Washington Research Council Blog

Boeing CEO explains what business wants from the other Washington

A good op-ed by Boeing CEO Jim McNerney appears in today's Wall Street Journal.

For the good of the nation, our elected leaders must now find it within themselves to pass sound laws, regulate judiciously, and put aside escalating tactical political battles. If the super committee succeeds [in its deficit-reduction mission], the White House and Congress should build on the momentum and:

• enact comprehensive, pro-growth tax reform that benefits everyone;

• proceed with regulatory reform; and

• reform and restructure existing entitlement programs.

Some will dismiss these prescriptions as the same tired lines from business. Others, rather than offer solutions, may take another opportunity to demonize all businesses for the part a small few had in contributing to the recession. But political leaders must rise above the vitriol and focus the country on the future.

Sound advice for this Washington too.

Governor wants state workers to pay more for health care benefits...they decline

State workers enjoy significantly richer health care benefits than do most private sector employees, as documented in this Thrive Washington paper.

Currently, Washington pays 88 percent of the premium costs for state employees for individual or family coverage.  In 2003-05, state employees paid, on average, 16.3 percent of the cost of their coverage (up from 6 percent in FY2001).  In 2005, the first budget enacted after public employees were allowed to bargain collectively, the state employee share of premium costs was reduced to the current 12 percent.

By comparison, the 2010 survey of employer health benefits conducted by the Kaiser Family Foundation and Health Research and Education Trust found that “on average (covered workers) contribute 19 percent of the total premium for single coverage (up from 17 percent in 2009) and 30 percent for family coverage (up from 2 percent in 2009).”

The latest collective bargaining agreement boosted the 12 percent to 15 percent - the governor had proposed workers pay 26 percent. Still, as the Kaiser Foundation reports, state employees have an uncommonly good deal.

The governor yesterday asked to reopen the contract to reduce state costs in the face of a $2 billion shortfall. Union groups quickly declined her invitation. According to the Seattle Times,

The governor's office said it still proposes to reduce by $16 million the state's contribution to employee health-care benefits this biennium. Gregoire's office maintains that would not affect the benefits because workers are tapping their insurance at a lower rate than previously anticipated, so that money would be missed.

Sounds like a pretty easy giveback - the money's apparently not needed to cover benefit costs anyway. Yet, the WFSE says,

 Federation Executive Director Greg Devereux told the WashingtonStateWire.com on Wednesday:

“‘State employees have given as much or more than anyone else in our state, and they are tired of this administration and the Legislature feeling like there are an endless amount of takeaways,’ he said. ‘All [the governor] has to do is look out the window and see Occupy Olympia, Occupy Seattle, Occupy Spokane. People are fed up.’ [Ed. note: That's a heck of a view from the dome.]

“Devereux said it makes more sense for the Legislature to order a three percent cut in all corporate tax breaks. ‘I think if we do that the $2 billion deficit goes away. Let’s just have a 3 percent across the board cut on all tax breaks.

Washington Policy Center analyst Jason Mercier notes the politics and the implications:

The unions' refusal to cooperate with the Governor's request is not surprising. Unions exist to fight for their members, not to advocate for policy that is in the best interest of taxpayers. This why it is incumbent on the Legislature to have the authority to weigh all spending requests equally in the context of the priorities of all taxpayers and citizens and not be cut out of budget decisions totaling millions of dollars.

All of which underscores the point made in a thoughtful editorial in the Herald of Everett.

 

If [proposed new revenue is] not accompanied by meaningful budget reforms that minimize the chance of further shortfalls, though, good luck getting it past skeptical, recession-battered voters.

 

Yes.

Taxes on table in NY, Colorado; California governor wants pension reform

As Washington lawmakers look at bleak budget options, they may find some guidance in proposals elsewhere.

Colorado voters decide the fate of Proposition 103 next Tuesday. Stateline.org describes it this way:

Proposition 103, a measure that would increase sales and income taxes to provide money for public education. The controversial measure, which would generate $2.9 billion over the five years the tax increase would be in effect, is lauded by supporters as “standing up for better schools” and vilified by opponents as a “job killer.” 

The arguments don't change much from state to state. 

The most recent poll, taken in August by the group Public Policy Polling, showed opposition to the measure leading by a margin of 47 percent to 45 percent — well within the four percent margin of error. 

While that looks close, any tax hike polling that low this close to the election has to be considered a long shot.

In New York, a millionaire's tax is scheduled to expire at the end of the year. Gov. Cuomo wants to let it go; predictably, a lot of folks disagree with him. Here's a link to the story at NPR.

The competitiveness of this state is hurt when you're one of the highest tax states in the nation, and businesses and people are more mobile than ever before," Cuomo said. "I also believe that point is all but inarguable."

True. But he's getting an argument anyway from the OWS crowd, liberal activists, and union leaders. (That's not entirely redundant, though there's obvious overlap.)

Tackling the spending side of the ledger, California Gov. Jerry Brown wants pension reform. Calculated Risk says if he's successful, it's a model for other states.

A big "if" ...

The San Francisco Chronicle outlines the plan:

Gov. Jerry Brown unveiled a 12-point proposal on Thursday aimed at shrinking the costs of public employee pension benefits in California, in part by raising the retirement age for most new employees from 55 to 67.

The plan would affect state, city, county and other public workers, including teachers, police and firefighters. Public safety workers would be allowed to retire with full benefits before the age of 67 depending on their ability to perform their jobs.

Brown also called for workers to increase contributions toward their benefits, and wants to institute a "hybrid" pension model that would combine traditional pensions with a 401(k)-style plan. The Democratic governor's plan would require that all public workers pay as much into their retirement savings as the government does, and is forecast to save from $4 billion to $11 billion in public funds over the next three decades.

While Washington faces a more manageable problem than California, Brown's plan represents the kind of thing we need to see more often. And, with a nod to the pro-tax movement in Colorado, New York, and elsewhere - including Washington - structural spending reforms like this will have to occur before voters embrace widespread tax increases.

Gregoire on Cutting $2 Billion from State Budget: "Dreadful"

Consider Gov. Gregoire's press conference yesterday the kickoff for the official annual budget contest (it just doesn't seem appropriate to call something this consequential a "game"). As Austin Jenkins writes in the Washington Ledge, the conference had an air of deja vu.

Throughout the recession, we've witnessed many such announcements, with many of the same expressions of frustration. Just last December, Gregoire unveiled a budget plan that included $4 billion in reductions, saying "I hate my budget." Don't mistake this, though for the boy crying wolf. Each round of cuts narrows the options and increases the risks. 

Her Budget Reduction Alternatives document makes for grim reading. Also at the link is her letter to lawmakers stating the need for at least $2 billion in spending cuts and suggesting that the November forecast will likely include more bad news. Among the cuts she thinks will be in her proposed supplemental budget:

•  
  • Eliminate the Basic Health Plan, ending subsidized health care to 35,000 low-income individuals. 
  • Cut off medical services to 21,000 people enrolled in the state’s Disability Lifeline and ADATSA (Alcoholism and Drug Abuse Treatment Support Act) programs. 
  • Trim 15 percent from the support we provide to our colleges and universities. 
  • Reduce levy equalization, which helps property poor districts, by 50 percent. 
  • Cut the length of supervision for all offenders, based on severity of offense. Sex offenders will be supervised for 24 months, and all other offenders, for 12 months. 

Although yesterday's news conference focused on takeaways, the governor said she'd also consider tax increases. Speculation that the all-cuts release was a strategy to soften up taxpayers and lawmakers for a revenue hike seems misplaced. The governor has a responsibility to produce a budget within available revenues. She did that. Clearly, she's not happy with it and this year appears more willing to entertain new taxes. Any revenue boost, however, will require voter approval. And most voters are in the same or worse shape as they were last year when they overwhelmingly endorsed I-1053 requiring a supermajority or voter approval for new taxes. 

More later.

Plenty of initial response and news coverage:

AWB: Gregoire lays out $2 billion in possible cuts, kicking off difficult budget debate

Washington State Budget and Policy Center: Is this the kind of state we want?

Washington Policy Center: Governor provides lawmakers with budget recommendations

Senate Democrats: Majority Leader Brown and Sen. Murray on governor's alternatives

Senate Republicans: Zarelli gives governor credit for sharing budget options early

House Republicans: House Republican leaders issue statements on governor's budget ideas 

House Democrats: Governor announces "dreadful" budget options

WFSE: All cuts budget options announced; urge legislators to cut tax breaks and raise revenue

Stories in the Seattle Times, The News Tribune, Columbian, Washington State Wire, Everett Herald, Yakima Herald-Republic, and Olympian.

Economic Assumption Changes for WA's Retirement Systems

Yesterday the Pension Funding Council met and agreed to make changes to the economic assumptions of state retirement systems, including lowering the investment return assumption from 8 percent to 7.9 percent for the 2013–15 biennium.  Additional reductions in later biennia were not agreed to at this time.

At the end of August, the Office of the State Actuary had released reports on the financial condition and long-term economic assumptions of the state's retirement systems.  The actuary is required to make these reports to the Pension Funding Council every two years. 

WRC Policy Briefs on Ballot Measures

Ballots are in the mail for the general election.  In case you missed any of them, here are our policy briefs on the ballot measures:

Initiative 1183 Would Produce Revenue Gains for State and Local Governments

State Analysts and WRC Agree: I-1183 Generates Positive State/Local Revenues

I-1125: Jamming Transportation Planning

I-1163: Once, Twice, Still Not a Priority

SJR 8206: A Prudent Savings Measure

Happy voting!

Preliminary September Employment Estimates Showing Washington Lost 18,400 Jobs Last Month Are Likely To Be Revised

The state Employment Security Department released preliminary estimates of September Employment this morning. These estimates show that the state lost 18,400 jobs (seasonally adjusted) from August to September; 7,600 of the lost jobs were in the private sector, and 10,800 were in the government sector.

Preliminary job estimates are, on occasion, substantially revised when more complete data become available. For example, the preliminary estimates for January of this year, (which were issued on March 1), showed that Washington had added 11,600 jobs in the private sector from December 2010 to January 2011, with a net gain of 11,000 jobs overall. Subsequent revisions have reduced the estimates of January job gains to 4,400 in the private sector and 3,200 overall. I expect this will be another occasion with substantial revisions to the private sector estimates.

Foie Gras Tourism: Economic Development Opportunity?

According to an artcle in today's New York Times, Californian's are bingeing of foie gras in advance of the ban scheduled to become effective in July 2012.  Perhaps this ban will provide a tourism opportunity for Washington State, complimentary to our promotion of wine tourism.

Foie gras tourism, of course, would be an even more natural line of business for Oregon.

Boom and Bust

The top story in Stateline today is all about Washington: "Boeing and Microsoft boom, but Washington State busts."  It's a downer of a story, which will be no surprise to anyone that's been paying attention to the state budget over the last few years.

The article says that Washington's budget problems stand out from those of other states and argues that some sources of the problem are our tax structure, stalled construction, and the economy in general, which is affecting consumer confidence.

Rep. Ed Orcutt is quoted: "I don’t know what we can do to encourage job growth. But we can do some things to stop discouraging it."  The article continues,

By and large, however, many state lawmakers have reluctantly come to the conclusion that fixing Washington’s economy, at least in the short term, is out of the state’s hands. State government cannot control what happens in the halls of Congress, and it cannot unfreeze national credit markets or drive home prices upward. Meanwhile, the deep budget cuts that are being planned for later this year are likely to result in more public-sector layoffs, perpetuating the bad news.

State lawmakers may not be able to fix the economy, but there are steps they can take to make state government more effective.  The Thrive Washington series set out a number of recommendations for the state along those lines.

Washington State at the Top in STEM-Related Jobs

Data developed by the consultancy Economic Modeling Specialists, Inc. show that in 2011 Washington State had the highest concentration of jobs in STEM (science, technology, engineering and mathematics) occupations among the 50 states, lagging only the District of Columbia. In Washington, 11.5 percent of net jobs added between 2001 and 2011 were STEM-related. For the nation as a whole, STEM's share of job growth was 3.5 percent.

In absolute terms, Washington State added 36,362 STEM-related jobs from 2001 to 2011, while California and Massachusetts actually lost STEM jobs (18,996 and 9,569 respectively).

Not surprisingly, more than 70 percent of our STEM jobs are in the Seattle area. However, Benton is the county with the highest STEM consentration in the state, ranking 15th highest among counties nationwide.

(h/t Susannah Malarkey and Chris Rivera)