WashACE Blog

State Labor Council Garbles Tax Rankings

As the Washington Research Council reported earlier this month, the new state-local tax burden data is out from the Census Bureau. (When dealing with government data, it's important to take a broad perspective when considering the meaning of "new." The data are for 2008.)

For 2007/2008, we have calculated that the per capita tax burden on the average Washingtonian was $4,354, while the amount of tax revenue collected per $1,000 of personal income was $105.49. Washington ranked 16th among the 50 states in terms of taxes collected per capita, and 30th in terms of the tax burden per $1,000 of personal income.

It's common to use both measures, as we've written here before. In looking for a handy discussion of the per capita and per $1,000 PI number I came across this clearly written analysis by the New York State Department of Tax and Finance. An excerpt:

Per capita taxes are the dollar amount of total tax collections divided by the population of a state. Measuring state tax burdens by using per capita tax collections can seriously mislead the reader. This measure does not reflect ability to pay tax or the demographic composition of taxpayers. Also, as already mentioned, it does not indicate the amount of state tax paid by nonresident workers and consumers, or exported to the federal government through deductibility (i.e., tax incidence, or “who pays the tax”).

Taxes per $1,000 of personal income are the dollar amount of total collections divided by the personal income of the state’s residents in thousands of dollars. Dividing state tax collections by personal income provides a better indicator because it provides some measure of taxpayers’ ability to pay. However, like per capita measures, it does not show who actually pays state taxes. This measure of tax burden is necessarily imprecise as not all residents pay tax particularly corporate and certain selective sales taxes)

And then, for a very weird description of the measures and what they mean or don't mean there's this incomprehensible bit from the Washington State Labor Council.

Using personal income to measure tax rates takes into consideration the relative tax rates of different taxpayers at different income levels. Measuring tax rates on a per capita basis, however, assumes all citizens are identical, meaning wealthy individuals pay the same in taxes as low-income individuals for purposes of the calculation.

To be clear, using personal income to measure tax rates has absolutely nothing to do with consideration of the relative tax rates of different taxpayers at different income levels. NothingI

If - and I'm only guessing here because the WSLC statement is garbled at best - but if they're trying to suggest that the lower ranking on the PI measure has something to do with wealthy people paying relatively less here, they're wrong. It does have something to do with Washington having a relatively larger economy - personal income is a surrogate for the economy - and there's more economic wealth here than, say, Mississippi. One reason the economy is larger: People have invested and created jobs here, in part because we don't have an income tax.

Maybe if the union understood the rankings, it wouldn't be supporting bad tax policy, like I-1098.

MORE The Washington Research Council does the arithmetic here.

FInal Public Hearing on the Budget in Spokane Yesterday

I was unable to attend, but the Spokesman-Review story makes it clear that the dynamic we've discussed earlier play itself out once again. The headline says it all: "Spare services, cut taxes."

Much of Thursday’s state hearing in Spokane aimed at finding solutions to the state’s financial turmoil would do little to balance a two-year state budget that’s expected to be $3 billion out of whack.

State budget director Marty Brown nonetheless expects to glean good suggestions from the comments and suggestions on the state website set up to solicit ideas. No one said this would be easy.

Looking at the broader economic picture, the news nationally is not getting better. Some good discussion here at the Calculated Risk site. Bottom line:

If things go well, the economy will be back to pre-recession levels later this year or in 2011. No wonder there is so little investment. And no wonder there is so little hiring!

Until employment rebounds, state budgets will continue to be in trouble.

More on How Washington Lost Out in the Race to the Top Competition

Peter Callaghan in The News Tribune reflects on mistakes made and lessons to be learned from this state's early exist from the Race to the Top competition. I think he nails it and urge you to read the whole column. Gregoire and legislative leaders worked with the teachers' union on a "consensus" package of weak education reforms.

School superintendents and education advocacy groups including the League of Education Voters, Stand For Children, the PTA and the Washington Business Roundtable thought it was fine to put more rigor in teacher and principal evaluations as the bill proposed, but there also needed to be a loss of tenure for veteran teachers who are failing.

They also thought student performance as measured by assessments needed to be a mandatory part of those evaluations. And they thought evaluations should be created by the state, not by 295 districts after 295 union bargaining sessions.

[Superintendent of Public Instruction Randy] Dorn, despite standing with Gregoire at that January unveiling, said those flaws and the lack of charter school legislation would make it tough to win the federal competition.

All those are interesting ideas, Gregoire said. But none would have been accepted by the union, so they could not be included in the bill.

The most disturbing aspect of the whole thing may be in how state leaders reacted to the rejection. Callaghan writes:

What we have in the way of reform legislation, they say, is all we’re likely to get.

“It is a plan that reflects our views and values, is unique to our state and one that we know will work,” Gregoire said Tuesday in a joint statement with Dorn and current state education board chairman Jeff Vincent.

The News Tribune editorial board gets right to the point.

Washington’s education establishment – meaning its lawmakers, school districts and teachers unions – is so resistant to reform that not even the prospect of $250 million in the middle of a severe recession could persuade it to accept the necessary painful changes.

<snip>

Gregoire and Superintendent of Public Instruction Randy Dorn jointly issued a self-congratulatory statement about pursuing education reform “our way, the Washington way.”

“The Washington way.” It makes you want to weep.

Yes.

To Call Special Session or To Not Call Special Session? That is the Question

Austin Jenkins writes at The Washington Ledge that a special session is highly unlikely. A decision is expected soon.

Gregoire planned to hold a conference call [Thursday] with legislative leaders and will announce next week whether she will call a special session. She says she would want a guarantee from lawmakers that they would come in and out of session within 72 hours.

Democrats don't want to come back. This  letter from Reps. Kelli Linville and Ross Hunter makes that clear. After reviewing the available options for dealing with Congress's failure to deliver federal Medicaid money that the budget relies on, Linville and Hunter recommend that the governor make across-the-board cuts August 10, with the cuts to take effect September 1.

Though they stress that the action be taken "in consultation with legislative leaders," it's not clear what difference such consultation would make. Her options are clearly prescribed.

Jenkins' post quotes Senate majority leader Lisa Brown as agreeing with Linville and Hunter that lawmakers would be unable to reach a swift resolution on budget reductions. I think Sen. Zarelli makes a better argument.

Brad Shannon has the story in the Olympian.

Executive-ordered cuts would carve 3.5 percent to 4 percent out of virtually all state-funded programs — prisons, social programs, and universities alike — with exceptions only for basic education, debt payments and pensions. Prisons alone could have to cut $25 million despite moving to shutter two institutions and close two others later, Gregoire said.

She considers it a blunt and unsatisfactory instrument.

Gregoire said the law allowing across-the-board cuts is too blunt and she would like it amended next year. “I don’t think this is the right tool for a governor. The last time we used it was 1991. I think it is a ridiculous tool,” Gregoire said, referring to a lack of discretion on priorities that she would like a governor to have in situations like this one.

Jason Mercier at the Washington Policy Center agrees with her.

... authorize the Governor to make discretionary cuts (instead of across-the-board) to eliminate a projected deficit and leave up to a one percent reserve. Reductions in programs for the independently elected statewide officials could be contingent on approval from those officials.

This broader deficit reduction authority for the Governor would help incentivize lawmakers to leave an adequate reserve that can weather all but extraordinary drops in revenue while providing the Governor the flexibility to swiftly address a deficit in an intelligent manner.

As a former legislative budget staff guy - long ago in a land far away - I'm not a fan of executive discretion or flexibility. It's the legislature's job to write a budget. ("The executive proposes, the legislature disposes.") Sure it's tough to deal with this just weeks before an election. (Perhaps they should have left a larger reserve last spring. We certainly weren't the only ones thinking they skated too close to the line. The risks were apparent.

And so what it if it's tough? Legislators run for office in times like this precisely to do the tough job.

They shouldn't run from it now.

More on Yesterday's Budget Hearing

Don Brunell, AWB president and member of the governor's "transforming the state budget" committee gives his first-hand view of the Vancouver public hearing on the Olympia Business Watch blog.

Please read it. It's a positive view of a difficult situation, and closes with a good set of recommendations.

Transparency Can't Be Taken for Granted

In my column in The News Tribune this morning, I used the example of Bell, California, to make a larger point on budget transparency. (If you're not familiar with Bell, this link provides some context.) I also want to plug a group that works hard to make sure Washingtonians have access to good, timely information.

The Washington Coalition on Open Government – an indispensable group whose membership includes many of the state’s major news organizations – exists to spur compliance with open meetings and public records laws. They offer public education programs to assure citizens know their rights.

Just as Neighborhood Watch promotes safe neighborhoods, groups like WCOG and active civic volunteers – including bloggers and gadflies – secure transparent government. Public participation is always inconvenient and messy. Secrecy is government’s default position.

Grading on the Bell curve, Washington governments generally get high marks. The day we take transparency for granted is the day we begin to lose it.

Given the depths of our economic and budget problems, it's vital that we stay engaged and vigilant. And, in that regard, I commend to you this column by Erin McCallum of Enterprise Washington. She explains the importance of this election to a healthy private sector.

Transforming State Budget Hearing in Vancouver Yesterday

From this report in the Columbian, the Vancouver hearing followed the now familiar pattern of more pleas to preserve programs and services than good suggestions for reducing spending. There were exceptions, though.

Ron Wilson, a former teacher who now works as an investor, questioned the generous salaries and benefits many state workers receive. “A prudent thing for the state to do is to cut wages and not raise taxes,” he said to loud applause.

Speaking of generous benefits, the Wall Street Journal this morning reports on another study confirming the disparity between public and private sector compensation.

Finally, we noted yesterday the union complaint against Pierce County for using volunteers. Kathleen Merryman's column in The News Tribune goes deeper.

It’s not the first time local unions have moved against a volunteer initiative. The City of Tacoma union pulled a similar stunt last summer.

Put kindly, those charges indicate a break with the new reality of making the most of a lot less.

Put unkindly, they reflect an unwillingness to bend when the rest of us are pretzeled out. That inflexibility is hard to defend, even for people who appreciate what unions have done for us.

I liked this.

A few geraniums were not going to affect their job security.

Right.

Sen. Zarelli Calls for Special Session

Sen. Joe Zarelli, the Senate Republicans' top budget expert, called for a special session in the latest of his periodic budget TidBits. He says a special session is the best way to make sure the necessary reductions are smart and targeted and achieve long-term savings. And, he says, it's the only to leave an adequate reserve.

There are only two reasons not to choose a special session.
 
One, political expediency.  No legislator, in an election year where the public is
apparently as discontent as recent polls have shown (SurveyUSA July 23rd poll: 72%
disapprove of job Washington state Legislature is doing vs. 17% approve),7 wants to be
called away from the campaign trail into a highly-publicized, and likely very unpopular,
second special session.
 
Two, legislative incompetency.  If it became clear that legislators were simply not up to the task of making reductions, then it would be incumbent upon the governor to balance the budget via any means at her disposal.   

Neither reason should come into play.   

More here.

Opponents to I-1053 Supermajority Initiative Try Slimy Tactics

Misrepresentations during initiative campaigns are common as ants at a summer picnic. Yet I've not seen much to compare with the desperate efforts of groups opposing I-1053 to tie the initiative to the oil industry. Erik Smith does a great job of reporting on the issue in Washington State Wire. Read the whole thing, but I want to quote from it here.

This might seem a little strange to anyone who has been paying attention to Washington politics over the last 20 years or so, but a ballot measure that aims to make it harder to raise taxes turns out to be a wicked new scheme to bail out big oil companies.

Well? That’s what they’ve been saying on activist websites for the last couple of weeks, anyway. Lately the message has been picked up and repeated by sympathetic media outlets.

The facts say something else.

Although the campaign got a big chunk of change from the oil industry, it accounted for only about a fifth of the $1 million that was raised. That’s nothing by comparison with the other five initiatives heading toward the ballot this year. Of all the initiatives, I-1053 has the grassiest roots of the bunch.

Give AWB's top lobbyist Gary Chandler the last quote.

Chandler said business decided to back I-1053 after this year’s session was over, and Eyman’s campaign was already well-established in the field. The stakes are too big for business to ignore, he said.

Next year the Legislature will face a $3 billion shortfall, and if this year was any indication, lawmakers will turn almost immediately to tax increases, rather than spending cuts. They faced an enormous shortfall this year, too. They raised taxes, he said, but they couldn’t bring themselves to junk the state liquor stores or the state printer.

“All of us in our businesses have had to take a look at our spending,” he said. “We don’t have as much money coming in. And how do we keep our people employed? We’re looking at our core values. I don’t know that government has done that yet.”

To get all the facts on I-1053 and why it's necessary to pass it this year, visit YesOn1053.com

Union Complains that Pierce County Violated Contract, Got Work Done More Efficiently

OK, the union did not mention that bit about work getting done more efficiently. But this story from The News Tribune certainly leaves that impression. Here's the lede.

A union has filed a complaint with the state alleging that Pierce County edged union employees out of hours and pay by allowing nonunion workers and volunteers to do park maintenance work.

Then, some of the specifics.

The complaint says the county:

 • Scheduled nonunion temporary workers for the Martin Luther King Jr. Day holiday in January, even though union employees were willing to work overtime and in the past had right of first refusal.

 • Allowed nonunion workers, including those doing court-ordered community service, to do maintenance work during nonholiday hours without giving the union the chance to negotiate.

 • Allowed nonunion volunteers to do maintenance work at Gonyea and Dawson parks, which was previously done by union employees, without giving the union the chance to negotiate.

The Parks and Recreation director is quoted as saying she'd never knowingly violate the contract. The maintenance budget has experienced budget cuts. The complaint also charges that the county went around the union to speak directly to workers about possible facility closures and layoffs.

“The (county’s) actions have had the effect of chilling union activity and undermining support for the union,” the complaint says.

Contracts are contracts. But I'm guessing a lot of taxpayers may be applauding use of volunteers and avoiding paid overtime. Could be the Teamsters complaint will also have the effect of "undermining support for the union" in the broader community. It certainly looks that way from the comments on the TNT site.