WashACE Blog

Practically the End of a Tough Legislative Session - Some Good Competitiveness Outcomes

About 11 hours after the 2009 legislative session adjourned, Gov. Gregoire announced her plans to call lawmakers back for a special session to clean up unfinished business. She'd like it to be short, a day or two, and limited to a handful of items necessary to implement the budget. Not everyone's enthusiastic.

It's important to take time to recognize that in a very difficult year, the Legislature accomplished some noteworthy things, foremost among them: balancing a budget without general tax increases. Critics may point at the heavy reliance on one-time money, including the federal stimulus cash, and the likelihood of another shortfall in the next budget. While that argument has validity, it's more important to note that lawmakers bought themselves - and us - another two years to transition to a sustainable spending level, we hope in a stronger economy. Tax hikes would have further hammered struggling families and businesses, delaying the recovery. Commend lawmakers for making the right budget decisions and avoiding new taxes.

Also, at the eleventh hour (literally), lawmakers adopted a clean unemployment insurance reform bill after the House receded from problematic amendments that would have led to a certain tax hike, particularly on mid-size Main Street businesses. Along with a balanced budget that did not rely on new taxes, UI reform has been a top WashACE priority. Thanks to all who contacted their legislators in the last few weeks!

Some other good things:

• Higher eduction budget cuts, inevitable this year, have been made less challengng (not easy) with tuition flexibility for colleges and universities.
• Progress on two critical transportation projects - the 520 bridge and a bored tunnel replacement for the Alaskan Way Viaduct.
• A three-year delay in paid family leave. (Better to see it repealed, but we'll take a delay.)
• The Employer Gag Rule (aka Worker Privacy Act) disappeared, at least for a while.

We'll have more on what did and didn't happen this session in the coming weeks. Facing considerable challenges, lawmakers were able to take meaningful steps to improve our economic competitiveness. That's no small accomplishment.

UI Reform Back to the House

Last night the Senate passed SB 5963, rejecting two bad amendments placed on the bill in the House. Here's Jennifer Sullivan's Seattle Times story.

The proposal will return to the House with the request that representatives drop amendments that would:

• Increase the amount of benefits paid to unemployed workers, up to $20 per week.


• Solidify a state Supreme Court decision from last summer that said some employees who quit voluntarily can receive state benefits.

The Senate bill is a responsible measure that protects the UI trust fund, brings state policy into compliance with federal law, avoids job destroying tax hikes, and restores unambiguous policy regarding employees who voluntarily leave their jobs. It originally passed the Senate in March on a 38-11, with bipartisan support. In the House, the amended bill passed narrowly, 53-45, Representatives should now quickly accept the Senate version.

UI Reform Back to the House

House Passes Fee on Petroleum Products - Equivalent of 4 Cent-a-Gallon Gas Tax HIke

The House just voted, 51-44, to adopt HB 1614, a new fee on petroleum refined in Washington. It looks like a tax to me.

It now goes to the Senate.

"House Passed Operating Budget, May be a While Before We Know What's In It"

Budget work typically involves lots of behind-the-scenes scrubbing and analysis (along with some dealing and trading), followed by apparently hurried voting on a bill that few lawmakers have read. And even with that scenario in mind, this year's legislative session has ended with unusually little public discussion of the final budget.

The House-Senate compromise budget, developed by the majority party, was released early yesterday and passed by the House last night. Brad Shannon writes in the Olympian that Republicans are crying foul. First, because they weren't involved. And then...

And of course the GOP does not like the content of the budget, once members looked at it.

"I think it looks exactly as I would have feared: Empty promises," Rep. Gary Alexander, R-Thurston County, said tonight. "It sets us up for a significant deficit when we come back in 2011 of over $10 billion. ... It's a credit card budget. They just raised their credit card limit and promised we'll pay it off sometime in the future. We're just not sure when.''

There's little doubt that this budget fails to solve the ongoing problem of shortfalls, though that $10 billion estimate is higher than anything I've seen. As the last year and a half of quarterly revenue forecasts has shown, economists have a tough time accurately predicting the future. Easily, though, we can see a shortfall of more than $4 billion in the coming biennium.

TNT political reporter Joe Turner also runs with Alexander's quote and adds this.

The budget relies on $3 billion in federal stimulus aid, $4 billion in cuts and a number of one-time moves to raid a rainy-day savings account, delay pension payments and shift money from construction accounts.

Turner has more on the budget here. And he points out the challenges facing the press corps - and through them, the public - in dealing with the mountain of budget detail in a very short time frame.

I generally am forced to rely on news releases and summaries handed out by the Legislature in writing my very first stories about the budgets -- and all three come out the same day (operating, capital transportation -- and I don't have a chance to read all the detail until after the Legislature adjourns.

We can expect to learn more over the next few weeks, before the governor signs the budget. Despite earlier promises from lawmakers, this has not been a transparent process. That's perhaps understandable when you consider the difficulty in cutting $4 billion from planned spending, but it does contribute to public skepticism about the process.

Speaking of skepticism, the PI reports estimates from the state budget office of $270 million in new taxes and fees over the next two years.

Seattle Times Provides Good Final Hours UI Advice to Legislature

Great editorial this morning in the Seattle Times: Now's not the time to raise payroll taxes.

In the middle of an economic crisis, it makes no sense to make it more expensive to hire a worker.

Just such a measure, Senate Bill 5963, is now in the final steps in the Legislature. The bill would make unemployment pay more generous for workers who qualify for less than the $541 maximum weekly benefit — an increase that is almost certain to trigger an increase in payroll taxes.

The Times editorial board points out that Washington employers already pay among the nation's highest unemployment taxes and unemployed workers here receive among the nation's most generous benefits,

WashACE has written a lot about this in recent weeks, most recently here. The Senate must reject the costly amendments placed on the bill in the House. As amended by the House, SB 5963 will cost the state good jobs.

"Close on Budget Agreement, Still No Deal on Taxes"

Democratic House and Senate budget negotiators have reached agreement on a spending plan that they'll unveil to their caucuses today. Here's how Brad Shannon of the Olympian reported it last night.

The House hopes to give it a floor vote as soon as Friday, leaving just a couple days for the Senate to hear it briefly in committee then vote to concur.

House Ways and Means Committee chair Kelli Linville, D-Bellingham, said the agreement was reached this evening on major issues, including agreement on K-12 public schools and higher education. Negotiators in the two chambers are working out provisos and language, a task that likely would go well into the wee hours of Thursday.

Rich Roesler has more in his Spokesman-Review blog, including this bit on prospects for a tax package.

The budget does not include a proposed state income tax or three-tenths of a cent sales tax hike. Lawmakers have floated both ideas — which would need voter approval — as a way to offset hundreds of millions of dollars in cuts.

The income tax proposal now seems highly unlikely, and the sales tax plan appears to be faltering.

Shannon reports that three or four tax hikes are theoretically in play, at least for a while.

None seems likely, and for good reason as a couple of good editorials make clear.

Tracey Warner weighs the arguments of tax critics and tax supporters in the Wenatchee World.

People don't die for lack of tax hikes, [tax opponents] say.

Perhaps, but some people are dying for them.

And the Columbian editorial board says, "this is the worst time and the worst place to violate the 'no tax increases' principle."

Right.

"Income Tax Plan, Not Dead but Sleeping in the Senate"

Senate Democrats held a press conference this afternoon to discuss the high earners income tax. Majority Leader Lisa Brown says it won't move this session but may come back soon. Rich Roesler has a good account of the discussion.

This really is becoming more urgent every year," said Sen. Jeanne Kohl-Welles, D-Seattle. "Our tax system is really not only unfair, but it's also out of kilter. She said she'll introduce a bill in a day or two for a sales tax on gum and candy, with the money going to children's health care... But she also said that the bill is unlikely to go anywhere in the legislative session's final few days.

Not dead, just sleeping.

"The point is: we can't stop discussing this," said Kohl-Welles, who has repeatedly introduced bills to launch a state income tax.

Not sure that "cant stop talking about taxes" is a theme that sells well with a lot of Washingtonians.

Niki Sullivan at TVW's Capital Record blog has an excellent series of posts on the conference and will soon link to the video.

Brad Shannon's report on the press conference includes some insight into the thinking of House Democrats.

In the House, Majority Leader Lynn Kessler, D-Hoquiam, said a caucus last night on four different taxes produced lukewarm interest, and she speculated that the caucus was tired. She said there appeared to be more enthusiasm for Rep. Hans Dunshee's jobs proposal, which is a $3 billion bond project to upgrade energy systems and improve safety at schools, universities and public buildings.

But Brown said she detects little support for a bond but that the Senate Democrats would consider a sales-tax proposal if the House can approve it.

Joe Turner writes in the Political Buzz that House leaders don't have the votes to pass the sales tax increase. And he includes a copy of the letter SEIU is distributing to legislators urging them to send the tax hike to the public. It's about what you'd expect: Bad things will happen without new revenues and, once properly educated, the public will support new taxes. Not convincing.

With just a few days left to adjournment, it's clear that Democrats can't find a tax plan that gathers majority support. It's time they quit looking for one.

UPDATE The Seattle Times is reporting that Rep. Eric Pettigrew, prime sponsor of the sales tax proposal, now says it's dead. (h/t Jason Mercier)

No Enthusiasm for Tax Hike

Passing out of committee 8-7 may be about as good as it gets for the proposed 0.3 percentage point hike in the sales tax rate for health care and targeted tax relief for low income people.Rich Roesler has a good account of the committee discussion. TVW has the hearing and the Republican press conference here. Brad Shannon's report is here.

Although the hospital association tells TNT reporter Joe Turner that they support putting it on the ballot, they're noncommittal about plans to fund the campaign. The News Tribune also today takes a thoughtful editorial look at the claim that "people will die" if voters don't support the tax hike.

From the editorial:

... we're dismayed that lawmakers seem bent on giving state workers their automatic "step" increases and keeping their share of health insurance premiums well below what private-sector workers pay. Meanwhile, they're talking about kicking thousands of low-income Washingtonians off the Basic Health Plan.

How about putting the sacred cows on the ballot, and protecting the poor in the actual budget?

If the Legislature decides to punt and tell voters that vital social services are theirs to save, it will be a dereliction of duty. And yes, people might die. But the fault won't be lawmakers' for not sending a tax measure to the ballot. It will be theirs for neglecting their job.

In my column today, I compare the final days of the session to a game show. We've just entered Double Jeopardy, where anything can happen. Let lawmakers know how you feel about new taxes.

Not Taking Boeing for Granted

In the last few weeks, we've seen two good reports assessing Washington's competitiveness for aerospace and the consequences to the economy of losing The Boeing Company. In his column in the Columbian, AWB president Don Brunell lays it out clearly. We're not competitive.

In Washington, Boeing faces higher unemployment insurance costs regulatory costs and labor strife — four strikes in recent years with 202 days of lost work.

Brunell notes that this year's Legislature has not only failed to improve our competitive position, but in several cases threatens to take us backward.

Take unemployment insurance:

... the Deloitte study recommends reducing employers' unemployment insurance costs to be more in line with competing states. State lawmakers reformed unemployment insurance costs in 2003 to convince Boeing to assemble the 787 in Washington, but later reneged on many of those key reforms. Currently, Washington's unemployment insurance costs are among the highest in the nation. But instead of lowering them, some key lawmakers in Olympia are pushing bills backed by union leaders to increase unemployment benefits and allow workers who voluntarily quit their jobs to receive full benefits.

And workers' compensation:

For the past 100 years, workers' compensation claims have been handled in an informal administrative process that doesn't involve trial lawyers. The employer works with an employee's doctors to manage the injured worker's treatment and eventual return to work. But the new law bans employers from speaking to injured workers' doctors once an appeal is filed. As a result, employers — and often workers — will be forced to hire attorneys for the more formal and time-consuming process of taking depositions, and as the delays drag on, legal costs pile up ...

Read the whole column.

Jerry Cornfield in the Herald of Everett reports that the House voted last night to approve an aerospace training institute but balked at endorsing the governor's proposed aerospace training council. If we get UI, workers' compensation, and labor relations wrong, last night's legislation won't make much difference in a cost-sensitive global competition to land good aerospace jobs.