WashACE Blog

Legislature Still Not Close to Resolving Budget, Tax Splits

It's beginning to look like Friday afternoon spitballing, tossing ideas against the wall to see what sticks. And the wall appears to be made of Teflon ... nothing adheres. The News Tribune reports that Gov. Gregoire has resurrected some tax ideas from early in the session. Soda pop and limiting a tax exemption for first mortgages are back on her list.

Jerry Cornfield in the Herald of Everett, notes that the governor initially proposed a budget with smaller tax hikes and more cuts. He asks a question more folks should be asking: Why not bridge the gap with more spending cuts? I bit.

"As long as they don't seem to be able to agree on taxes, it would be a pleasure to see them put the same kind of effort into finding $200 million in reductions,” said Richard Davis, coordinator of the Washington Alliance for a Competitive Economy.

Yesterday The News Tribune editorial page pointed out that this stalemate should have been resolved much earlier.

...the size of the shortfall hasn’t changed significantly since November. The gap was $2.6 billion late last year when Gov. Chris Gregoire released her all-cuts budget proposal; it has since inched up to $2.8 billion.

Lawmakers ran out the regular session’s clock after waiting far too long to get down to negotiating a state spending and taxing plan...

Lawmakers have had plenty of time to get it right; now they just need to get it done.

Right.

Employment Recovery Remains Distant

We showed this graph a while ago, comparing job losses in this recession with other post-WW II downturns. Here's an update, courtesy of Richard Florida's Creative Class blog via the Minnesota Fed.

Teachers' Unions and Race to the Top

Seeing the legislature adopt education reform that would better position the state for federal Race to the Top money was a WashACE priority this year. When the governor introduced her legislation, we and others were both surprised and concerned that she worked closely with the Washington Education Association in crafting the legislation. The teachers' union had not been a big supporter of several initiatives widely deemed critical to success in the federal competition. Charter schools and merit pay, for example, have been strenuously opposed by the WEA over the years.

Now that Round 1 grants have been awarded to Delaware and Tennessee it looks like Gregoire may have taken the wise route, at least in terms of winning the money. That may not be the best course for education reform, however, as the Wall Street Journal's Neil King Jr. writes: 

The Obama administration sent a core message to the states by picking just Delaware and Tennessee as winners in its $4.35 billion Race to the Top competition: Buy-in from unions and school districts matters, a lot.

Jay P. Greene, education scholar at the Manhattan Institute, is blunt: 

If people know that union opposition scuttles a state’s chances, then no state will apply in the future unless they have union support.  This means that the unions will dictate what reforms will be pursued, which means that there will be virtually no reform.  This enhancement of union power also undermines the rhetorical effects that RTTT had by narrowing state and local policy debate to those measures acceptable to the unions.

He's right.

Special Session Enters Week 3

As the session goes into its third week of overtime, there are reports of slight progress in breaking the sales tax impasse. Austin Jenkins writes at Crosscut that the Senate may be retreating from its insistence on a sales tax increase.

[Friday Senate Majority Leader LIsa] Brown ... offered the first hint that the Senate may blink first. She said she’s begun looking for $200 million in taxes that could replace the Senate’s proposed two-tenths-of-a-penny sales tax increase. What those alternative revenue sources might be, Brown isn’t yet saying.

In the Everett Herald, Gary Chandler, top lobbyist for the Association of Washington Business, reminds us that the longer this goes on, the riskier things become.

There wasn’t anything too bad or too good for business this year, but as Chandler told members of the Greater Marysville-Tulalip Chamber of Commerce, things are far from over yet. Lawmakers are in special session and still have to approve a budget. And they could basically deal with any other issue while they’re in Olympia.

“They may go back in and make changes in legislation to pick up a vote (on the budget),” said Chandler, a former legislator who owns a UPS store in Moses Lake.

For example, as we noted here, the employer gag rule may come back. The Kitsap Peninsula Business Journal has this.

Representative Bruce Chandler (R-Granger) has sent a letter to State Attorney General Rob McKenna asking for informal guidance on a proviso in the proposed 2010 supplemental operating budget [that he finds] is “eerily similar” to the Employer Gag Bill...

The attorney general’s office responded to Chandler that the proviso would likely “be preempted by federal labor law” and that the language has a “striking similarity between the proposed legislative language and the language in California statue invalidated in Brown vs. United States Chamber of Commerce.”

Pushing unconstitutional anti-business legislation seems like an utter waste of time ... but so does much of what's happened during this prolonged session. They need to get it right. And then they need to leave.

Intervention and Uncertainty Stalling Our Economic Recovery

Intervention and Uncertainty Stalling Our Economic Recovery

Good column by AWB president Don Brunell.

More on Public Employee Unions and Their Effect on Government Budgets

The Seattle Times runs on op-ed today by Bill Baldwin under the header Time to rethink dominance of Washington's public employee unions.

Public-sector unions achieve influence on both sides of the bargaining table by contributing to campaigns and organizing get--outthe-vote drives to elect politicians who control negotiations over their pay, benefits and work rules. It's a never-ending — and toxic — unsustainable cycle, and our state is paying the price.

I recommend you read the whole thing. And then consider this from LaborPains.org building on a Wall Street Journal story today.

No End in Sight for Special Session

The tax and spending impasse in Olympia continues. In this column, I comment on the budget stalemate.) The editorial board at the Herald of Everett thinks it's time for the governor to bring out the hammer.

She should state flatly that she’ll veto the Senate’s sales tax proposal, which she has said is too risky to a weak economy. That should be enough to break a stalemate that has already kept lawmakers in session for an extra two weeks.

And the Columbian is also fed up.

... they say that getting Democrats to agree on anything is like herding cats. This is an insult to cats. We suspect achieving the near-impossible fusion of feral felines would be much easier than trying to scratch out any progress in the state Legislature.

Some very slight progress in the appointment of a conference committee, as reported by the Spokesman-Review, also in the Herald.

Austin Jenkins reports that the Senate may be close to giving up on the sales tax increase. But, he concludes:

Bottom line: the Senate may be showing some signs of softening up, but a go-home deal does not yet appear anywhere close at hand.

Possibly complicating things next year, as if there's not enough to worry about, the environmentalists' attempted overreach with the hazardous substance tax this session has provoked a lawsuit that may lead to the total elimination of the tax. Jim Brunner has the story in the Seattle Times.

Angered by environmentalists' push to more than double the tax on oil and other chemicals, an association of gas-station owners has sued the state to overturn the tax altogether.

Filed this week in King County Superior Court, the lawsuit argues the state's hazardous-substances tax is unconstitutional.

Interesting times.

From Slo-Mo to No-Mo in Budget and Tax Negotiations

Along with most folks, I hope the headline for this post is wrong. Progress and a swift conclusion to a disappointing legislative session would be welcome. But the reports from Olympia are not encouraging.

Andrew Garber writes in the Seattle Times: The Legislature could be here a long time.

"I'm concerned we're going to be here longer than I hoped, perhaps much longer," said Sen. Ed Murray, D-Seattle, chairman of the Senate Democratic caucus.

It's the sales tax.

Murray said Senate Democrats met Monday and reaffirmed the caucus' support for increasing the sales tax.

House leaders have said they don't have the votes to boost the sales tax. However, House Majority Leader Lynn Kessler said it may be time for her caucus to count votes again and see if there's been any change in support. "Then you'd know how rigid the impasse is," she said.

As Garber reports, Kessler supports a sales tax increase. House Speaker Frank Chopp does not.

Although the governor has been asked by Kessler to make clear her intentions regarding a sales tax veto, she has so far declined the offer. In the Everett Herald, Jerry Cornfield provides some insight into her reluctance. 

[Senate Majority Leader Lisa] Brown said for [Gregoire] to pledge a veto would draw a line in the sand between the two chambers and hamper already difficult negotiations between the Senate and House.

The governor agrees.

Gregoire continued Monday to insist the veto card is on the table but she's not inclined to play it - or announce she won't play it - because of concern it will damage the conversation between the two chambers.

"I've been trying to be as prudent with power as I can in this special session so they can get negotiating," she said.

Yet, she consistently indicates her opposition to a sales tax increase. Cornfield detects a rationale for Kessler's request for a clear signal.

There may be strategy here in trying to force the governor's hand on the veto pen. Every day she does not announce a veto is one more day for pro-sales tax lawmakers in the House to gather their forces for a possible run at a vote in the caucus.

Not sure how that works for the governor. Or how long she'll let the negotiations play out. At the Washington Ledge, Austin Jenkins also covers the sales tax politics.

[Gregoire] wouldn’t vow to veto one, at least not yet, in an effort to give both sides “room to negotiate” but clearly Senate Democrats aren’t getting her message in their private talks. At what point would she make such a public statement?

“When they’re here too long, there are a lot of things I’ll have to say,” she said.

That just leaves us to wonder how long is "too long." Guess it depends on whom you ask.

An Income Tax Initiative in the Works?

Publicola reports on that an income tax initiative, naturally targeting "high earners," has been filed by a liberal Seattle attorney.

Progressive attorney Knoll Lowney has filed a potential statewide ballot initiative this year—I-1070— for a high-earners income tax (5 percent on income over $400,000 for couples and $200,000 for individuals). Lowney isn’t sure if he’s going forward with it yet.

But, as Josh Feit writes,

When the ballot title came back from the Attorney General’s office, there was no mention of high earners.

I suppose we'll see more such efforts. After all, Washington voters have been clamoring for another opportunity to express themselves on the subject.

Budget Stalemate Extends Special Session

The House apparently will not convene until Thursday. And maybe not then. Negotiations continue.

Chris Grygiel at SeattlePI.com writes that they don't expect to reach an agreement until next Monday. 

Senate Majority Leader Lisa Brown held a press availability this afternoon, which is available at TVW's Capitol Record. She makes it quite clear that the Senate is not prepared to accept key elements of the House package, nor does she intend to make additional spending cuts. 

At The Washington Ledge, public radio's Austin Jenkins reports that the House doesn't see a quick agreement either. 

...over in the House, Majority Caucus Liaison Larry Springer, D-Kirkland, who is on the revenue negotiating team, is skeptical that a deal down the middle is in the offing. He says lawmakers - in both chambers - are looking for "the right way out," not the "easy way out."

Springer calls the division between Democrats in the House and Senate a "fundamental disagreement."

This could take a while.