Olympia Business Watch

State Supreme Court to Review Budget Mischief"

Remember the flap over the 2005 state budget? It's finally made it to the state Supreme Court.

David Ammons reports on yesterday's hearing. At issue is a series of accounting transfers used by lawmakers to lift the Initiative 601 spending limit and make it easier to raise tobacco and liquor taxes, along with the estate tax. The challenge was brought by the Evergreen Freedom Foundation, the Washington Farm Bureau, NFIB, the Grange, and BIAW. A Snohomish County Superior Court ruled that the transfers were a sham and threw out most of the tax increases. For technical reasons, the estate tax and cigarette taxes survived.

I wrote on this for a column in The News Tribune earlier this month. The issues are bigger than just the fate of a few sin taxes. At risk is the ability of voters to impose tax and spending limits by initiative.

AWB filed a friend of the court brief defending the constitutionality of I-601.

Support for Postponing WASL Math Requirement

"Reluctant support" looks like the majority verdict on the proposal by Gov. Chris Gregoire and Superintendent of Public Instruction Terry Bergeson to delay the WASL math graduation requirement for three years. A story in The News Tribune quotes leaders of the Washington Roundtable and the Partnership for Learning as backing the delay, with reservations, while insisting on stronger math requirements and improved performance .

Editorials supporting accepting the move ran today in The News Tribune, the Seattle P-I, the Seattle Times, and The Daily News. Nobody is enthusiastic about the stutter step. All emphasize the importance of holding schools and students accountable for their performance. The Union Bulletin thinks there's still time to get it right without pushing the deadline back.

We would prefer not to retreat from the WASL and high standards. It sends the wrong signal. It says the state really wasn't serious about setting high standards.

If the problem is the way in which math is being taught, as Gregoire said Monday, then address the issue throughout the education system. The standards set by the state should nevertheless remain valid.

The failure rate is too high, all agree. It makes sense to fix the problems in math education before imposing a standard too many students can't meet.

Don't Get Too Comfortable

In his column in the Columbian, AWB president Don Brunell reminds lawmakers that  good times rarely roll on for ever. The crux:

Our elected officials need to remember that costs and quality are the driving factors in the marketplace... Consequently, companies are always looking for ways to reduce their costs...

Today, taxes, economic incentives, workers' comp, and unemployment insurance costs, highly educated and skilled workers, and regulations are critical decision-making­ factors. Legislators can help keep Washington strong by continually considering the impacts their decisions have on the cost of doing business in our state.

He recalls the shock waves sent by the loss of Boeing corporate headquarters and the competition to land the 787 business here. The state found its competitive footing and the employment base grew. Now, he says, "Nurturing those jobs is the task of the current crop of legislators, because fortunes can turn in an instant."

Read it all.

Reviewing the Massachusetts Health Care Plan

Health care reform is the perennial "everybody talks about it, but nobody does anything" issue. Even when a state takes action, as Washington did - unwisely - back in 1993, the absence of consensus quickly unravels the scheme.

Massachusetts bucked the trend, with a bipartisan package adopted last spring. Other states are looking to see how the plan succeeds in combining free market mechanisms, an employer fee, and a universal coverage requirement. With Gov. Mitt Romney a leading 2008 GOP presidential contender, the state's health care reform would get a lot of play anyway.

But with health care reform still a dominant legislative issue, the MA plan is getting a lot of scrutiny. For background, check out these links from the Kaiser Family Foundation, the Heritage Foundation, the Forums Institute for Public Policy (New Jersey), and the New America Foundation.

I wrote a column for AWB on the MA reform last spring. At the time, I thought it was too early to tell how the plan would work. After hearing a discussion in August at the National Conference for State Legislature's annual meeting in Nashville, I'm convinced that's true. But it's worth following.

Streamlined Sales Tax Defended

State Senator Debbie Regala (D-Tacoma) has an op-ed in today's Seattle P-I, responding to concerns raised by a couple of Seattle Port Commissioners that the streamlined sales tax may end up skewing land-use decisions.

AWB supported the SST legislation sponsored by Sen. Regala, who has the better of this argument.

WASL Performance Still Not Adding Up

With nearly half the class failing the WASL math requirement, Gov. Chris Gregoire and Superintendent of Public Instruction Terry Bergeson will ask the Legislature to ease the requirement for now. The Seattle Post-Intelligencer says that under their plan, the math portion of the WASL would not be a graduation requirement until 2011. In the meantime, students will be allowed to graduate if they either pass the WASL or "rigorous math classes."

Math has been a stumbling block for Washington high-schoolers, and only a little more than half the state's sophomores passed the math portion of the test last spring. In Seattle, about 55 percent of the city's sophomores passed the math test.

Students would still be required to pass the reading and writing portions of the test. The science WASL is not scheduled as a requirement until 2010.

 

The Seattle Times quotes Washington Roundtable vice president Marc Frazer as saying the business group is not retreating on its insistence on standards.

"We believe the WASL has put a bright light on the deficiencies of math education in the state. Now the state needs to remediate itself."

AWB and the Roundtable have been strong supporters of the WASL requirements, recognizing that our economic competitiveness depends on an educated workforce. More important, our students deserve an education that allows them to succeed in a demanding and constantly changing economy.

Fund Education First

For months, Rep. Glenn Anderson (R-Fall City) has been promoting his plan to "fund education first" to any one who would listen. Basically, Anderson argues that, since providing education is the "paramount duty" of the state, it makes sense to set the education budget first. After that, let all the other priorities compete for the rest of the money.

The Herald is buying it. Their Sunday editorial concludes:

Funding education first would have a positive ripple effect on the rest of the budget, because it would force an open, honest look at spending priorities. Think of what that could do for voter trust.

The editorial board of the Seattle Post-Intelligencer is nearly there:

One Republican legislator has offered a bracing way to focus the Legislature's attention on education. Rep. Glenn Anderson, R- Fall City, author of a dissenting minority report on the forthcoming Washington Learns Report, suggests requiring that the Legislature adopt the education budget before the rest of the budget. It might be a way to keep priorities straight.

With the Washington Learns report expected to dominate education debate  next session, Anderson's idea is certainly worth a closer look.

How Problems Compound

Two former legislators - and retired teachers - explain to The Columbian why an unaffordable, unjustified pension benefit is a good thing. Hint: It gives retirees more money.

Nonsense.

As AWB president Don Brunell wrote in his column last January:

The program was supposed to pay for itself.

But there was a flaw. Because of the way the law was written, the gain-sharing payments permanently increased pension benefits for tens of thousands of state workers. ...

To date, the legislature’s "no-cost" gain-sharing program has increased the state’s pension obligation by $2 billion. Fortunately, the legislation contains a “kill switch” that allows lawmakers to end the gain-sharing program at any time. They should do just that and the sooner the better.

But more than that, they should take a lesson from what happened. Benefits have costs. There is no free lunch. If you provide a benefit, you must be able to pay for it.

Too often, when lawmakers make a mistake, as they did with gain-sharing, it's the taxpayers who pay for it. This one they can fix now. And should.

 

A Strict Budget Diet this Holiday Season

AWB and its WashACE partners, the Washington Roundtable and the Washington Research Council, have  warned that the state's temporary budget surplus does not justify a spending binge in 2007. Today, the Seattle Times weighed in again on the subject:

SPENDING lobbyists who expect a feast in Olympia should curb their appetites. The feast has been eaten. That was the 15.3-percent jump in state spending in the two-year period ending June 30, 2007.

The money's all been spent. If education is a priority, then lawmakers need to cut elsewhere.

In The News Tribune, Peter Callaghan made a similar point on Sunday, observing that the state's structural deficit - longterm spending obligations exceeding anticipated revenues - guarantees future problems.  His solution:

Two things can be done to cure such a deficit: The state could spend less or tax more. And if you no longer want to spend less, tax cuts only make the structural deficit worse. Rejecting calls for tax cuts can actually make a legislator seem responsible, even serious.

What lawmakers should do: Ask voters to amend the state constitution to create a tough rainy day account that can’t be spent until the economy sours, negating the need for recession tax hikes and budget cuts.

In a few weeks, Gov. Chris Gregoire releases her budget plan. She and her budget chief have said they intend to be prudent. No one seriously worries about tax hikes next year. The danger is overspending.