WashACE Blog

Speaker Chopp, Let our legislators go home: Allow the House to vote on workers' comp

Make no mistake, the main thing holding the Legislature in Olympia is Speaker Frank Chopp who, in lock-step with organized labor, is setting the stage for double-digit increases in workers' comp rates. The increases will primarily hit small, locally based businesses in Washington, and the current stand-off in Olympia threatens to require a second 30-day special session.  Here are some of our regulars on the current status of work compensation reform and a budget for the upcoming 2011-13 biennium: 

House should allow vote on crucial reform, Everett Herald, and House should allow vote on workers’ comp reform, The News Tribune, Richard Davis

Something’s About to Give on Worker’s Comp – But What?, Washington State Wire, Erik Smith 

TVW takes a revealing look at Oregon's workers' comp success story, Olympia Business Watch Blog

State preps for July shutdown as budget talks stall, Associated Press, Mike Baker 

Freshman Dems propose tax increases on home buyers

Brad Shannon reports this morning on new taxes proposed by freshman Democrats in the House:

Freshmen Democrats in the House introduced a bill that targets favorable tax treatment for large home lenders and out-of-state shoppers. They say it would raise $170 million for K-3 programs in public schools....

...HB 2078 specifically targets first-mortgage interest earnings of banks that exceed $100 million a year and would end tax breaks for out-of-state shoppers. It would raise more than $80 million a year from each tax.

Missing in this representation of the mortgage interest earnings exemption, in particular, is that if the tax exemptions mortgage lenders now enjoy in Washington were eliminated, banks would pass the tax on through to home buyers.

Result: Home purchases become more expensive and Washington's current housing market, which is struggling mightily to recover, takes another hit.

The continuing hew and cry for "closing tax loopholes" is misleading many into believing there is some quick revenue fix for balancing the state budget. But budget challenges in Olympia have been for some time and continue to be due to legislative over-commitment of state taxpayers to unsustainably high spending.  

Richard Davis's blog on the Washington Research Council's tax loopholes paper and  a subsequent Crosscut column explain the role and complexities of tax exemptions in Washington's tax system. 

The News Tribune calls "'Loophole repeal: An imaginary budget solution," saying 

the “loopholes” targeted by the protestors tend to fall into two categories: Expendable but piddly, and potentially lucrative but also justified.

Not everyone in the political environment currently surrounding the budget debate is interested in fully understanding the why's and wherefore's  -- as they say, "you don't want to wreck a good story with the facts!" -- but the information on tax exemptions is available. 

With revenue and certainty down, biennial spending plans should undershoot forecasts

Chief state economist Arun Raha announced this morning that estimated revenues available for the 2011-13 biennium are down an additional $700 million from earlier forecasts.

Governor Gregoire, responding to Raha's report, urged the Legislature to develop long-term budget solutions, avoiding one-time fixes. 

“We can’t rely on short-term solutions,” Gregoire said. “Short-term solutions may cause less pain now, but we need a budget that is both sustainable and long-term.”

WRC President Richard Davis wrote in January that the earlier $4.5 to $5.5 billion budget deficit should more accurately be understood to be about $2.5 billion. This is because the higher deficit estimates include about $2 billion in spending that has never actually been spent...on programs like voter-approved initatives 728 and 732 (class-size reduction and teacher pay). These programs, as well as more recent education finance reforms, are on hold due to insufficient funding. 

Nonetheless, even without counting these items, the budget hole has now deepened to more than $3 billion and there is no reason to believe that future forecasts will improve the revenue outlook. On the contrary, global economic conditions are more likely to contribute to a worsening revenue picture yet. Anticipating continuing reductions in revenue forecasts, Davis wrote earlier this week that lawmakers "should underspend the forecast..." for the next biennium.

We can't afford the government we've created, says Davis. Savings outlined in Thrive Washington papers being produced jointly by the Washington Research Council and the Washington Roundtable provide a roadmap for how to prioritize spending within the budget shortfall that exists.  In dialing back the state's spending commitments we should...after funding those mandated activities like basic education and public safety and health...maintain our commitments to the greatest extent possible to those activities, like higher education and transportation infrastructure, that will contribute to the state's long-term economic recovery.

Coming up next -- legislative townhalls tomorrow in districts around State

Now that we've past the first legislative cut-off, the pace in Olympia promises to quicken.

Lawmakers will be in their districts tomorrow conducting townhall meetings. Labor is mobilizing its supporters to turn out at these events. They want to kill workers comp reform and to increase business taxes in order to continue the unsustainable spending practices that have gotten us into this mess. Here are labor's talking points. 

Business owners need to turn out for these meetings, too.

Tell you legislators that higher taxes and employer costs work against economic recovery and job creation.

Here's the  Legislative Townhall Schedule as it stands currently (we will update it, as we confirm additional meetings). Please try to attend to one in your area tomorrow.

Tell your legislators that higher taxes are NOT the answer.

Tell them that we don't need more studies on workers' comp, we need action now in the House to allow injured workers to settle their claims and get back to work. Explain to them that sensible reforms, which are already working to save money in 44 other states, passed out of the Senate with strong bi-partisan support and the support of the Governor's office. Tell your representatives to get behind SSB 5566 and work to adopt it in the House, too, and send it to the Governor's desk for signature. 

Don't create artificial regulatory barriers to entry

Government regulation is often the source of concern for business, so it can be confusing when existing private providers of a service ask for government intervention.

The legislature seems poised to help soil and wetland scientists this year with SB 5225 and its companion HB 1313, which are both moving through in their respective committees with "do pass" recommendations.

In his opinion column this weekend Danny Westneat questions (cleverly and appropriately) the scientists' request. 

Government can place a heavy foot on the scales of fair competition, creating (intentionally or not) artificial and harmful barriers to entry.

Calling out the "sweet grandfather clause" in this legislation, Westneat writes: 

There may be a need to license workers in wetlands, just as there is in, say, hospitals. But this bill gives away its intentions in the fine print. First, it declares an emergency...then it exempts anyone already working as a wetlands specialist from having to take the certification test.

Opponents say the bill's added costs, unintended consequences, and expansion of government create confusion without solving the issues it attempts to address.

Greens priority would cost Lewis County 300 jobs

State revenues are slow, but environmentalists and healthcare advocates with their legislative partners, still want to tax more, layoff workers, increase energy prices, and jeopardize the rural economy of Lewis County area.

Katie Schmidt posted on the TNT political blog that a bill sponsored by Senator Phil Rockefeller (D, Bainbridge Island) would phase out TransAlta’s coal-fired plant in Lewis County by 2020. 

Environmental groups and healthcare workers said coal-fired electricity is too harmful to go on...

Workers at TransAlta and residents of Lewis County, though, pointed out that the plant provides about 300 well-paying jobs in an area plagued by unemployment...

TransAlta USA president, Lou Florence, said the plant pays an average salary of about $88,000 per year. According to the Office of Financial Management, the median household income in Lewis County is about $42,000 per year.

This is one of the environmental community’s top four objectives for this legislative session. 

Am I missing something?

January tax collections down; optimistic forecast flat

Arun Raha, the state’s economic forecaster, reported this week that revenue collections are coming in lower than expected in his November forecast. There are several one-time events, which served to make the picture a bit brighter temporarily, but the upshot is:

 For this collection period [November 11, 2010 to February 10, 2011], year-over-year adjusted (for one-time factors, such as the large refund) Revenue Act growth was 2.5%. If the impact of the change in Revenue Act payment patterns is also taken into account, the adjusted year-over-year growth in Revenue Act collections is estimated to be 8.0%. Our November forecast had expected 10.4%.

 Despite this less-than-stellar picture, Peter Callahan blogs that Raha continues to be optimistic about Washington’s economic recovery.

 

UI compromise signed into law

Bipartisan legislation was signed into law late Friday afternoon by Governor Gregoire. SB 5135 and EHB 1091 relieve 90 percent of Washington employers of $366 million in new UI taxes in 2011. They also extend UI benefits for 70,000 Washington workers and their families.

 

Don Brunell contrasts Washington’s unemployment situation with that of California and other states.

 

Public employee unions driving states' budget problems

In my column this morning I look at the disconnect between the union agenda in Olympia and the interests of Washington employers, taxpayers, and ... not incidentally ... the members of private sector unions who depend on a growing economy.

A more pointed commentary in the Wall Street Journal by Fred Siegel reminds us of how recently public employee unions emerged as a political force.

In the 1930s, New York Mayor Fiorello LaGuardia warned against it as an infringement on democratic freedoms that threatened the ability of government to represent the broad needs of the citizenry. And in a 1937 letter to the head of an organization of federal workers, FDR noted that "a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable."

Private-sector union leaders were also divided. George Meany, the president of the AFL-CIO from 1955-1979 who came out of the building trades, argued that it was "impossible to bargain collectively with the government." Private unionists more generally worried that rather than winning a greater share of profits, public-sector labor would be extracting taxes from a public that included their own workers.

As events unfolded, the worries proved prophetic. Read the whole thing.

In related news, teachers' unions are increasingly being challenged for their opposition to education reform across the country. Here, Gov. Gregoire continues to support math and science graduation requirements.

Watch on TVW, which also shows her opposition to labor's call for a UI dependent's benefit.

Unemployment insurance reforms require swift legislative action - let them know now

Business groups urge immediate action on important unempllymnet insurance reforms that will provide  tax relief to employers. We wrote about Gov. Gregoire's proposal here. In his column, in the Columbian, AWB president Don Brunell provides both personal and professional persepctive.Read the whole thing - here's the policy crux:

This year, employers are asking the Legislature for relief. They’re requesting a temporary reduction in UI premiums until the economy improves. After recovery, the employers will repay that money into the state’s UI trust fund to ensure our state can pay unemployment benefits without borrowing from the federal government.

...When high UI costs stifle an employer’s ability to create jobs, no one wins. After all, a paycheck always beats an unemployment check.

AWB also provides a useful video primer on the issue here. And a link to the governor's press conference restating her commitment to meaningful reform.

At the Washington Ledge, Austin Jenkins breaks out the divisions between organized labor, which wants to add a new UI entitlement, and the governor and business community, whose focus is on tax relief and job creation. (My characterization, not his.)

Jerry Cornfield at the Everett Herald reports on Boeing's support for the governor's proposal.

More background in t the Seattle Times and the Associated Press.

Last updated January 25, 2011 1:32 p.m. PT