gas lines and stagflation of the 1970s moved them in the other.

Which raises the question of whether the financial ructions of 2007-08 (09?) will move them back again.

He goes on to examine the passage of time has blunted collective memory, setting the stage for a pendular swing back to the 30s. Here's what's at stake.

Reviewing the long course of history, I think it's obvious that market capitalism, together with the rule of law, hard currency and regulations that ensure transparency and accountability, has produced bounteous growth and the resources to address problems that require government action, like defending the nation and protecting the environment.

Read the whole thing.

(Crossposted at Olympia Business Watch)

Budget Problems Spread

This morning's Seattle Times calls on gubernatorial candidates to be clear on how they're going to resolve the $3.2 billion budget problem without raising taxes. They agree with a no-new-taxes pledge.

That is the only rational position for a state that cannot abide higher taxes at a time of such economic fragility.

The Times also carried a great column by Jon Talton on the week that changed Seattle's economy. Make that the state's economy. Talton effectively makes the case for the importance of healthy headquarters companies. And warns that the worse may not be over.

Whatever one calls this economic distress, it is putting companies under stress they haven't seen in years? even decades? and shows no sign of letup.

That's why WashACE argues that lawmakers must evaluate every decision that make next year by asking: will this enhance or damage the economic competitiveness of our state's private employers?

Here's an example of  how states dig holes for themselves. (h/t stateline.org)

Gov. Rod Blagojevich's administration doesn't know who it's signed up for an enlarged health insurance program, how much money in premiums it's collected or even where that money is, according to a court ruling Friday that blocked the program's expansion.

Illinois' First District Appellate Court in Chicago upheld a lower court's decision to deny Blagojevich permission to broaden FamilyCare after he was rebuffed by the General Assembly and the secretary of state.

Expensive, open ended entitlements are always the wrong way to go.

State Unions Split on Contract - Does it Matter?

Members of the Washington Federation of State Employees voted to approve their new contract with the state. The Olympian's Adam Wilson notes:

The contract covers 33,000 workers in state government, and set the tone for other union deals: 2 percent raises and an extra day off in each of the two fiscal years it covers.

The News Tribune's Joe Turner probably has it right.

I wonder if the prospect of a $3.2 billion budget deficit for 2009-11 had any bearing on the rapid ratification of the contract. Workers may figure this is no time to dicker.

The Teamsters apparently are in a dickering mood.

Adam Wilson reports that at least one key legislator is willing to consider voting no on the deal.

Rep. Hans Dunshee, the Democrat who is likely to take over as budget chairman, described the contracts exactly like this: "I think we can?t eliminate any option at this point. Those are well negotiated and such, but we don?t even know what the situation is in February. So at this point I?d say any option should be talked about."

Washington CEO thinks the tide is about to turn in Olympia and Thurston County.

What do you think?

WashACE Competitiveness Redbook Released

Last week, we released the 2009 WashACE Competitiveness Redbook, a comprehensive guide to key indicators of the state's business climate. This year's edition includes 53 data tables, providing national and statewide comparisons on a diverse set of factors, including higher education enrollment, energy costs, state and local government employment, union membership and ... well, too many to list here.

Single copies of the book are available from WashACE founding member the Association of Washington Business.

Carl Gipson at the Washington Policy Center has already begun to pore through the data.

Welcome!

Thank you for visiting the Washington Alliance for a Competitive Economy (WashACE) website.

Perhaps you were drawn here by this radio ad. Or this one. Or maybe you saw this or this in your local newspaper. Regardless of how you found us, we're happy to have this opportunity to introduce ourselves.

WashACE was founded in 2000 as a partnership among the Association of Washington Business, Washington Research Council and Washington Roundtable to focus attention on issues relating to our state's economic competitiveness. In 2008, the Alliance was expanded to include a number of like-minded business associations and chambers of commerce. Here's a nice WashACE background article by Mike Flynn, former publisher of the Puget Sound Business Journal.

Over the years, WashACE has published a number of in-depth Competitiveness Briefs and Special Reports, examining issues from unemployment insurance to infrastructure, health care to education. A major issue for us this year is the looming $3 billion budget deficit lawmakers will be facing in January and its implications for families and employers.

Please take your time here. Review the blog posts below. Check out the 2008 research (link at right) and the archives. The candidate questionnaires. And sign up to be on our email list (form at top right).

And don't hesitate to email us with your suggestions, questions, and comments.

Thanks for stopping by.

Light Blogging Ahead

I'm heading north to the AWB Policy Summit and will have limited opportunities for blogging for the balance of the week. Watch TVW for the candidate debates Thursday. Should be a lively time.

New WashACE Competitiveness Brief on Unemployment Insurance

Yesterday, we released Make Unemployment Insurance Work, a Competitiveness Brief prepared by the Washington Research Council examining one of the critical issues before the 2009 Legislature.

The bottom line:

Washington?s unemployment insurance system remains one of the nation?s most generous.
The average benefit is fifth highest among the 50 states; the minimum benefit is second highest; the maximum benefit, sixth highest.    

Among the factors that must be addressed next session:

First, steps must be taken to bring the state UI system back into compliance with federal requirements. Members of the business community are working in a broad coalition to develop solutions, with technical assistance from the Employment Security Department.

Second, in accordance with the intent of the 2003 legislation, the Legislature should clarify that the statutory enumeration of 11 good causes for voluntarily quitting is exhaustive.

Third, while the UI tax rate of the average employer has declined significantly over the past several years, the state?s rates have remained among the nation?s highest. As a result, the state has built up an unnecessarily large balance in the UI trust fund. The Legislature should adjust the tax rate system to reduce the inflow of funds at times when the trust fund balance is high. 

It's a good overview of our system, recent reforms, and challenges ahead. I encourage you to read it all and share with your colleagues.

Check out the Candidate Questionnaire Link

If you've not visited our candidate questionnaire page, this would be a good time. We've recently added dozens of new completed questionnaires. Good information.

More Analysis of the State Budget Challenges

The Senate Ways and Means Committee updated its Six Year General Fund Outlook. While it differs slightly from the WashACE report released last week, the differences are minor and the bottom line is unaffected. A shortfall of $3.2 billion is projected for the 2009-2011 biennium. Draining the entire $728 million rainy day fund would still leave a gap of $2.5 billion. If the budget office succeeds in making the $200 million savings the governor ordered on top of the $90 million savings expected from the hiring and travel freeze, there's still plenty of work to do to close the gap. 

The Governor told the Columbian the rainy day fund may need to be tapped to manage the shortfall (h/t Jason Mercier).

Elsewhere in the papers, Sen. Joe Zarelli has an op-ed in the morning Seattle Times, giving his perspective on how the state's fiscal house can be put back in order.

And in the Herald of Everett, I write that the state has no budget crisis, it has a problem to manage. (My apologies for a transposition error in the "slice" number, which should be $529 million. Just a typo, it doesn't affect any of the analysis.)

Rushing to The Last Resort, the Budget and Policy Center calls for a sales tax increase.