WashACE Blog

Editorials Call on Legislators to Control Spending, Limit Taxes

There's no shortage of budget advice for legislative leaders in Olympia.

The News Tribune editorial Sunday outlines a possible path lawmakers can take to get out of town on time. I like this bit describing the governor's approach to taxes.

Gregoire stepped off the curb first, but she wasn’t about to throw herself under the bus. Her $605 million package of targeted tax hikes might have been a screamer last year. In 2010, it’s what passes for restrained.

...Whatever type of tax, lawmakers have yet to prove that they need near what they’re asking. The burden is on the House and Senate to show why they need more.

The Seattle Times thinks the Democrats erred by scrapping the supermajority requirement.

Some of the revenue proposals would have received Republican votes. Putting together a budget would have been a struggle, but the Legislature could have followed the two-thirds rule on taxes.

Now, though, they're looking for a billion dollars in taxes without, as the Times routinely editorializes, without doing some necessary trimming of the state payroll.

In what is supposedly the greatest crisis since the Great Depression of the 1930s, the House plan would cut state employment — 97,853 full-time equivalent workers — by 0.2 percent. The Senate plan would cut it by 1.2 percent. Neither proposed budget takes away "step" increases — automatic pay raises for state employees not at the top of the pay scale.

...If the Democratic majority was willing to take on these issues, it would not be putting so many human services on the block in an attempt to raise nearly $1 billion in taxes.

The Yakima Herald-Republic takes a wry view of the mixed messages on tax policy coming from Olympia.

First, the governor wants to slap the hands of those reaching out for a can of sugary soda pop by laying on a sales tax of 5 cents for a 12-ounce can. But, instead of encouraging consumers to quaff something healthful like water, the governor does the opposite and saddles water sippers with an even higher tax -- amounting to 17 cents for a typical bottle.

The Herald-Republic does get it when it comes to "temporary" taxes.

And we should all take note of how lawmakers have linked together the words "temporary" and "taxes." With a simple majority now in force, don't expect this linkage to last for long. Somehow taxes remain in place. It's the temporary part that gets dropped by the wayside.

So does the Walla Walla Union-Bulletin.

The Wenatchee World calls foul on the hidden gas tax.

And in Friday's Puget Sound Business Journal, I wrote that the final days of the session would be a search for the Least Bad Alternative.

State Senate Narrowly Passes Spending Plan - No Agreement on Taxes to Pay for It

On Saturday, the State Senate adopted an operating budget with the bare minimum of 25 yes votes, with 19 no votes and 5 members excused. Curt Woodward's AP story explains it wasn't easy.

The Senate budget, a product of the Democratic majority, cleared its latest hurdle on a back-and-forth 25-19 vote. Several Democrats voted against their own budget, and a couple of senators had to switch their votes at the last minute to ensure the package would get the minimum number of "yes" votes required for approval.

The tax vote will be more difficult. Woodward writes:

As drafted, the Senate tax plan includes a three-tenths of a penny sales tax increase, a raft of deleted tax exemptions, and a $1-per-pack cigarette tax hike. But Democrats already are backing away from key portions, including a plan to drop the sales-tax exemption on the value of trade-in cars.

At least one Democrat who voted for the budget is not a sure bet for the tax vote.

[Sen. Chris] Marr said later he switched to yes “in the interest of moving ahead” but still has serious concerns that the budget cuts aren’t enough and proposed tax increases are too large.

...Although Democrats have 31 seats in the Senate, they don’t yet have 25 votes for a tax plan, Marr said: “Now we begin the discussions in earnest around loopholes and tax proposals.”

Senate Democrats post their account of the budget action here. Statements also from Republican leader Sen. Mike Hewitt and the GOP's budget leader Sen. Joe Zarelli.

Woodward reports that Democrats in both chambers are having trouble agreeing on taxes. Last week the Senate produced a tax plan that would have raised about $950 million.

Votes on bills to collect the revenue have not been scheduled, indicating there may not be support in the caucus.

That may not be enough money. At a Senate budget committee hearing Friday, Democrats restored what Republican members estimated was $70 million in spending.

And in the House, the on-again, off-again scheduled release of a revenue plan remains off again. unless you count this title-only bill. That doesn't mean they're not giving this a whole lot of thought. Jerry Cornfield's Petri Dish blog for the Everett Herald links to 8 pages of mostly bad revenue proposals submitted by House Democrats. 

Just a thought, here, but I'd guess that the smaller the revenue target, the better chance they have of getting agreement on how to reach it. Keep the tax number low, very low.

Legislators Still Split on Tax Hikes; Should Focus on Reining in Spending

The Seattle Times has another story today on the apparent stalemate in Olympia on tax increases. Andrew Garber writes,

...it increasingly appears the Legislature is high centered when it comes to increasing taxes.

...House Democrats have repeatedly delayed announcing the taxes they support increasing, saying they haven't yet reached a consensus. Their caucus has considered several options and was counting votes Friday to see which ones had the most support.

There's still a divide in the House between lawmakers who support a sales-tax increase and those who prefer closing tax exemptions as a way to raise money.

That's a choice Washington Roundtable president Steve Mullin described this way in yesterday's Times:

"Our view is, it's sort of like asking: 'Do you want death by lethal injection or death by hanging,' " Roundtable President Steve Mullin, said of sales taxes versus exemptions. "We'd prefer to stay alive."

In Washington State Wire, Erik Smith touches on a theme also found in Garber's story, suggesting business groups lean toward a sales tax.

The trouble is that the House and Senate proposals hit individual businesses in dozens of ways, some of which are not fully understood at this point, [Association of Washington Business lobbyists Amber] Carter said. And lawmakers might want to rethink the whole thing.

AWB isn’t endorsing a tax increase, mind you, she said, but there is some talk in Democratic circles of a one-cent sales tax increase that could raise $1 billion a year and avoid most of the troubles. “Lawmakers seem bent on raising taxes,” she said. “We’re not in favor of that. We feel the state should live within its means. But if taxes are raised, we feel that they should be broader-based and should not just place the burden on a few industries.”

The key message is clear: rein in spending. Business is not endorsing tax increases, or choosing between lethal injection or the noose. Lobbyists for specific industries will work to make sure their clients are not adversely affected by the tax changes being considered now. And, Smith writes here, one group - auto dealers - appear to have saved the sales tax credit for trade-ins.

It's premature to talk about tax hikes without having pushed hard to reopen public employee union contracts, considering reasonable privatization options, or  having done what's necessary to win federal Race to the Top funding. And, premature or not, tax hikes of the magnitude being discussed will increase unemployment and delay recovery. 

WashACE Friday Morning Briefing Posted to the Site

Each week, we post the WashACE Friday morning telephone briefing, held from 7:30 a.m. to 8:00 a.m. to our website. Listen here.

And to register for the call, sign up here. Everyone's welcome.

Looking for the Least Bad Alternative to Resolve State Budget Shortfall

In today's Puget Sound Business Journal, I have a column on the budget endgame. The piece was written before the House and Senate budget plans came out this week. But I think it holds up. The Senate revenue plan includes a 0.3 percentage point hike in the sales tax rate. The House continues to struggle with its work, having twice postponed release of a tax package. They may have one today, or maybe Monday. Least bad alternatives face stubborn opposition.

However they resolve the situation, there will be another crisis next year. Here's how I characterized it in the PSBJ:

A depressing inevitability haunts Olympia. Tacky rhetorical sunshine no longer brightens the dome. A “crisis too good to waste” has been wasted. The multibillion-dollar shortfall failed to spur innovation and restructuring.

Timing plays a role. Major reforms take time to implement. Savings are rarely realized immediately... With another shortfall expected next year, it might make sense to plan ahead.

But this has been the session of the here-and-now. Fiscal reforms — privatization, restructuring, right-sizing the state payroll — don’t get much attention. Why offend favored constituencies, like state workers, when doing so won’t solve the immediate problem? Even going after a minor giveback like furlough days, which will capture savings now, sparked a major union hissy fit. Overreacting to small stuff works well for powerful lobbies, who find they then have little to fear from major challenges to their hegemony.

Thirteen days remain in the regular session.

The Seattle Times has a good account of the tax discussions. The Everett Herald offers a thoughtful assessment of the tax plans that have been introduced. They also note the lack of restructuring during the fiscal crisis.

The state will likely continue doing things it shouldn't — such as distributing liquor — and state employees will avoid many of the pay and benefit cuts private-sector workers have been making for years. Meanwhile, important priorities like education will suffer.

This will be the key issue in this fall's legislative elections.

What do you think?

SurveyUSA Poll Finds Overwhelming Opposition to I-960 Repeal

Results here. Strikingly 60 percent of self-identified Democrats and 79 percent of Independents support a two-thirds majority for tax increase; Republican support for the requirement reached 89 percent.

Asked whether they thought repeal was the right or wrong thing today, 68 percent responded "wrong thing," including 79 percent of Republicans, 55 percent of Democrats, and 74 percent of Independents.

Tough vote.

Voter-Approved Taxpayer Protection Gone for Now - Economy Shows Signs of Weakness

Yesterday Gov. Gregoire signed legislation temporarily suspending the I-960 supermajority requirement for tax increases.

The initiative, approved by voters in 2007, requires two-thirds approval from legislators to raise taxes - a significant hurdle compared with the simple majority needed to pass other measures. The bill signed by Gregoire would pause most of the initiative's provisions until July 2011, when the next two-year budget cycle begins.

As the Times reports, some stuff remains.

The measure doesn't suspend all of the initiative: e-mail notifications sent to the public about proposed tax increases, including 10-year cost projections of the measures, will continue. However, the requirement of a nonbinding advisory vote by the public on taxes passed by the Legislature is suspended until July 2011. Also suspended was listing how lawmakers voted on taxes in the voter pamphlet sent out before elections.

Republicans had asked Gregoire to veto the section of the measure that suspends the public advisory vote on tax increases, but Gregoire signed the measure as it was passed by the Legislature.

The Washington Policy Center thinks it shouldn't be so easy to overturn the will of the voters.

Now, taxes can be passed with a simple majority. Senate Democrats are ready to roll. In the House, they're still working on it. 

All this occurs as evidence that unemployment continues to rise. Calculated Risk notes another uptick in initial unemployment claims.

The four-week average of weekly unemployment claims increased this week by 6,000 to 473,750.

The current level of 496,000 (and 4-week average of 473,750) are very high and suggest continuing job losses in February. This is the highest level since last November.

Also on Calculated Risk, a bleak economic report from the head of the Cleveland Fed, Sandra Pianalto.

Our current problem is a lack of job openings. In fact, the job-finding rate now stands at a historic low. Businesses are not creating new jobs very quickly, and where labor utilization is picking up, employers are simply restoring hours that had been previously cut.
...
So, to sum up, while we are likely now in a period of recovery, it doesn't really feel much like one.

Employers want to put people back to work. Increasing costs will continue to frustrate job creation.

Raising Taxes in a Down Economy

In this morning's column, I write about Idaho's attempts to capitalize on the Oregon tax vote.

Some left-leaning think tanks contend that tax increases will have the happy effect of stimulating economic growth. Oregonians may just have made their case for them. The Beaver State’s recent vote to boost taxes on business and the wealthy may well deliver a much-needed jolt … to the Idaho economy.

Idaho Statesman columnist Dan Popkey writes this week that Gov. Butch Otter is hard at work. He quotes Otter as seeking “incentives for folks to take flight from Oregon and come over here, because we’re getting a lot of phone calls about their tax increase.”

The state’s economic development office, Popkey reports, is developing strategies for luring businesses from Washington, Oregon, and California — Western states with higher taxes and aggressive business regulation. 

The Seattle Times again objects to the tax increases proposed by the governor, Senate Democrats, and the still-unreleased House Democratic plan. 

The affronts to taxpayers' sensibilities and their wallets were billowing out of the state Capitol Tuesday as legislative leaders released their proposed budgets with audacious revenue increases — the Senate would raise taxes by $918 million, including a boost in the sales tax, and the House by $857 million.

Last week, Gov. Chris Gregoire was a little more restrained, proposing about $605 million in new tax increases — still twice what this page feels is prudent while taxpayers struggle.

The Times also carries this example of the raise taxes to grow jobs argument.

And, in case you missed it, stories in the Olympian and Puget Sound Business Jounral discuss the Senate tax plans. 

Finally, see this Washington Research Council analysis of Gov. Gregoire's tax plan.

Reforming State Government ... Much Too Slowly

Yesterday, the Columbian editorial board objected to the Legislature's "two legged stool" approach to budgeting.

The governor and legislators are moving toward further infuriating both camps as they ponder both tax increases and service cuts. They see this two-legged stool as the only way to close a $2.8 billion budget gap, oblivious to every stool’s requirement of a minimum three legs.

Why do they keep focusing on two legs while paying virtually no attention to the third strategy: reforming state government overall?

The Olympian today tackles the reform question in  an extended editorial.

Paring back the size of government is proving to be more challenging than imagined.

... It’s clear that there is no political will to pursue substantive government reform efforts.

They applaud Sen. Jim Kastama's plan

The Puyallup Democrat says a panel of elder statesmen should be convened to make recommendations for government reform that lawmakers must either vote up or down — without changes. Kastama’s proposal is modeled after the Pentagon’s base-closing commission which has taken the politics out of difficult base-closing decisions across the country.

I'm not sure about it, but it's clear things aren't working now.

AWB president Don Brunell reflects on the Olympian editorial here.

Government must innovate, change and cost less.  The rest of the world makes that clear to us each and every day when they, for example,  build factories faster and with less expense to provide newer, cheaper and better products that American use every day. Change is painful, as businesses on Main Street, corporations like Boeing, and working families are learning.

House Proposes $857 Million in New Revenues - No Specifics Yet

House Democrats are rolling out their budget proposal now. The revenue package isn't defined - it comes out tomorrow - but they do provide this overview.