Olympia Business Watch

Happy Thanksgiving

In my column this morning, I briefly look at some Thanksgiving history.

Sara Josepha Hale, who championed the national  holiday in the 19th Century, said the late November date had more than the harvest celebration going for it.

In 1857, she noted that, by the end of the month, "the war of politics will be over for the year."

At least for me, it's over on the blog for the holiday weekend.

Happy Thanksgiving!

Has the 1-Percent Cap Caused Problems?

Sen. Joseph Zarelli is back with his useful "budget tidbits."

His take on I-747:

Some contend I-747's 1 percent growth limit is unrealistic, asserting it prevents property tax revenue growth for local governments from keeping pace with inflation. That is erroneous.

Property tax collections have continued to be a strong, growing revenue source, rising at an annual rate in excess of 5 percent due to new construction and voter-approved increases. That is more than twice the rate of inflation during that time frame.

While the effects of the initiative may vary among local jurisdictions, the statewide data backs him up.

"fuggedaboutit," Rules Supreme Court

At least, that's how the opinion in the long-lingering challenge to the Legislature's 2005 session abuse of I-601 appears to read. In 2006 lawmakers amended the way the state spending limit was calculated to validate actions taken the prior year. There's a five member majority opinion and four concurrences. This is from the majority opinion.

The state expenditure limit is a creature of statute, as are the laws that govern its calculation. The legislature is free to amend the expenditure limit and the process by which it is calculated. The legislature exercised this prerogative when it enacted the 2006 amendment. When the legislature enacts laws, it speaks as the chosen representative of the people.

Retroactivity is explicitly fine, too.

It is undisputed that the legislature intended the 2006 amendment to operate retroactively.

Postman has a good account.

The Washington Policy Center offers its perspective.

The Evergreen Freedom Foundation, which was a party to the lawsuit, has terse comment.

Update Weird formatting glitches fixed.

Some Pre-Holiday Discord Over Special Session

We've not said much about the upcoming special session to right the wrong of the state Supreme Court decision trashing the I-747 1-percent cap on property tax revenues. That's not just because my holiday meal features a little crow (I thought liberal Democrats would balk more at reinstating the tax cap most of them opposed).

It appears they're balking but resigned. Postman has a good roundup of Democratic opinion. He notes opposition to the 1-percent from Senate Ways and Means Vice-chair Craig Pridemore and speculates that there may be "something resembling debate" in the Senate. But...

Sen. Darlene Fairley, D-Lake Forest Park, says she... is a definite no. By her count there are eight Democratic senators committed to voting against a 1 percent cap. That's far from enough to stop it, and Fairley concedes there's not much the opponents can do.

Richard Roesler's Eye on Olympia picks up some of the sharper criticism from the left.

Gov. Gregoire tells the AP's David Ammons that she doesn't expect a "3-ring circus."

Probably not. But it may not be a walk in the park, either.

Paid Family Leave Task Force: Thoughts on Funding

The joint legislative task force trying to figure out how to administer, fund, and implement the state's new paid family leave benefit mandate continues to grind along.  In its meeting last week, there was a hint of progress: some degree of consensus emerged around using the general fund to pay for the administration and benefits of the program.   Brad Shannon for the Olympian covered it here, while the Associated Press reported here. 

The combined costs of both are projected at between $75 million and $100 million per biennium.  That doesn't include almost $30 million in hardware and programming costs necessary to establish the computer system that would spit out the benefit checks. 

The idea of using the general fund beat out several other options such as taxes on liquor, carbonated beverages, candy and gum, and different forms of payroll taxes.  The fact that any of these options would entangle legislators in new taxes during an election year was not lost on the task force members.

Yet interestingly, Governor Gregoire is quoted in both news articles as possibly opposing use of the general fund to pay for benefits:

“The governor is open to looking at the general fund on start-up costs, but as for benefits, she is not there yet,’’ Gregoire’s legislative director Marty Brown said.

All this, of course, came the day before the state's chief economist downgraded the state's revenue forecast by $132 million -- just a tad more than the expected start up, computer, administration, and benefit costs of the program in the first biennium.

That fact, in turn, was not lost on the Vancouver Columbian, which editorialized:

The surplus must be used judiciously, not frittered away on half-baked, feel-good campaign fodder such as the paid family leave bill. As we've editorialized before, there's nothing wrong with competitive, private-sector enterprises offering paid family leave to workers, and paying for it.

But state-subsidized paid family leave is wrong on two counts. It diverts public money to many families that don't even need it, and it absolves people of the traditional financial-planning responsibilities that every family has appropriately faced.

This notion, further burdened by supporters' lingering inability to fund it, should be abandoned.

Lots to agree with there.  But politics -- the art of the possible -- will likely preclude not only the abandonment of a bad idea but the implementation of a good idea as well: leaving this up to the competitive private sector.  In the end, the task force seemed to be saying the general fund would be the only possible means of funding this creature next year and they're probably right.

Governing Magazine on Supreme Court and Governor

The 13th Floor blog of Governing Magazine, which recently carried a cover photo of Gov. Chris Gregoire, takes a look at the governor's response to the Supreme Court's jettisoning of I-747.

The governor's response to the court: Thanks, but no thanks.

She's calling for legislation to reinstitute the cap. If local governments rush to raise property taxes, Gregoire says she'll call a special session to stop them.

The subtext here is that Gregoire is up for reelection next year and her opponent, Dino Rossi, was ready to pounce on the issue. Gregoire is part of a trend among Democratic politicians in state government. She's willing to advance many progressive causes, but more cautious on taxation issues -- especially 12 months from an election.

I'm not sure I see that trend, nor would it necessarily apply to the governor. I-747 strikes me as a special case. State government - Gregoire's primary executive responsibility - is relatively unaffected by the initiative. And while state spending has grown substantially in the last 3 years, the strong economy allowed the spending to grow with minimal increases in state taxes.

Meanwhile, the Tri-City Herald, would like to see a "workable solution." Apparently, that's somewhere between 1 and 6 percent.

Less Money, More Caution Following Forecast

From the news coverage of yesterday's revenue forecast, it's likely that the 2008 legislature won't be boosting spending. At least, not much.

Chris Mulick reports in the Tri-City Herald:

ChangMook Sohn, the state's chief economist, called the drop a "very minor fine tuning" that is likely to represent just the beginning of a long-expected slowdown.

"Deceleration is coming," he warned.

Folks got the message.

Victor Moore, director of the state budget office, said voters were right this month when they approved a constitutional amendment creating a rainy day savings account ...

Gregoire is not expected to include major new spending initiatives in her budget plan.

"Caution is still the rule of the day," Moore said.

"Restraint is really the key," said Rep. Jim McIntire, a Seattle Democrat ...

State Rep. Ed Orcutt, R-Kalama, said ... "I think we need to be putting more money in that rainy day fund than we are."

While Sohn's not predicting a recession, he acknowledges that the downside risk is greater than the upside.

The Calculated Risk blog points out international concerns over the health of the US economy.

2010 Winter Olympics Approaching Fast

Whistler, B.C.---The 2010 Vancouver Winter Olympic Games opening ceremonies are set for Feb. 12, 2010 and construction on the venues are ahead of schedule.  Construction is visible especially on the  78 mile (125 km) mountainous highway from Vancouver to Whistler. 

Venues for the 17-day games are split between Vancouver and Whistler with skiing and sliding sports sites at Whistler and ice and ceremonial events in Vancouver.

The proposed operational budget for the Games is $1.7 billion, which will come from sponsorship, TV revenues, ticket and souvenir sales. That does not include the $580 million of taxpayer money being spent to build the competition venues.  Nor does it include the $775 million the B.C. government is spending to upgrade the highway that links Vancouver to Whistler. Another $2 billion is being spent to build a transit line between the airport and downtown Vancouver, with a stop at the athletes village.

Canadian games organizers are hoping to avoid a budget shortfall.  Turin organizers reported than the 2006 Winter Games posted a projected shortfall of US$32 million on their operating budget of US$1.58 billion, believed to be one of the first Olympic deficits in decades. Half of the Vancouver Games costs will be picked up by broadcasting revenues with 40% coming from corporate sponsorships.  So far, the Vancouver organizers are $15 million ahead in sponsorship revenues.

For Washington businesses, there are still opportunities to get a piece of the action.  The Vancouver 2010 Winter Olympic Games official Web site has a procurement section which lists vendor and contracting opportunities.  The games are expected to generate millions for Washington as people from around the world make their way to Vancouver and Whistler.

Next Moves in the SCHIP Battle

The contours of the Democrats' strategy to bring back the State Children's Health Care Initiative (SCHIP) expansion bill are beginning to emerge. According to Politico.com:

Democrats are considering giving Republicans a stark choice on the stalled children’s health bill: Cut a deal now or face a politically treacherous vote on the issue a month before next fall’s elections....

President Bush has already vetoed one SCHIP bill, and he has threatened to veto the latest, new version, even though it has been modified to include firm income caps on eligibility and stronger language to prevent illegal immigrants from receiving the health benefits.

If there is no deal by mid-December to expand the program to 10 million lower-income children, Democrats may just propose a temporary extension to last until Sept. 30, 2008, which would force a vote on a critical issue just before the election, according to Democratic aides.

Of course, the idea is to put pressure on vulnerable GOP members of Congress to abandon their principled opposition to creating a new middle class entitlement in the face of loud accusations that anyone who opposes the bill doesn't care about "our children." Unfortunately, many of the squishier Republicans will likely succumb to such nonsense and cave.

Meanwhile, Bush may be obliged to veto SCHIP again....and soon. Politico reports:

Without a breakthrough, Democrats may just send the SCHIP bill back to the president once again, as soon as Thursday, for another veto.

Republicans, meanwhile, are complaining that Democrats are shutting them out of the process, and they fear that Democrats will drop a new SCHIP bill on the floor that nobody has seen....

But Republicans warn that they might not support any new SCHIP legislation if they have been cut out of negotiations.

House Republicans also believe the Democratic strategy to use SCHIP as a political tool could backfire.

“Democrats are making a strategic miscalculation here,” said Kevin Smith, a spokesman for House Minority Leader John A. Boehner (R-Ohio).

“Their partisan rhetoric on SCHIP has not resonated with the public. Congress’ poll ratings are in the dumpster because Americans don’t see both parties working together and accomplishing something for the good of the country.”

The politics of the SCHIP expansion is truly disheartening. Instead of using SCHIP to try to embarrass members of the congressional minority party, Congress' Democrat leadership should put politics aside and approve a bill that actually will provide health care for poor children without creating a new, extremely expensive middle class entitlement. Do it for the kids!

Washington on pace to gain another Congressional Seat.

According to the website Polidata.com, Washington is on track to gain another congressional seat in 2010. Congressional districts are redrawn after every census. In our state, the task of redistricting both Congressional and Legislative seats is the responsibility of a state’ non-partisan redistricting commission. The first election for these new districts would be in 2012.

Accord to this estimate, Washington is one of eight states likely to gain seats. Texas could pick up four. Florida and Arizona may each gain two. Georgia, Nevada, Oregon, Utah, and Washington state would gain one each.

There are eleven states projected to lose seats. New York and Ohio would lose two apiece while Illinois, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, and Pennsylvania would each lose one.

So where is Washington’s 10th district going to be? Clark, Spokane counties might be growning like crazy, however they cannot hold a candle to the remarkable population growth in the Puget Sound area this decade and what is expected in the comming years. This gives the Puget Sound region pole position for a new seat.