Olympia Business Watch

More on Forbes "Best States" Report

I'd have missed this if Rich Roesler's Spokesman-Review blog hadn't linked to it. Rick Bender, president of the Labor Council, has a unique take on the Forbes report ranking Washington the fifth best state for business. (We've posted on it before here and I commented here.)

Bender thinks our state's successful because we're "worker friendly."

A few short years ago, it was fashionable among business lobbyists to declare -- as former Boeing executive Alan Mulally infamously said -- that "we suck." They said our state's highest-in-the-nation minimum wage, high unemployment benefits, high taxes and high workers' compensation costs were all, well, too high. ...

Thankfully, our leaders recognized that the struggling economy had little to do with state    policies. The 9-11 attacks decimated the airplane market and Boeing shed tens of thousands of jobs. The dot-com bust hit our state disproportionately hard. The phony Enron energy crisis delivered a death blow to our aluminum industry.

Although legislators briefly slashed unemployment benefits in a panic over whether Boeing would build its new Dreamliner here, state officials generally chose to ride out the       recession without unnecessarily harming working families. (With the support of Boeing, among others, most of those unemployment benefit cuts were quickly restored.)

He's got a lot of the history right. In the months prior to the 9-11 attacks, business groups had raised legitimate concerns about the high cost of operating in Washington. That's when AWB, the Washington Roundtable, and the Washington Research Council formed the Washington Alliance for a Competitive Economy (WashACE). And, after Boeing announced its headquarters move to Chicago, the dot-com bubble burst, and the nation was sliding into recession, with Washington leading the way, Gov. Gary Locke formed the Washington Competitiveness Council to understand how to improve the state business climate. Locke cited the work of WashACE at the time.

But the Labor Council overlooks a few things. Boeing and the business community fought hard for the UI reforms, which were essential to winning the Dreamliner competition and important to many other businesses. Regulatory reforms coming out of the Competitiveness Council's work has improved the business climate, as Forbes reported. And, of course, there was that big cost-reducing incentive package
that sealed the Dreamliner deal.

While I've expressed concerns about business costs (Forbes ranked us 33rd best), good news is good news. As long as we don't forget the work that goes into maintaining a competitive economy, Washington can continue to be a good place for employers and workers. For certain, it won't be a good place for workers if their jobs go out of state. There's a lot of work left to be done.

U.S. Senators Introduce Free Market Health Plan

With health care very much on my mind this week, I couldn’t help but notice a recent article in The Olympian about a new plan to bring universal health insurance to the United States:

WASHINGTON - A group of conservative Republican senators put forth a plan Thursday that seeks to ensure every American has health insurance - a cause long championed by the political left.

The bill encourages families to find their own health coverage and offers refundable tax credits of up to $5,400 per family.

Introduced by Sen. Mel Martinez, R-Fla., with co-sponsors Sens. Richard Burr, R-N.C.; Tom Coburn, R-Okla.; Bob Corker, R-Tenn.; and Elizabeth Dole, R-N.C., the measure, known as the Every American Insured Act (S. 1886) would, according to Burr:

….give patients "buying power" by allowing them to hunt for personalized coverage.

[Burr] said the tax credit would cover an employment family health benefit worth up to $15,000.

Also from Burr:

One of my greatest fears is that continuing high health care costs will force companies to dump their employee health care plans and millions of Americans and their families will be left without health care insurance. We must prevent this dangerous scenario by giving individuals control over their health care so they do not have to rely on their employers or the government for their health care. The ‘Every American Insured Health Act’ does just that…. Personal freedom means owning your own health care without the fear of losing your job, your employer taking your insurance away, or being forced into a government-run health care plan. We encourage all Americans to own their own homes, so why don’t we encourage people to own their own health care?

….The plan is budget neutral and puts an end to unfair discrimination in the IRS tax code that only benefits health coverage offered by employers and that disproportionately subsidizes Americans with more costly health plans and with higher incomes….

The plan also improves health insurance affordability in state marketplaces by turning patients into shoppers and giving them buying power. As millions of uninsured Americans purchase coverage for the first time, health care costs for all Americans will decline. The ‘Every American Insured Health Act’ also creates the pathway for statewide insurance pools to reduce costs and help high risk individuals access affordable coverage….

Although the actual text of the bill is not yet publicly available, I’m already interested in reading the fine print. This measure only goes to show that there are, indeed, free market-oriented health care solutions.

Brunell Column: Business & Government Should Play by the Same Rules

Don's column in today's Columbian considers how lighter regulation of government finance places taxpayers and investors at risk. Citing a recent speech by Christopher Cox, Don writes:

Christopher Cox, chairman of the Securities and Exchange Commission, says shaky financial management in the public sector puts investors and taxpayers at risk. He's calling for tougher scrutiny of state and local governments.

To make his case, Cox points to the financial collapse of New York City in the 1970s. A decade later, our state added buckets of red ink to the ledger with the billion-dollar default by the Washington Public Power Supply System.

What's happening here?

Washington performs better than many state and local governments, both in disclosure and performance. Still, we could do better.

Washington owes its public employee pension fund $5.7 billion. ... for the past four years, Washington lawmakers skipped the recommended payments to whittle down that debt.

This year, despite sitting on a $2 billion surplus, state lawmakers decided not to pay those missed payments. And because pension funds are invested, just one missed payment costs taxpayers $564 million in lost investment income.

 

it's a good column.

Monday Links 7-30-07

The earth has rotated  seven or so times, which means it's time for this week's Monday Links.

- Last week, Oregon State University released a rather harsh and extensive report on alternative fuels. In this study they conclude:

" For all three biofuels evaluated (corn-based ethanol, canola-based biodiesel, and cellulosic wood-based ethanol), energy independence is achieved at costs that are 6 to 28 times higher than for other policy options such as raising the gas tax or tightening corporate average fuel economy (CAFE) standards."

Ouch. Oregon State University isn't the first university questioning the economics of biofuels. A study done jointly by Cornell University and University of California-Berkley in 2005 also takes a critical look at the cost of biodiesel. A few weeks ago, Don Brunell took a look at the impact of biofuels production on corn prices.

- Another big transportation ask... $350 million for needed Transportation projects.

- In entertainment news, according to a rumor on Huckleberries Online (done by the Spokesman Review's D.F. Oliveria) Paris Hilton may be buying a condo in Northern Idaho. Yeah... right...

- The TNT did an interesting feature about the rapid expansion of the Port of Tacoma. It is good insight piece into the growth and expansion of the importance of international commerce to Tacoma.

- Washington wines are gaining ground in Japan. This article in the Yakima Herald really shows the moxie of the Washington Wine Commission and a few driven individuals who open up new frontiers for Washington's businesses.

- Second quarter economic numbers spring back from a slow winter. With rising energy prices, inflation, and sluggish housing sales, this is a surprise. The one thing that makes me nervous about this economy is that:

“Economists had been mystified about how consumers could keep boosting their buying even as the value of their most valuable possessions -- their homes -- was skidding.”

Recommendation of the Week (other than to join AWB) Seattle Sounders versus Portland Timbers, Wednesday, August 1 2007
7:00pm PT, Qwest Field

Let’s face it, ever since the Sonics and Blazers went into the toilet this has been the most fierce and enjoyable rivalry between the Emerald and Rose cities. This year is especially tight with the Timbers and Sounders neck and neck for both the league and the Cascadia Cup. The game on Wednesday will have huge implications for both sides. Can my beloved Timbers slam the door shut for the league title? Can Seattle seal the Cascadia Cup? Will Dan and the Timber Army make it out of Seattle alive? Can Timber Jim do his forward handsprings on Qwest’s slick turf? Will Dan make it through work on Thursday with a horse voice, a headache, and having the distinct smells of cheap beer, smoke bombs, and sweat pulsating from his pours?

General admission tickets are only $13 a person and plenty of good seats will be available.

Sicko: The Sequel

More thoughts on Michael Moore’s Sicko:

Although Sicko is ostensibly non-fiction, filmmaker Stuart Browning’s comments appear to support the portrayal of Canadian health care in two films by Denys Arcand, one of Canada’s most acclaimed filmmakers. In Jesus of Montreal, a man receives a head injury and wanders from hospital emergency room to hospital emergency room, always forced to go through reams of paperwork and waiting long periods for the treatment he needs, but never receives. When one emergency room finally does take him, it is too late, and he dies on the operating table.

Arcand’s The Barabarian Invasions also sheds light on Canada care by showing the plight of a cancer patient in Montreal who must take an ambulance ride across the U.S. border to Burlington, Vermont, in order to receive an MRI, for which there is an impossibly long waiting list back home in Canada. While Arcand’s films may be fictional, they have much more of the ring of truth than Moore’s propaganda.

As for Sicko’s portrayal of Cuba as a kind of medical paradise, I have a great deal of trouble believing that the high level of care afforded to the Americans Moore brought to Havana is at accessible by typical citizens in the land of barely running ’59 De Sotos and decaying buildings and infrastructure that even Moore’s fawning cameras can’t hide.

I remember years ago on a visit to Russia, in the bad old days when the hammer and sickle still flew over the Kremlin, the terror I felt when I came down with pneumonia and began facing the possibility of seeking health care in the “free” Soviet medical system where standards were low, supplies were short, and practices like reusing hypodermic needles were commonplace.

In his promotion of Cuba, which slavishly (and foolishly) modeled its entire system on the flawed Soviet model, Moore comes off as the proverbial useful idiot for a failing regime.

When I was in Russia, Radio Moscow approached our tour group for an interview. We refused since we knew our recorded comments would become fodder for promoting the totally repugnant Soviet regime. It was just basic common sense - something Michael Moore apparently lacks.

As one would expect from a guy who built an entire film, Roger & Me, around the lie that Roger Smith, General Motors chairman and CEO, was afraid to sit down for an on camera interview in regard to a Flint, Michigan, plant closure, Moore plays fast and loose with the truth throughout Sicko. For one, his claim that there are 47 million uninsured Americans is bogus. According to an article from the Business & Media Institute:

The actual total [of uninsured Americans] is open to debate. But there are millions of people who should be excluded from that tally, including: those who aren’t American citizens, people who can afford their own insurance, and people who already qualify for government coverage but haven’t signed up.

Government statistics also show 45 percent of those without insurance will have insurance again within four months after job transitions.

Accounting for all those factors, one prominent study places the total for the long-term uninsured as low as 8.2 million – a very different reality than the media and national health care advocates claim.

Another flaw in Sicko is its refusal to consider free market solutions to problems in the U.S. health care system. Moore spends a lot of time attacking HMOs and health insurance companies, but Sicko never mentions health savings accounts, association health plans or other alternatives that are successfully providing health insurance for many individuals and small businesses.

AWB’s health care objectives nicely sum up the problems with our less-than-perfect health care system, but also point to some real solutions Moore ignored:

Causes for [health care cost] increases include: (1) the introduction of expensive new medical technology and drugs have raised the expectations of patients and providers for successful outcomes; (2) financial support for government programs (e.g. Medicaid and Medicare) have seen dramatic reductions; (3) government regulations (e.g. mandated benefits) add to the cost problem and limit choices for purchasers of health care; and (4) rising malpractice insurance premiums due to increased litigation. These factors, along with an aging population and the need to cover the costs of uncompensated care, put upward pressure on insurance premiums.

Private and public entities should continue efforts to address the major problems associated with rising health care costs. Certainly, citizens should adopt healthier lifestyles. And, in the process of receiving care, they should be more aware of the costs and efficacy of their treatments. Government policies should be revised to reduce unnecessary regulations, most particularly mandated benefits. Insurers should be permitted to offer affordable basic health care plans, free of many of these mandates, along with those that may contain more options.

Unfortunately, Moore’s agenda is not finding solutions to the U.S. health care system’s problems. The National Centerfor Policy Analysis’ John C. Goodman says it well:

“Sicko” isn’t a movie about health care and how to fix it. It is a one-sided attempt to drive a very specific agenda – single-payer, government-run health care.

The problems with America’s health care system are complex. Simplistic solutions, like socialized medicine, are false cures that are much worse than the disease.

SHRM Survey Pans FMLA

As we in Washington continue our march toward paid family leave, our friends at the Society for Human Resource Management remind us today that the original unpaid version of the law, the Family and Medical Leave Act continues to vex business owners and managers.  For example:

Nearly 40 percent of human resource (HR) professionals report that confusion over implementation of the Family and Medical Leave Act has led to illegitimate leave being granted, according to a report released today by the Society for Human Resource Management (SHRM).

The big stumbling blocks continue to surround what's called "intermittent leave" -- taking leave sporadically and in small chunks here and there -- and the elasticity over what constitutes a qualifying "serious health condition." 

The SHRM report notes these difficulties certainly dampen incentives to offer more generous leave policies.

The number of organizations that offer job protected leave above and beyond FMLA regulations fell from 59 percent in 2003 to 44 percent in 2007. -- Respondents admitted that the FMLA can have a negative impact on employee absences (63 percent), employee productivity (55 percent) and business productivity (54 percent).

The SHRM report is another reminder there are faults in the basic blueprints the architects of Washington's paid family leave entitlement are determined to follow.  But just how much employer advocates can get back on the drawing board remains to be seen.  In the current climate, I'm not optimistic.

Samuelson on Prius Politics

Coining the wonderfully alliterative label, "Prius Politics." Washington Post columnist Robert J. Samulson takes a look at politicians, Greens, and climate change.

The Prius is, I think, a parable for the broader politics of global warming. Prius politics is mostly about showing off, not curbing greenhouse gas emissions. Politicians pander to "green" constituents who want to feel good about themselves. Grandiose goals are declared. But measures to achieve them are deferred -- or don't exist.

We've looked at this before, for example here, here, and here.

Samuelson sums it up nicely.

In 2006, 20 percent of the U.S. corn crop went for ethanol; the share is rising. Driven by demand for feed and fuel, corn prices have soared. ... Americans' oil use and greenhouse gas output haven't declined.

Deep reductions in emissions of greenhouse gases might someday occur if both plug-in hybrid vehicles and underground storage of carbon dioxide from coal-fired power plants become commercially viable. Meanwhile, Prius politics is a delusional exercise in public relations that, while not helping the environment, might hurt the economy.

As Washington embarks on its climate change initiative, Prius politics is substitute for economic common sense.

First Take on Sicko

Never let it be said that I am anything less than fair minded. Although I will admit to a bias in favor of free market health care solutions, I felt it was essential that I see Michael Moore’s latest opus and much ballyhooed slam on the U.S. health care system, Sicko, for myself in order to understand Moore’s viewpoint and judge the film on its merits.

So here is part one of yours truly’s random thoughts after viewing Sicko in an otherwise empty theater at a late show at the Yelm multiplex:

Sicko cleverly focuses not on the uninsured population, but on individuals with health insurance – largely HMOs who somehow fell through the cracks in their quest to get treatments for serious illnesses. Moore knows that anyone with a heart will sympathize with people like the Denver couple who faced financial ruin when the husband developed heart disease and cancer devastated his wife, the Kansas City woman who lost her husband to cancer when their HMO refused to approve his treatment, or the 9/11 volunteers who developed respiratory ailments as a result of their exposure to the witch's brew of poisonous substances, including asbestos, in the debris cloud that arose from the collapse of the World Trade Center.

Moore, however, cynically takes our sympathy for these unfortunate individuals and builds a case that they would have received better, more reliable treatment in the socialized medical systems in Canada, the United Kingdom, France and yes, even Cuba. Constantly, Sicko beats the drum for the “free” health care found in these countries while soft-pedaling the inconvenient truths that there is no such thing as “free” medicine and that only much higher taxes could sustain such a system.

But is Moore’s assertion that something like Canada care would be superior to the U.S. health care system supported by the facts? I think not. Check out the comments of Stuart Browning, an independent filmmaker who has also examined the Canadian health care system, but came to some very different conclusions from Mr. Moore. According to Browning:

….Americans should know that Canada rations health care and that many Canadians wait inordinately long periods of time for urgent medical treatment. The Fraser Institute's annual report "Waiting Your Turn" estimates that Canadians are waiting for nearly 800,000 medical procedures. If the Canadian system was adopted in the U.S. - and you assume one person per treatment - that would translate to nearly 7.3 million Americans. Not 7.3 million Americans theoretically without health care due to a lack of insurance - but 7.3 million Americans who need medical treatment but cannot get it without being on long waiting lists.

Is this really the kind of health care system we want in the United States? Buyer beware!

Cheese, Transfats, Single Payer and Some Common Sense

There's always more health care coverage - news coverage, that is - than anyone can absorb. Still, I wanted to call out a few recent bits of local/statewide relevance.

Yesterday's Wall Street Journal cast a nice light on Wisconsin's experiment with state-run health care. Gotta love the first paragraph.

When Louis Brandeis praised the 50 states as "laboratories of democracy," he didn't claim that every policy experiment would work. So we hope the eyes of America will turn to Wisconsin, and the effort by Madison Democrats to make that "progressive" state a Petri dish for government-run health care.

We've puttered in that Petri dish here a time or two. But the folks in Wisconsin appear to have messed up in a major way.

Democrats who run the Wisconsin Senate have dropped the Washington pretense of incremental health-care reform and moved directly to passing a plan to insure every resident under the age of 65 in the state. And, wow, is "free" health care expensive. The plan would cost an estimated $15.2 billion, or $3 billion more than the state currently collects in all income, sales and corporate income taxes. It represents an average of $510 a month in higher taxes for every Wisconsin worker.

Employees and businesses would pay for the plan by sharing the cost of a new 14.5% employment tax on wages.

Talk about losing your competitive edge. Moving from cheeseheads to trans fats, King County has gone into scold mode, banning trans fats and requiring menu labels to disclose calorie, fat, sodium and carbohydrate contents. It's controversial. I write about it in this column.

Newsweek financial columnist Jane Bryant Quinn oddly climbs on the single payer bandwagon this week, channeling arguments that fell flat in 1993. Bargain hard for universal prices, take the profit out of the sytem, use Medicare as our model (?) and we, too, can have systems as efficient and compassionate as those of France - her ideal - Canada and the rest of Europe. For another look at Canada's health care, read this article by Danielle Rhéaume in AWB's Washington Business magazine.

For a common sense counter to the single-payer paeans, read Merrill Matthews op-ed in The Bellingham Herald. Here's a  snippet.

We can also look for ways to provide incentives for good behavior. Many employers now offer incentives to avoid risky behavior and take certain positive steps. Major health insurer WellPoint recently announced that it will link 5 percent of employee bonuses to an index that will track 20 different clinical areas to measure patient-care improvement.

And we can reduce negative incentives. The Wall Street Journal reports that some insurers are reducing or eliminating co-pays for some chronic-disease medications.

Finally, new insurance products, such as Health Savings Accounts, promote financial responsibility and encourage people to live a healthier lifestyle because they benefit financially from making good choices.

In essence, market principles work: reward behaviors you want to encourage and penalize behavior you want to discourage. It's more complicated than that, but considerably less complicated than attempting to nationalize more than a tenth of the economy.

Of course, there's always this -- the ultimate negative sanction applied unproductively.

More Today's The News Tribune weighted in with more common sense.

Government mandates generally should be a last resort adopted only after voluntary measures have failed.

 

Today the Congress, Tomorrow the World?

At least he's brutally honest about his ambitions.  AFL-CIO national president John Sweeney, on yesterday's minimum wage hike:

I also want to make it clear that this victory we’re celebrating today isn’t the end of something, it’s the beginning of something even bigger. We raised the minimum wage because we started cleaning out the Congress last Fall. We started getting rid of the greedy enemies of working families. We regained some control and next Fall—in 2008—we’re going to finish the job and take back full control of Congress and full control of our country.

I think 1775 was the last time someone asserted "full control of Congress and full control of our country."

AWB Presents Legislative Awards

With publication of our annual Legislative Review and Voting Record (check your mailboxes!), it's time to  recognize lawmakers who stood with business last session.

State representative Bill Grant, D- Walla Walla has been selected to receive the Matson award, the top honor AWB presents each year to a member of the state legislature.

Forty-five members of the Legislature received Cornerstone Awards, recognition of their support for business during the session. To receive the Cornerstone Award, a lawmaker must ave a pro-business voting record of at least 80 percent.

Don Brunell: Look to Europe for Real Tax Reform

Don's column in the Columbian takes notice of an emerging European tax trend: cutting tax rates to boost investment and job creation. After years of economic decline, as European nations raised business taxes to fund an expanded welfare state, new political leaders have gotten the message.

Europe finally realized its mistake and conditions are improving, according to a recent article in The Wall Street Journal. For example, the German government just approved an 8.9 percent rate reduction on corporate income taxes. From a high of 52 percent in 2000, the overall tax rate will fall to 29.8 percent by 2008.

Germany's tax turnaround is part of a trend, according to The Wall Street Journal. Recently, 25 other developed countries adopted the same tax-cut strategy proposed by President Reagan in 1980.

Meanwhile, we're sliding in the wrong direction.

Ironically, the United States may soon have the world's highest corporate tax rate -39.3 percent when the state average is added to the federal government's 35 percent.

... Congress is considering higher taxes on corporate dividends and foreign-source income.

Our state is not immune, despite some important credits and exemptions.

... Washington should be especially cautious. State lawmakers resurrected the estate tax, and Washington employers continue to pay the nation's highest unemployment insurance taxes. When you add business and occupation taxes, sales taxes and property taxes, Washington ends up being one of most heavily taxed states for business.

That's one reason business remains concerned about budget sustainability. We know where lawmakers go first to cover the shortfalls.

Speaking of the Minimum Wage

The federal minimum wage goes up today.  It's up $0.70/hour to $5.85/hour, and will rise again in two steps over the next two years to $7.25 per hour. 

It's a non-event in Washington State, where the minimum wage, tied to annual inflation since the passage of I-688 in 1998, sits presently at $7.93.  Between the state and federal standard, the law applies the one more favorable to the worker.

Small businesses rightly decry significant jumps in the minimum wage because it drives up the cost of products and services and the labor it takes to make or provide them, forcing cutbacks.  AWB has historically contended spikes in the minimum wage generally hurt workers they're intended to protect.

Bad policy should not be encouraged just because good may incidentally come from it, but Washington small businesses may benefit from this action at the federal level.  Especially in border towns, employers may see a small decrease in the cost advantage enjoyed by competitors in Idaho or Oregon, where labor costs are much less and slightly less, respectively.

One note of interest:  All Washington employers must post the new federal minimum wage even though it technically doesn't apply in Washington.  This is a US Department of Labor requirement.  AWB consolidates all required federal and state employment postings into two posters, and sells the set for a nominal rate.  Check into it here.

Unions Endorse Outsourcing?

Something strange is afoot in east-coast labor union tactics.  They're called "hired feet."

From this morning's Washington Post comes this report, describing a very unusual carpenter's union picket line in Washington D.C.: one populated not by aggrieved union members demanding better wages and working conditions but by the homeless, the unemployed, and ex-convicts.  According to the Post, they're sent to hassle building owners who dare to save money by having carpentry, drywall, and flooring installation done by non-union contractors.

It's a motley crew on the picket line:

Many have arrived with large suitcases or bags holding their belongings, which they keep in sight. Several are smoking cigarettes. One works a crossword puzzle. Another bangs a tambourine, while several drum on large white buckets. Some of the men walking the line call out to passing women, "Hey, baby." A few picketers gyrate and dance while chanting: "What do we want? Fair wages. When do we want them? Now."

There's something decidedly odd about this.

First, I thought unions were against outsourcing, or contracting out functions that are legitimately performed by union members?

Second, I thought unions fight for a living wage?  $8.00 an hour is hardly a living wage by union estimates.  It's only seven cents an hour higher than Washington State's minimum wage.

Third, these workers have no benefits.  No health insurance?  I thought unions were against this sort of thing.

Well, to be fair, there is some upward mobility in for-hire picketing:

William R. Strange, 41, said he started working as a for-hire picket two years ago when he lived in a homeless shelter on New York Avenue. He is now paid $12 an hour because he plays the buckets during the demonstrations.

Not all in labor see this bizarre practice as befitting of the movement:

"If I was a member of the general public, and I asked someone picketing why they were there, and they said they don't work for the union and they were just hired to stand there, that wouldn't create a very positive impression on me, nor would it create a very sympathetic position," said Wayne Ranick, spokesman for the United Steelworkers of America.

Exactly.

Monday Links 7-23-07

Hello, I’m Dan Brunell (that DAN Brunell, not DON Brunell) and this is your “Monday Links.” This a new feature on Olympia Business Watch where I bring you what you might have missed this weekend. So off we go…

- It just isn’t Boeing that booming... Microsoft surpasses $50 billion in annual revenue for the first time.

- Tim Eyman was strangely without costume as his measure, I-960, became the only citizen initiative qualifying for the November ballot.

- The only way they are getting those delicious Dick’s hamburgers away from me is when they pry them from my cold, dead fingers… King County to phase out trans fats.

- The only certainties in life are death, taxes and fines at Hanford.

- Joel Connelly manages to give Gov. Gregoire a backhanded compliment even as he throws a former PI editor under the wheels of a moving truck.

- Illumination on Washington’s ferry crisis? This makes me think twice before I take another date on my traditional Bremerton-to-Seattle ferry ride day trip.

- Well, as of today, there are more then 440 new laws on the books. If you want to find some reasons why your business needs AWB as your advocate in Olympia... All you need to do is look as some of the things that your legislature came up with this year.

Recommendation of the Week (other then to join AWB): Duke Ellington’s Far East Suite

I am a complete and total audiophile. I would be remiss if I didn’t give a recommendation or two. This is one Duke Ellington’s later classics, The Far East Suite. It’s hard to describe but imagine if you mix Ellington big band jazz with flavors from  the near, mid, and far east. Absolutely wonderful, especially Johnny Hodges solo on Isfahan and Rufus Jones’s drumming throughout. It is one of my preset “road trip albums” when I travel to eastern Washington, Oregon or whereever the grandeur of the landscape needs a grand soundtrack.

Deja Vu, Down Under

On the heels of this morning dispatch from the National Association of Manufacturer's ShopFloor blog, noting the alarmism coming out of national labor unions in Australia over declining membership, comes this priceless headline from the Australian Broadcasting Corporation:  "Labor's IR laws will hurt WA: business group."   

The lede says it all:

The West Australian Chamber of Commerce and Industry says a new report shows the state's business community would suffer if Labor's industrial relations policy is implemented.

Different country, different WA, different chamber.  But whether it's card check legislation, paid family leave, or union "neutrality" legislation, to name a few, the headline remains the same.

How Did I Miss This?

OBW readers know we have no reticence when it comes to concerns about Washington's novel paid family leave mandate (e.g., here, here, here, here, here, here, and here, and many more -- you get the idea).  This take, admittedly a few weeks old, is worth reheating.  It comes from Washington CEO Magazine's law section, and relies heavily on the views of AWB and its members:

"We know a mandatory benefit is coming in October of 2009, we know how much it will be, but we don't know how or who will pay for it, and we don't know how or who will administer it," explains Kris Tefft, general legal counsel for the Association of Washington Business (AWB).

AWB lobbied hard against the act, as did myriad business groups, including the Alliance of Washington Cities and the National Alliance for Small Business. They believe the Act will disproportionately harm small businesses. Unlike current family leave legislation, which exempts companies with fewer than 50 employees, the Paid Family Leave Act applies to all companies.

I couldn't keep my mouth shut about how bad this new law is:

Overlapping laws regarding family leave make the issue particularly troublesome. AWB's Tefft points out that family leave is now regulated by a federal family leave law, two state laws and the Human Rights Commission's maternity disability regulation. "What you see is this patchwork quilt of state and federal leave laws, not all of which operate consistently," he says.

AWB Board member and small business owner Judy Coovert of Printcom, Inc., is also quoted:

"I've got three printing press operators. What if two of them decide to take the leave?" says Coovert. "There is nothing I could do to stop them. You're not going to be able to find temps, not in our industry."

Coovert is also concerned that some of these employees on leave could end up on unemployment. That could mean higher rates on her unemployment insurance. She is reminded of 9/11, when, following the terrorist attacks, business dropped and she had to lay off several workers. In one year, her unemployment insurance rate doubled to 4.2 percent of employee wages before ultimately climbing to 6.15 percent. "If you're a small company like we are, and if you have even a few employees take unemployment, it affects your (rates)," says Coovert. With just 14 employees, she paid $18,757 in unemployment insurance last year.

The effect on unemployment is one of the many unintended consequences of this bill.

AWB President Don Brunell gets the last word in the article:

In a letter to Gov. Gregoire, Don C. Brunell, president of AWB, said the new law would bring Washington closer to "the countries of Europe, with stagnant economies and crumbling welfare benefit structures," and make it more difficult for the state to compete with more dynamic Asian powers such as India and China.

Added Brunell: "What the Legislature has done ... is enact a programmatic mandate that only one other state in our nation, California, has put into place, and one that is entirely foreign to our new global competitors to the east."

As Richard Davis might say, I can't argue with that.

Good, Bad, and Ugly; They All Went Into Effect

Sunday, July 22nd marked the 90th day since the adjournment of the 60th session of the Washington Legislature (my, it feels like it was just yesterday).  And, as our constitution sets forth, all laws not otherwise subject to an "emergency clause" went into effect at midnight.  The AP gets it here.  The focus is on WASL, sex ed, and then the parade of sillies, like the crowning of the official state vegetable (Walla Walla sweet), amphibian (Pacific Chorus Frog), and sailing ship (Lady Washington).  Meanwhile, the AWB Legislative Review hits the mail this week, showcasing what we think was good, bad, and ugly this last session.

An aside.  The meter at WashingtonVotes.org shows that in 2007, 2,592 bills were introduced and (fortunately) only a fifth, 522, became law.  About 440 went into effect Sunday which means about 80 were subject to "emergency clauses," that constitutional declaration that a law is necessary for the immediate protection of public peace, health, or safety, or for support of state government, thereby causing the bill to go into effect immediately and, for all intents and purposes, be immune from a citizen referendum.  The insulation from citizen referendum is what makes the Because-I-Say-So nature of emergency clauses so controversial (the court system won't review the truth or falsity of legislative declarations of emergency unless they are "obviously untrue or a palpable attempt at dissimulation").  In fact, Rep. Barb Bailey, R-Oak Harbor, was so incensed about this she offered amendments to strip virtually every emergency clause attached in 2007.  Governor Gregoire got in on the act, turning back many an emergency clause with her veto pen.   

522 new laws in a session would be a record, but for the prodigious work of the 2005 Legislature, in the last 105-day session, which passed a record 523 laws.  (Unless you have a copy of the unlinkable Session Laws handy, you'll have to take my word for this).  2005 was also the year where indiscriminate use of the emergency clause became a matter of debate, mostly through a lawsuit brought by the Farm Bureau and Evergreen Freedom Foundation over that year's budget.  That year, 98 bills carried emergency clauses. 

To summarize:  A whole lot of new rights, obligations, and fits of silliness are now officially law.  And while there is no discernible end to the desire to legislate in off-election years, at least the emergency clause controversy of late has led to about a 20% curtailment on a potential legislative abuse.    

US Chamber, NAM, support FOIA reforms

In today's New York Times, the business section looks at Congressional legislation pending to reform the federal Freedom of Information Act (FOIA), the law that allows citizens, trade associations, and of course journalists, to pierce the veil of obscurity that often surrounds the machinery of government.

The Times, citing examples, notes the federal sunshine law has stopped working, resulting in wrongful denial of public records requests and abusive delays by federal agencies without any meaningful consequences.

And so the oddly-if-optimistically titled "Openness Promotes Effectiveness in Our National Government Act of 2007" (OPEONGA?) is moving through the US Senate, with support from AWB national partners the US Chamber of Commerce and the National Association of Manufacturers.  It would among other things provide tight deadlines for complying with records requests, provide consequences for wrongful denial, and establish an ombudsman to resolve disputes.

This may be deja vu for Open Government watchers in Washington.  We've been through much the same debate over our own Public Disclosure Act the last few legislative sessions.  Attorney General Rob McKenna has made a cause celebre of bringing more sunshine to government, making public records requests more user friendly, and putting place our own state open government ombudsman.  Progress in this regard, which has been substantial, is nicely cataloged on his website.

Personally-identifying information and private commercial information in the hands of state regulators ought to be shielded for important policy reasons.  But beyond that, sunshine in government state and federal -- is essential to accountability.  A wag put it best recently, saying, "the era of 'trust me' government is over."    

"Pay or Play" Loses Again in Federal Court

“Pay or play” health care mandates are having a rough time in court. Consider the following item from  Business Insurance:

CENTRAL ISLIP, N.Y. — A federal court has invalidated the two-year-old Suffolk County, N.Y., pay-or-play health care mandate requiring certain retailers to provide a prescribed level of health insurance to their nonmanagement workers.

The Suffolk County law is pre-empted by the federal Employee Retirement Income Security Act, which bars states from legislating the content of employee benefit plans, ruled Judge Arthur Spatt of the U.S. District Court in Central Islip, N.Y., on Monday.

The ruling comes in a lawsuit filed in February 2006 by the Arlington, Va.-based Retail Industry Leaders Assn., which also successfully challenged a similar law enacted last year in Maryland.

Suffolk County’s law required large retail stores that sold groceries pay health care expenses - at a “public health cost rate” to be determined by the county - for the majority of non-managerial, full-time, part-time and seasonal employees.

Over the last few years I’ve witnessed numerous attempts to bring “pay or play” in some form to Washington. I remember one bill that would have applied to all businesses with over 10 employees. Another – obviously targeting Wal-Mart – took at aim at large employers with hints that it would ultimately expand to smaller firms.

I’m always encouraged when a court strikes down a patently wrong-headed law like Suffolk County’s. Government health care mandates, like “pay or play,” are, after all, counter-productive to building a market-oriented system that would actually provide low-cost insurance for small businesses.

Unfortunately, you can bet the store that “pay or play” will be back in some form when the Legislature re-convenes in January. The proponents of these kinds of laws are a determined bunch. Court rulings, no matter how well-reasoned, are not going to stop them from pushing their agenda. 

Initiative 960 Qualifies for the Ballot

Secretary of State Sam Reed says Initiative 960 has qualified for the fall ballot.

It wasn't an easy trip for the initiative that had to survive a silly legal challenge along the way.

Reject Referendum 67 - On the Ballot in November

The  Consumers Against Higher Insurance Rates (CAHIR) filed petitions today to qualify Refendum 67 for the November ballot.  From the press release:

Association of Washington Business president Don Brunell, noting the state’s efforts to improve its business climate, says R-67 puts the competitiveness of all Washington businesses at risk.

“The combination of extremely loose legal standards and extraordinarily high payoffs will open the floodgates,” he said, “leading to more claims, more expensive settlements to avoid prolonged and costly court cases, and, ultimately, higher insurance premiums for everyone. Businesses will think twice before locating or expanding here.”

The point of the referendum is to overturn the trial-lawyer supported law that was passed last session by the legislature and signed by the governor. Here's how the Seattle PI framed the debate this morning.

A negative vote on Referendum 67 would repeal a law signed by Gov. Chris Gregoire this year that makes it so insurers who "unreasonably" deny claims can be ordered by a Superior Court judge to pay up to three times the owed damages, as well as the cost of the trial.

The battle lines are drawn, with insurance companies saying the cost of court-awarded damages and attorney fees will fall on their customers. But supporters of the law, including the Washington State Trial Lawyers Association, say insurers are just trying to weasel out of paying claims.

AWB opposed the legislation last session and urges voters to reject R-67 in the fall.

MORE Kris Tefft updates: "I just left the R-67 coalition"s turn-in event at the Second of States office, where 8,563 petitions were turned in.  If all sheets were full, and all sigs were valid, it would be about 171,000 signatures, but the campaign estimates about 155,000. They need about 112,000. It'll qualify."

 

GAO Sees Budget Woes Ahead

The Government Accountability Office, not an outfit given to hysteria, has released a report identifying "persistent fiscal challenges" for state and local governments in the coming decade.

Take a look at it and see if you think it resonates here.

The crux:

... within the next decade current expenditures will outstrip available receipts resulting in a deficit (e.g., a negative operating balance). This deficit—worsening throughout the projection timeframe under an unchanged policy scenario—indicates that state and local governments will need to make tough choices on spending and tax policy to meet their budget requirements and to promote favorable bond ratings.

As is true for the federal sector, it is the growth in health-related costs that is a primary driver of the fiscal challenges facing the state and local government sector. In particular, two types of state and local expenditures will likely rise quickly because of escalating medical costs.

Sounds plausible to me.

MORE Here's Governing magazines brief report on the GAO analysis.

Although long-term fiscal projections are common at the federal level, the GAO study represents a rare example of collectively forecasting state and local finances. “This feels really ominous,” said Michael Bird, federal lobbyist for the National Conference of State Legislatures.

And this.

The fact that the GAO study is concerned with collective deficits and average revenue streams across all state and local governments masks even deeper problems, suggests Robert Reischauer, president of the Urban Institute and former director of the Congressional Budget Office. ...

”What they have presented is gloomy,” Reischauer said, “but we should take no solace from it.”

"But" ...?

 

Union Bargaining Records Are the Public's Business

The Spokesman-Review welcomes a decision by King County Superior Court Judge Christopher Walken  Washington to open up negotiating notes to the public. Well, at least in part. And they're right. Essentially, the decision lets the public know what went on after it's too late to influence the action.

[Walken] ruled that the public has a legitimate interest in seeing the written proposals as well as Washington state agencies' notes from collective bargaining sessions with public employee groups.

"These records are of interest to the citizens of the State," he wrote. Contrary to what several public employee unions had contended, they are not exempt from the state's public records law.

But ...

Unfortunately, he also declared that the records' release could be withheld until after the Legislature approves the budget that implements the bargaining agreements. That means that citizens can dig out the information only when it's too late to do more than complain about what's already been done.

At least his ruling assures a measure of public accountability. It doesn't do much to allow effective public action.

Richard Roesler in his S-R blog "Eye on Olympia" provides background and all the important links.

All of them except this one to my column on the case last March.

PI Podcast on Sreamlined Sales Tax

The Seattle Post-Intelligencer posts podcasts of some of its editorial board meetings. Amber Carter, who lobbies on taxes (among other things) has been participating in some ed board meetings around the state, along with representatives from the state revenue department and others.

Here's how they describe it, along with the link

We've also posted a new podcast about a coming change in the state's sales tax. We know ... a discussion about tax mechanism. It's not exactly high drama. But it is a big deal. Retail sales will be the same to the consumer, but eventually more people will pay for items purchased by catalog or over the Internet. The P-I Editorial Board met with: Cindi Holstrom, director, Washington Dept. of Revenue; Amber Carter, Association of Washington Business; Jim Justin, Association of Washington Cities, Mark Johnson, Washington Retail Association; and Mike Gowrylow, Dept. of Revenue.

Listen here.

Exciting? Perhaps not, but worth knowing.

WASL Too Easy?

In today's Seattle Times, Linda Shaw reports that a consultant thinks Washington needs to beef up it math education, a conclusion that will surprise very few folks in business or education.

An outside review of Washington's standards for mathematics found them sorely lacking — with key concepts missing, a lack of focus and insufficient clarity, especially when it comes to the basics.

Consultant Linda Plattner, hired by the state Board of Education, says Washington expects too little of its students in math, even though roughly 40 percent of Washington 10th-graders fail math each year on the Washington Assessment of Student Learning (WASL).

Because performance lagged, lawmakers delayed the WASL, over the objections of business leaders.

The News Tribune carries the AP story on Plattner's report.

Deciphering audit reports

I'd missed this story in Sunday's Seattle Times.

Anyone who's slogged though a 10-K annual report or a 10-Q quarterly report knows the feeling: The two or three key pieces of data you need are buried in pages of incomprehensible legalese. ...

That, in fact, was the theme of a breakfast-time panel last month in downtown Seattle sponsored by the Center for Audit Quality, which proved unexpectedly fascinating. (And yes, we're aware that the words "breakfast" "audit" and "fascinating" may never have appeared in the same sentence before.)

The center, an affiliate of the American Institute of Certified Public Accountants, is holding a series of forums around the country to discuss ways to improve how corporate financial results are reported and audited — and how to give the investing public enough information to ferret out incompetent or corrupt companies without unduly burdening the honest, competent ones.

Those of us who've attempted to mine government data have grappled with similar issues, particularly the "hide it in plain sight" response that sees a simple information request met with a mountain of minutiae.

That's why this development makes  sense. The Governmental Accounting Standards Board does largely thankless work to increase transparency and accountability - stuff most often appreciated by wonks, gadflies, and ratings firm. But it's important stuff.

As pointed out by our AG in the Times story, the trade-offs aren't easy.

... state Attorney General Rob McKenna, one of the panelists, compared the financial reports to menus, with every stakeholder and interest group working to make sure the reports include at least one tasty morsel of data to their liking.

"That pension footnote is very important to somebody, even if it's not important to the average investor," McKenna said.

And speaking of pension problems.

Where Does Washington's Legal System Stand?

Richard Davis's last line on lists, referring to ranking state legal climates, deserves a closer look since a state's tort environment is generally considered part of its "business friendliness" index.  In this area, Washington faces some challenges and has a Supreme Court and Legislature poised to make things worse -- not better. 

This spring, the US Chamber's Institute for Legal Reform (ILR) released the results of its Harris Interactive Poll of 1,599 senior attorneys across the country on the fairness of the states' litigation systems toward business.  In determining a state's "lawsuit climate" the poll asked about twelve different factors -- ranging from handling of class action suits to punitive damages to reasonable limits on non-economic damages -- that, taken as a whole, give a picture of a state's legal system.  Washington ranked 25th this year, up from 28th last year, but down from 15th in 2005.  Similar rankings have Washington at 19th or 14th. 

According to the ILR, perception of how Washington handles class action lawsuits, and timeliness of summary judgments are two indices that improved our score.  Another factor that cannot be understated is that Washington tort law does not generally allow punitive damages -- the kinds of damages that turn well-running court systems into "judicial hellholes."  But each of these factors buoying Washington's legal climate are likely to deteriorate given recent legislative and judicial events.

Take class actions.  Last week, as we criticized at the time, the Washington Supreme Court usurped the legislative role of making public policy by declaring the consumer's right to a class action is a paramount policy goal of our legal system and is a rationale to strike down even a consumer friendly agreement to submit disputes to alternative dispute resolution.  This plaintiff-friendly ruling frustrates what our friend of the court brief summarized as the sound policy of channeling commercial disputes to private resolution away from the cost, delay, hassle, and uncertainty of litigation.  It only incentivizes the mass consolidation of so-called consumer protection lawsuits against corporations.

Take summary judgments -- a judge's resolution before trial of all or part of a case because the material facts are not in dispute or are not sufficient given the law to merit consideration by a jury.  This procedure speeds up and narrows the process of litigation.  But astute trial lawyers in Washington are getting bills passed that make summary judgment -- again, judgment on the law where facts are not in dispute -- an endangered procedure.

This summer's Referendum 67 is an excellent example of that trend.  The underlying bill apparently headed to the voters for consideration imposes punitive damages on insurance companies for the "unreasonable denial" of a claim.  This is not a legal standard.  Whether or not a company has acted "reasonably" is going to be a fact in dispute.  And it's going to be a question for the jury.  And so companies will not be able to have even tenuous complaints dismissed on summary judgment. 

And what about punitive damages?  Again, take R-67.  The underlying bill imposes what are in essence punitive damages -- imposed without regard to the actual economic or non-economic damages a claimant alleges or is found to have sustained.  This last session of the Legislature, the Senate initiated a new Consumer Protection and Housing Committee, chaired by active trial lawyer Brian Weinstein, D-Mercer Island, a major focus of which is to move bills like this, this, and this, which significantly expand damages, including punitives, in Washington.

Steve Hantler, chairman of the AWB-supported American Justice Partnership, a national pro-business liability reform group, summarizes the situation nicely:

The Legislature passed several bills in 2007 that expanded liability in insurance law, wrongful death and employment discrimination law, creating a downward trajectory in Washington's liability climate. . . . Washington is clearly a state to watch as most of the factors affecting a state's liability climate are not promising.

Lists and More

That Forbes "best states for business" list has generated a lot of talk, here and elsewhere.

David Ammons reports on a governor's press conference - without the governor - that turned into a good news celebration. The headline the TNT put on Ammons's story drew some deserved criticism and a correction.  The Olympian reports on the press conference and allows GOP chairman Luke Esser to provide some perspective.

Over at WashBlog, folks compare Esser's comments to an item I posted earlier, peculiarly finding an "Esser vs. AWB" theme that I simply don't see. Esser said a lot of folks were involved in helping create the strong economy. True enough. And that's the point the governor's press office made in asking the TNT to fix the headline.

I weighed in on business climate lists in my column this morning.

Continuing the theme, the National Association of Manufacturers Shop Floor blog compare the Forbes list with one produced by CNBC. Unsurprisingly, different results. And, they  look at state legal climates.

Countdown for Referendum 67

As we thought, the folks behind Referendum 67 appear to have the signatures required to get the measure on the ballot. Richard Roesler reports in the Spokesman-Review on the end-of-the-line negotiations with the governor's office to avoid the ballot issue.

AWB opposed the bill Engrossed Substitute Senate Bill 5726 and supports efforts to repeal it by rejecting Referendum 67.

It's Not Just the Presidential Campaign That's Started Early

The campaign seasons just keep getting longer.

News today has Peter Goldmark jumping into the race for state commissioner of public lands against incumbent Doug Sutherland.  Richard Roesler provides a nice introduction to the challenger who ran unsuccessfully last year against Rep. Cathy McMorris Rogers. And he previews the battleground.

"I think he's vulnerable because he's been serving narrow interests," Goldmark said Monday. Under Sutherland's watch, he says, the state Department of Natural Resources is favoring timber companies and developers to the detriment of Washington's nearly 3 million acres of state-owned forest and other lands. Asked for specifics, he cites a logged-off steep hillside near Hood Canal, land swaps in Eastern Washington and private forest owners clashing with the agency.

Sutherland scoffed at the attack, saying that he's doing a good job of balancing good stewardship of state lands with his mandate to generate income for schools, universities and government services.

"Obviously, they're looking for something for some traction," Sutherland said of the criticism. "But quite frankly, this doesn't get there."

And new state senator Rodney Tom announced that he's running for the 8th District Congressional seat now held by Rep. Dave Reichert. First, he'll have to get past Darcy Burner.

And, speaking of presidential politics, Zogby today has Hillary Clinton and Fred Thompson leading in their respective races. I know, early polls may not mean much, but it's also a chance to plug the leadoff speaker for our 2007 Policy Summit.

Brunell on Globalization and Boeing

Don's column in today's Columbian uses the 787 rollout to examine how global competition - and cooperation - have transformed business.

How times have changed.

The components for Boeing's new 787, rolled out in early July, are made in Korea, Japan, Italy, France, China, Australia and the United States. The fact is, Boeing now assembles - not builds - airplanes in America. Parts, and even entire sections of the aircraft, are flown in, railed and shipped by sea to Paine Field in Everett.

That trend will continue as worldwide competition for airline sales intensifies. Between 2006 and 2026, airlines around the world are expected to order 28,600 new aircraft worth $2.8 trillion. About one-third of those new planes will replace existing, less fuel-efficient fleets, while the rest will fly on new routes.

He even works in Ichiro. It's a good read.

Looks Like We'll Vote on I-960

An exultant Tim Eyman emailed us and thousands of his closest friends that he had a great Friday the 13th.

Justice occurred in King County today when Superior Court judge Catherine Shaffer, a Gary Locke appointee, rejected arguments by opponents of I-960 who sought to prohibit a vote of the people on the measure.

There's more.

The Secretary of State's office just emailed us the following (we originally reported 314,566 signatures on 18,167 sheets):

From: Glidden, Teresa [mailto:tglidden@secstate.wa.gov]
Sent: Friday, July 13, 2007 1:38 PM
To: tim eyman
Subject: Initiative Measure No. 960

Mr. Eyman,

We have finished the page and signature count on I-960.

We have 18,182 petitions sheets, and 314,504 signatures.

To certify the Initiative for the ballot, we will be verifying 3% (about
9,435 signatures) with our random check.
Sincerely,

Teresa Glidden
Initiatives Supervisor, Elections Division Office of the Secretary of State 520 Union Ave SE Olympia, WA  98504 360-725-5780 Tglidden@secstate.wa.gov

So it's likely we're see I-960 on the ballot. Here's what David Ammons had to say for the AP about Eyman and the initiative.

His I-960, the only citizen initiative headed for the ballot this year, would make it harder to raise taxes in Olympia and would require much more public information about all finance proposals.

And a nice assessment by Jerry Cornfield for the Everett Herald.

To encapsulate - many details won't fit in this capsule - I-960 would:

* Put every statewide tax measure on a ballot for voters to approve, disapprove or offer an advisory opinion.

* Require every fee hike to be passed by legislators and signed into law by the governor.

* Mandate that a press release be issued on every meaningful action on bills dealing with taxes and fees. ...

It comes down to this, as Cornfield writes.

Eyman said it ensures lawmakers, not appointed bureaucrats, are held accountable to voters for any cost increase. That's the meaning of representative democracy, he said.

That much democracy will give legislators indigestion.

Eyman is counting on voters having stronger stomachs.

We'll have a few months to determine just what we're prepared to swallow.

Trial Lawyers 2, Judicial Restraint 0

National and local media have picked up on an important set of cases out of the Washington Supreme Court yesterday (for example, here, here, here, and here).  The cases, Dix v. ICT Group (the suit actually targets America Online) and Scott v. Cingular Wireless involve the question whether a company's service contract with consumers may contain provisions that effectively channel legal disputes with the company into individual, rather than class action, litigation claims.  Elevating the right to class action over several other competing public policies, the court in both cases struck the challenged clauses.

In Cingular, the disputed clause was an "arbitration clause" requiring billing and service disputes with Cingular to go to arbitration, a faster, less formal, less expensive method of dispute resolution that doesn't add to the overburdened taxpayer-funded public courts system.  In fact, Cingular's arbitration clause was so friendly to the consumer that the company, among other things, picked up the tab of arbitration, paid attorneys fees if it lost, traveled to the consumer's home county for arbitration, etc.

Alternative dispute resolution, like arbitration, is so important to the efficient operation of our courts system that AWB, alongside Microsoft, RealNetworks, Amazon.com, and Intel, filed a friend of the court brief in Cingular framing the issue this way:

In recent years, businesses and consumers throughout the United States have successfully turned to arbitration as a quick and economical method of resolving commercial disputes. AWB has been a leading proponent not only of arbitration as an important instrument of alternative dispute resolution, but also of public policies that will keep Washington an attractive place to do business. In this case, AWB sees the two policies dovetailed. On the one hand, it would be unsound legal and public policy for our state to turn its back on a longstanding and common-sensical practice of arbitrating consumer disputes. On the other hand, it would impair Washington’s competitiveness and the resulting ability to generate jobs for Washingtonians if our state’s legal climate signals to businesses that it differs from the vast majority of other states regarding the enforceability of consumer-friendly arbitration agreements.

AWB therefore argued four things: (1) the court should further our public policy supporting arbitration; (2) the court should not toss out ALL arbitration agreements merely because they limit class actions, (3) Cingular's clause, in fact, was so consumer friendly it certainly wasn't "unconscionable," and (4) any broad policy changes in arbitration should be accomplished in the Legislature, which makes the law, instead of the Judiciary, which is merely supposed to interpret it.

Well, these themes did come up yesterday, but unfortunately in the withering dissent by Justice Barbara Madsen, signed by Justices Bobbe Bridge and Jim Johnson.  Justice Madsen accused the majority, correctly, of crafting out of nowhere a broad ruling that will basically strike down all arbitration agreements -- no matter how consumer friendly -- if they happen to require individual rather than class action resolution of claims.  Justice Madsen also pointed out that if this were to be the direction for Washington's legal system, it should come from the Legislature, not 6 people making up a Supreme Court majority.

The Cingular case was brought by a group called the "Trial Lawyers for Public Justice".  And in the biggest of big pictures, that's what this case is about.  As it was put in this morning's Spokesman Review:

Kris Tefft, general counsel for the Association of Washington Business, saw it differently.

It's a mistake, he said, to favor massive class-action lawsuits over quick, efficient arbitration. In class-action cases, he said, attorneys often get millions while customers get little."

I think the trial lawyers really end up being the winners in both of [the] decisions," he said, "although both are dressed up as victories for consumers." Also, he said, courts are generally good about policing abusive contracts.

There's the rub.  These cases are so important to trial lawyers because in aggregating small claims that could be quickly and efficiently resolved, class actions can devour years of judicial resources, resulting in enormous attorneys fees that handsomely enrich the plaintiffs' lawyer while the individual claimant may get a few bucks or a coupon back for their trouble. 

The other problem is the court's unreflective sweeping away of our state and federal policy promoting arbitration of disputes.  This has been a carefully balanced and legislatively crafted public policy.  Trying as hard as they might to grant maximum leeway to class action lawyers in the name of consumers, the court took it upon itself to do what the Legislature is supposed to do -- create public policy.  That's the epitome of judicial activism.

So on this one, it's Trial Lawyers 2, Judicial Restraint 0.

US Chamber Throws Party for Lawsuit Abuse Victims

Washington DC cocktail parties are usually held to swell the coffers of this or that political personality.  But here's a worthier cause, worthy of mentioning.  The US Chamber of Commerce's Institute for Legal Reform and the American Tort Reform Association are jointly hosting a fund raiser later this month to support the Chung family, victims of outrageous lawsuit abuse.

The Chungs, OBW readers recall (here and here), are the small business owners in Washington DC whose dry cleaning business was sued for $54 million dollars by a customer (who happened to be a judge) over a misplaced pair of pants.  The cleaners found the pants a few days later and offered to return them to the judge, but he refused.  Rather, he tried to take the cleaners to the cleaners, alleging the ludicrous sum of $54 million+ in damages on the basis that signs in the cleaners' window deceptively warrantied "satisfaction guaranteed" and "same day service." 

The DC court rightly tossed the lawsuit a few weeks ago.  But not before the Chungs endured the hidden and not-so-hidden costs of being targeted by a lawsuit.  Tens of thousands of dollars in defense costs and the difficult emotional and physical turmoil of such a stressful circumstance.   Good for the US Chamber and ATRA for sticking up for the human face of lawsuit abuse.   

Forbes Rates Washington #5 in "Best States for Business" Report

No question: It's nice to have a top national business magazine do your marketing for you. And the Forbes report does one powerful sales job.

... Washington is the big story. The biggest mover (tied with Tennessee), rising from 12th to fifth place, Washington is also the only state to finish in the top five in three main categories (labor, regulatory environment and growth). And Washington's numbers are up across the board when you look both backward and at projections into the future.

The governor's office is on it, with a press release laying out additional good news.

“Our top five ranking in the Forbes survey confirms that Washington is moving in the right direction and that our state is a great place to do business, work and raise a family,” said Governor Chris Gregoire.

KING 5 has already posted an online story,which includes my first impressions.

Richard Davis, a spokesperson for the Association of Washington Businesses, told KING 5 the ranking was positive.

"We have become a better place to do business – the economy has been strong," he said. "We need to focus on continuing to streamline regulation to balance economic and other social or environmental interests, and do what we can to control the cost of doing business in the state."

He was concerned that  Forbes ranked Washington 33rd in business costs.      

"Over time, you can't be uncompetitive in costs and expect to prosper," he said. "Over the last year- we've seen a number of things come out of legislature … that may threaten our ranking here."

He pointed to initiatives on health care, climate change and family leave.    

Well, I can't argue with that.

I've looked at a lot of these reports and there's no getting away from the analysts' subjectivity. Our relatively low ranking on "quality of life" - we're 32nd - will surprise folks, until they read that Forbes Q of L index looks at schools, health, crime, cost of living and poverty rates. We're ranked high on labor (education, net migration, and projected population growth). regulatory environment (regulatory and tort climate, incentives, transportation, and bond ratings), and growth prospects (projected job, income, and gross state product growth).

Forbes singles out our improved regulatory environment.

One of Washington's big strengths is reduced red tape. The Office of Regulatory Assistance helps individuals and businesses sort through the many layers of government regulation all in one place. If a number of state agencies need to be contacted for a new business to obtain permits, it can be handled from one source.

I've no reason to dispute this. AWB applauded continuation of the Office of Regulatory Assistance. With business support, state officials have taken positive steps to improve a regulatory climate that the first Washington Competitiveness Council called "a tangled structure that evolved in piecemeal fashion, resulting in an uncoordinated and inefficient regulatory regime." Few would contend, however, that we're out of the woods.

Take a look at the report. And, if you have comments, please share them. Are we really that good?

David Postman's blog offers a political assessment.

MORE The P-I also has the story. I agree with this comment by Washington State Labor Council  spokesman David Groves.

... the ranking doesn't necessarily mean that businesses will flock to Washington, said Groves, who called magazine rankings "interesting curiosities." What really matter are the opinions of site selection consultants, which advise companies on where to locate or expand their businesses, he said.

For example, Pollina Corporate Real Estate Inc., a Chicago-based consultant, has ranked Washington as No. 17 in 2007, based on 29 factors over which the state can control.

Fair enough, although I think labor's wrong when they argue this:

"Organized labor's position is that the state was never a bad place to do business," Groves said.

The reason the site selection assessments matter more than magazine ratings is because site selection consultants match specific businesses with specific locations. The magazine ratings take a broad brush look, sometimes providing useful information, but often masking as much - or more - than they reveal.

And there's this:

In the Forbes study, Washington ranked 33rd in the "business costs" category, which is based on the cost of labor, energy and taxes. Despite a natural economic advantage in energy costs, the state still ranked in the bottom half, Davis said.

"The one area we would worry about is that pride often goes before the fall," Davis said. "We've got some real reason to be concerned about things that the government can affect, such as business costs."

 

Collecting Bargaining & the State Budget

In 2002, Gov. Gary Locke signed - with much fanfare as I recall - legislation giving state employees the power to engage in collective bargaining over wages and benefits. Last week, we posted Kris Tefft's comments on the thorough Ralph Thomas story in the Seattle Times looking how public employee unions have fared under the new regime.

In today's Spokesman-Review, I add a few thoughts of my own.

Brunell Column Cautions Against Complacency

In today's Columbian, Don's column uses Sunday's rollout of the Boeing 787 to take a longer look at what led to the plane's assembly here and ongoing threats to our competitiveness.

In 2003, then-Gov. Gary Locke and state lawmakers approved a series of "competitiveness" bills to convince Boeing to assemble the 787 in Everett. The package included major unemployment insurance reforms, which were largely reversed in 2005. Last year, lawmakers approved another UI reform bill that took some of the sting out of the 2005 reversal, but that legislation may not survive a challenge by the U.S. Department of Labor.

There were real problems this session.

Last year, union leaders pushed a bill that essentially leverages its organizers into non-union Boeing suppliers. It died midway through the session, but will be back in 2008. If that legislation is adopted, aerospace-related companies with fabrication plants in our state could lose tax credits and other incentives granted in the 2003 competitiveness package if they don't bow to union organizing pressure....

So, while we all are encouraged by the Dreamliner's debut, we should remember that it took a lot of heavy lifting to make sure Boeing put the "Made in Washington" label on the 787. Keeping that label should be our primary goal.

Boeing's corporate headquarters were moved out of Washington. The rest can be moved, as well, if unions and elected officials aren't careful.

It's a thoughtful column and a good reminder.

Toward a More Diverse Judiciary?

Our state appellate judiciary, particularly the Washington Supreme Court, decides dozens of precedent-setting cases every year expanding or contracting liability in areas of tort, contract, employment law, workers' compensation, taxation, environmental and property rights issues, all of which become part of the body of laws and regulations that stifle or stimulate our state's economic competitiveness.  So it's composition is a big deal to the business community.

So big of a deal that AWB for the last two cycles of Supreme Court elections has interviewed and endorsed candidates, and published a well-received "Judicial Scorecard and Guide to the Washington Supreme Court."  AWB has also maintained an active amicus curiae practice before the Washington Supreme Court, alerting the court to the business community's perspective in this or that case of high precedential importance.

So it was interesting to read in today's PI this op-ed contribution by Yale Law Student Cyrus Habib, entitled "State needs a more diverse judiciary."  Mr. Habib's point of departure is the recently announced retirement of Justice Bobbe Bridge from the Supreme Court, a vacancy that will be filled by an appointment from Governor Christine Gregoire.  The point of the op-ed is that, I take it, the administration of justice would be better served if Ms. Gregoire appointed a person of color, or perhaps a disabled person, or another woman, to the seat. 

Maybe so -- but not on that basis.  The only diversity that should matter in staffing our courts is intellectual diversity.  And in this regard we need a more diverse judiciary.  Our state appellate bench is largely comprised of folks who tend to take a more activist view of the powers of the judiciary, a more expansive view of the role of law in righting perceived social wrongs, and view litigation as an means of achieving regulation through non-legislative means.  This mindset has resulted in decisions expanding tort liability, eroding open government protections, restricting private property rights, and imposing inconsistent and expansive legal burdens on employers. 

When Governor Gregoire chooses the next Supreme Court Justice she should eschew identity politics and simply look for diversity of intellectual perspective.  That's why Lady Justice wears a blindfold.   

787 Is Proof Incentives Work

When Boeing rolled out its new 787 on Sunday, it provided visible evidence that state incentives work.  Without changes to our unemployment insurance policies and tax and training incentives from the state in 2003, the 787 probably would be manufactured somewhere else. 

 

Airlines, recovering from 9-11 and reeling from high fuel costs, are far from flush.  In fact, since the terrorists hit the twin towers and the Pentagon, the travelers were slow to fly again and now fuel has jumped a buck and a half a gallon. They have been swimming in red ink, rolling up huge debts. They need to cut costs and replace their existing fleets with fuel efficient and comfortable jets with lower maintenance costs.  The 787 is build for that, saving 20% on JP-4 jet fuel, but still the price tag is $162 million a copy. 

 

Thirty years ago, our nation was in the midst of the Carter years---high inflation, high interest rates and a real deep recession.  I was hired by Crown Zellerbach, a 100-year old prominent forest products company with deep roots in the Northwest.  The company was in a situation where it needed to upgrade its Camas pulp and paper mill, the oldest in the West and one of the largest.  We either added a new modern paper machine, increasing pulping capacity and removing contaminants in the papermaking process, or we closed. 

 

In 1978, Crown Z took a gamble and allocated $400 million for the modernization.  My job was to work with the state to expedite permits and qualify the project under the old Economic Assistance Authority (EAA)---a package of incentives state lawmakers put in place following the Boeing crash in 1972 when the supersonic transport was canceled and Boeing fell on difficult times.  (That was when the billboard went up reading: "Last one out of Seattle, Turn out the Lights").  The EAA provided sales tax exemptions for pollution control equipment---half the costs of the Camas project---and a sales tax deferral and B&O tax credits for the rest.

 

When the state hit the financial skids in 1980, the legislature eliminated the EAA and Crown had to plead with the legislature to grandfather the project in.  That required special legislation and it was tough sledding.  We felt like beggars on a street corner.

 

In the end, the Camas project costs jumped to $425 million because of higher interest rates, an increase in the state portion of the sales tax which Crown was not able to recover. And because of the monkeying around by the state bureaucrats and politicians, the whole process left a bad taste in the company's mouth.  Crown never made another major investment in Washington after that and the successor companies which purchased the Camas mill struggle to keep it going.  Meanwhile, 40 miles down river on the Oregon side at Wauna, Crown Zellerbach owned another more modern mill.  Today, that mill is owned by Georgia Pacific and millions have been invested over the last 30 years.  Oregon's state incentives helped a lot and today that operation is a major producer of bathroom tissue and paper toweling in the west.  Its future is bright even though foreign papermakers continue to probe supermarket shelves across the west.

 

The point: Incentives work.  The best thing Washington lawmakers can do is to make sure those incentives remain and are enhanced.  They need to resist calls by unions to limit the incentives to companies which are unionized.  Otherwise, the next generation of Boeing jets may roll out on the tarmac of an airport in some other state or nation.

 

Incentives work and without them the Camas mill would be a goner today. And who knows where NBC's Tom Brokaw would have broadcast from last Sunday.

Religion, Politics, and Unions in the Workplace

For the last couple years at the Washington Legislature, union lobbyists have been pushing variations of a proposal that would bar employers from holding meetings with employees, in which attendance is mandatory, in order to discuss matters such as religion, politics, and union organizing.  (E.g., here, here, here, and here.)  Although these bills have consistently failed, the employer community can be certain they will return with force in 2008.

It is rare, not to mention in poor taste, for employers to regale their workers with overt religious or political sermons.  Clear thinkers, then, have seen the politics and religion part of these prohibitions as a fig leaf to hide what is in reality a gag order on employers opposing union organizing campaigns.  Gagging employers from expressing their views to their workers on unionization not only violates federal labor law, but the free speech protections of the First Amendment as well.  It also offends traditional notions of fair play -- the employer facing an organizing campaign is forced to play by Marquis of Queensbury Rules  while the unions fight freestyle.  AWB has strongly opposed the bills on these bases.

Union elites will undoubtedly be thrilled, though, to read about this lawsuit, reported today.  Basically, a medical assistant and a nurse who used to work at a pediatric medical clinic in Puyallup allege they were forced to pray and subjected to religious-based harassment at staff meetings and otherwise within the clinic.  The two filed a federal lawsuit claiming violations of the 1964 federal Civil Rights Act on the basis of a hostile work environment and discrimination on the basis of religion (or lack thereof).

I have no doubt this lawsuit will be dug up next session when labor pushes for its speech restrictions, furthering the canard that it is about protecting workers from on-the-job religious or political harassment as opposed to keeping employers from expressing opinions disfavored by unions. 

What this lawsuit says to me, however, is that existing law and judicial resources are adequate to air these kinds of complaints and redress these kinds of grievances.   No new laws -- especially ones as egregious as the Legislature has considered -- are necessary to root out these thankfully rare instances of human resource mismanagement.   

Brunell on Beatles, and Bugs

Don's column in the Columbian last week took a look at forest management practices.

The Kenai Peninsula may be best known for its world-famous salmon runs, but it is the area's white spruce forests that have captured the spotlight now, underscoring serious problems with our forest management practices.

Bark beetle infestations have turned the Kenai's once rich, green forests into a barren landscape of dead and dying trees. Because these trees are fire hazards, wildfires in Alaska have jumped threefold since 2004 - and Alaskans are bracing for another record fire year.

A related beetle preys on western inland forests. The problem could be managed better.

To deal with these threats, President Bush proposed his Healthy Forests Initiative a couple of years ago. It would create firebreaks, salvage commercially valuable burned timber, and replant the forests outside wilderness areas and national parks. The idea was quickly shot down by folks in Congress who believe that any timber harvesting in national forests is taboo.

 

Given the number of acres scarred by wildfires, Congress should reconsider that policy. ...

Wouldn't it be wiser to log the beetle-killed trees while they have commercial value and put people to work on logging sites and in sawmills?

Wouldn't it be better to thin forests to prevent the devastation caused by beetle infestations and forest fires?

Yes.

More on Lawsuit Abuse--International Edition

A while back, Don Brunell's column in the Columbian looked at lawsuit abuse, especially its effect on the finances of small businesses in America.  Brunell noted the phenomenon of frivolous lawsuits -- which I would broadly define as litigation designed not to compensate the truly injured for real damages but to serve some other social, regulatory, or pecuniary end -- puts a $246 billion annual drain on the US economy.  Brunell parsed that figure out to an $845 per person "tort tax" in America.   

This morning, the National Association of Manufacturers ShopFloor blog takes a look at the program from the annual convention of the American Association for Justice (a recently adopted "sue"-donym; the previous sobriquet, the American Trial Lawyers Association, had become the PR equivalent of an ambulance chase).   NAM finds particular interest in the convention's program, where the agenda for the group's litigation committee enumerates the top 77 new areas targeted for litigation (or, as AAJ puts it, the application of "groundbreaking legal theory"). 

These areas range from the basic, like interstate trucking or construction, to the curious, like casino gambling or lawnmowers, to the morbid, such as funeral services.  (As an aside, I count about a third of these liability expansions in the medical or pharmaceutical industries, further highlighting a major cost driver in health care -- but that's a post for another day).  So much of this is at best "regulation through litigation" -- attempts to impose regulations upon economic activity through the (often unelected) judicial branch, rather than through the representative branches of government.  At worst it is simply rent-seeking by the most sophisticated of the plaintiffs' bar.

All of this gets me thinking of closer to home.  This morning in Seattle, a panel of the United States Court of Appeals for the 9th Circuit will hear the appeal of the family of Rachel Corrie, the Evergreen State College student-activist who died in 2003 in the Gaza Strip when an Israeli bulldozer ran her over.  The Seattle Times covers it here.  Who does the lawsuit target?  Not the Palestinians (it couldn't).  Not the Israelis (it couldn't).  It targets the US manufacturer of the bulldozer, Caterpillar Inc. 

The basic allegation is that Caterpillar is responsible for Ms. Corrie's death because it sold bulldozers to the Israeli military, knowing they would be used for what the lawsuit alleges are "war crimes" and human rights violations.  In fact, the lawsuit claims that Cat itself committed war crimes and human rights violations by making its bulldozers and selling them to Israel.  According to Ms. Corrie's mother, the lawsuit was motivated "only because of our frustrations to get some kind of accountability and find out what happened."

The federal trial court rightly dismissed this nonsense in 2005.

Now, regardless of what one thinks of Corrie's activism or the nuances of Israeli-Palestinian relations, the point is a US manufacturer should not be on the hook for tens of thousands of dollars in defense costs because of what a buyer a world away does with its products -- or because an understandably grieving mother is frustrated and wants to know "what happened." 

That weak motivation for suing aside, this is part of a disturbing recent trend in American tort law which seeks to hold manufacturers liable for their products when a third party buys and uses those products in a way that harms themselves or others.  We recall the firearms industry was first tagged for the fact that people shoot other people with guns.  Then the fast foodies for selling waist-expanding cheeseburgers.  Now the bulldozer maker finds itself embroiled in foreign policy disputes.  Next, will Boeing will be sued by activists over the military's use of defense technology in Iraq? 

"Groundbreaking" legal theories indeed.  As Brunell pointed out, the costs of these lawsuits add up, and when it comes to operating a business of any size, these costs matter.

State Employee Paychecks Swell with Union Clout

Yesterday marked the first day of salary increases for state employees across Washington, thanks to a new collective bargaining agreement going into effect between employees and their union, the Washington Federation of State Employees.  The Legislature ratified the pay increases last session during budget talks.  All told, the raises -- which go from cost of living adjustments up to 25% for some state employees -- will cost the state 1.6 billion in taxpayer money over the next two years.  (That amount, not incidentally, is just a tad over the $1.3 billion the Legislature spent in excess of incoming revenue this last session, as Richard Davis recently noted). 

Ralph Thomas at the Seattle Times took a look yesterday at the relationship between the unions, the state employees, the Governor's office, and the Democrat-controlled Legislature.  As Thomas put it, the raises are "a testament to the growing clout of the state's public-employee unions."

AWB's Don Brunell, however, sounded a note of caution: 

That's a huge concern," said Don Brunell, president of the Association of Washington Business. "The unions have so much clout, and they're basically funding the people they're bargaining with.

In other words, as Thomas details, most of the union spending goes to fund the political aspirations of the folks negotiating and ratifying these agreements.  Naturally this starts to look like a one-way upward ratchet for the taxpayers who pick up the tab.

State employees may well deserve a salary roughly proportionate to their peers in the private sector and other areas of government -- the stated rationale behind the increases.  But the workers and their union should also understand -- rather than resist, as has been the recent practice at the Legislature -- calls for greater accountability and efficiency in the delivery of government services in exchange for higher pay.