Olympia Business Watch

Special Session and Hints about I-960

In my column in today's Everett Herald, I take a look at I-960 and the recent property tax legislative session. The crux:

Although lawmakers reinstated the 1 percent property tax limit, they clearly are not bound to lift tattered initiatives from the state Supreme Court's discard pile and enact them as legislation. The Democratic majority has little reason to do so. ...

With passage of I-960, which [the state Supreme Court will doubtless review and reject], expect the initiative's restrictions on legislative tax-raising authority to fall.

When they do, lawmakers will not rush to replace them. After years of amendment, Initiative 601 had few teeth left. Regardless of what the courts do, I-960 could anticipate similar oral surgery.

The lesson to the voters is clear. Pay attention to judicial elections. And don't rely on statutory initiatives to control taxes and spending. If you want conservative fiscal policy, elect fiscal conservatives.

Pretty straightforward assessment, I think. Which is why I cannot fathom what caused me to write this as a comment on the restoration of the I-747 cap and the deferral program.

While both measures received strong bipartisan support in the Democratically-controlled legislature, Republicans displayed most of the tax cap fever.

Obviously, that's wrong. Republicans opposed the deferral plan and argued strenuously against it in both chambers. I knew that. What I meant to say was this:

While the I-747 restoration received ...

And so on. My mistake.

Building New Ferries

Don's column in today's Columbian acknowledges the challenges the state faces in replacing an aging ferry fleet. To get the job done, state officials will have to break some old habits.

The DOT and lawmakers have known for years the ferries need replacing, but finding money to build new modern vessels is a challenge, especially when our transportation needs are so great, the costs are skyrocketing, and fuel taxes and fares aren't keeping pace.

... Lawmakers and the transportation department need to look at all options. Some have been around for a while, while others are just surfacing.

For example, under a proposal put together about a decade ago by longtime Tacoma shipbuilder J.M. Martinac, the state's ferry system could have four new 130-car, 1,200-passenger ferries. Martinac developed a design and engineering proposal for four "Island Class" ferries capable of safely navigating the Keystone Channel in any weather. ...

According to Martinac, their proposal would save Washington taxpayers $200 million: $80 million in construction costs, another $80 million in financing, and $40 million in maintenance costs.

A second proposal comes from Matt Nichols, CEO of Nichols Brothers Boat Builders. He wants the state to consider purchasing a ferry similar to the one his company just built for Pierce County.

Working with these in-state firms would produce another benefit.

...as our economy shows signs of weakening - shipyards, their workers and suppliers would welcome the business.

 

Special Session Doesn't Satisfy Eyman

It's a good thing that the special session wasn't about satisfying Tim Eyman, because the guy really wasn't satisfied. In another email to the world, he's distributing what he calls a "scarlet letter," saying ...

The Scarlet Letter ... provides voters with the truth -- a list of the Olympia politicians, led by Gregoire, who blocked the real 1% property tax cap (and the supreme court justices who think voters are stupid and think it's OK for the Legislature to ignore our state's laws and violate our constitutional rights).

I think Patrick O'Callahan gets it right in The News Tribune's editorial page blog.

The accusation here is that they're ripping off the taxpayers by not also repealing the "banking authority" – i.e. letting local government collect taxes in one year they hadn't collected in a recent year. (This, incidentally, is meant to remove the use-it-or-lose-it incentive governments would otherwise have to tax to the max every year. I-747 didn't address it at all.)

You give some guys Czechoslovakia, suddenly they want Poland, too.

Yep.

Energy Bill In Congress is a "Whopper!"

I'm on Red Cavaney's e-mail list and thought I'd share the one I received today about the energy legislation currently before Congress.  Red is president of the American Petroleum Institute, Washington, D.C., and always has thoughtful insights which you would normally not see in the mainstream media.

As policymakers continue to debate energy issues on Capitol Hill, it is important to remember that ill-conceived, piecemeal solutions should never be a substitute for a comprehensive energy policy for our nation’s future.

This was made clear by a new economic impact study, prepared by CRA International and commissioned by API. The report finds that the combination of seven provisions in either the Senate or House energy bills would likely have significant adverse effects on American consumers and businesses, as well as on our nation’s economic strength. According to the study, these provisions would further limit domestic oil and natural gas production while promoting unproven, costly alternatives – and they would restrict the amount of energy available to the economy, increase the cost of energy supplies, and weaken U.S. global competitiveness.

The report finds that the combination of seven provisions in either the Senate or House energy bills would likely have significant adverse effects on American consumers and businesses, as well as on our nation’s economic strength. According to the study these provisions would further limit domestic oil and natural gas production while promoting unproven, costly alternatives – and they would restrict the amount of energy available to the economy, increase the cost of energy supplies, and weaken U.S. global competitiveness.

The study highlights the various risks and dangers we face when the government becomes involved in picking “winners” and “losers” in the energy marketplace. For instance, the seven provisions in the bills, if passed, would likely lead to an estimated $1 trillion in lost economic output and nearly 5 million lost jobs by 2030 – even after taking into account the jobs that would be created by the nearly five-fold expansion of the biofuels mandate. Additionally, the study estimates that:

• The average American household’s purchasing power could drop by $1,720 by 2030

• Aggregate business investment in the U.S. would likely drop by $220 billion by 2030

• Costs of petroleum products could be expected to more than double by 2030

Don C. Brunell, AWB President

Plenty of Tax Stuff Ahead

"Stuff" may be a little casual, but with every change in tax policy called a "reform" that label has long since been drained of substance. Anyway, tax changes are clearly on the agenda for 2008, given that nearly everyone involved seems to be experiencing a special session hangover of some sort. Enshrining the 1-percent I-747 property tax looks like a stopgap measure, though legislators resisted efforts to make it explicitly temporary. And the tax deferral program passed with little enthusiasm will probably draw amendments in January.

Brad Shannon spotlights some of the proposals in the Olympian.

Legislators who broke camp after a one-day blitz have a raft of leftover ideas that go well beyond the two property-tax measures that won passage and that Gov. Chris Gregoire signed into law.                        

Many lawmakers, just like activists and interest groups, are far from content with what they accomplished...

So what's on tap?

[Senate majority leader Lisa] Brown's caucus of 32 members is far from agreement on any one idea — whether it might be a homestead exemption shielding the first $75,000 of home value from taxes or a "circuit breaker" that gives tax rebates to lower income homeowners when their tax bills hit 5 percent of income.                        

One Democrat, Sen. Tim Sheldon of Potlatch, wants a constitutional amendment to limit yearly valuation increases to 1 percent. House Majority Leader Lynn Kessler of Hoquiam wants to renew her proposal for a California-style freeze on property valuations as long as a buyer keeps a home.                        

... the GOP leader, Rep. Richard DeBolt of Chehalis, wants to hand out $400 rebates to all homeowners. Some Senate Republicans want to slash or eliminate the state's share of the property tax.                        

Other Republicans ... want to get rid of local governments' ability to tap into unused tax capacity that was left over from the years before 2002.

We have some ideas, too.

Business groups led by the Association of Washington Business want yearly valuations to smooth out distortions in tax values. They also want to change the burden of proof, making it easier for property owners to challenge bad tax assessments.

That's a lot of stuff to pour into a 60-day session. But then, the session's just the beginning.

In the Herald, Jerry  Cornfield looks at the politics of an extended tax policy debate.

Nothing could seem sweeter for GOP leaders. Losing in the legislative arena won't matter and may even help them excite and organize their base, which brings a degree of unpredictability into the picture for fall 2008 not evident a month ago.

Taxes will be uttered, debated and voted on often in the 60-day session, setting the stage for explosive debates one wouldn't have expected in an election year.

Is that the difference a day makes?

Wage & Hour, Discrimination: Employers Facing Liability Expansions

First it was the Washington Supreme Court's October surprise, Stevens v. Brinks Home Security, which surprised employers by holding that an employee's basic commute to work, if done in a company-provided vehicle, may well require compensation.  (The ramifications of that holding, ranging from great uncertainty to copycat class action lawsuits, is discussed in a white paper we've put together at AWB available here).

Then last Thursday the Supreme Court ruled in Hegwine v. Longview Fibre that despite legitimate health concerns over the ability of a pregnant applicant to safely fulfill the lifting requirements of her job, an employer committed sex discrimination under state law on that basis by rescinding a job offer once the limitations came to light.

Then this morning, the Olympian reported on the latest wage & hour class action targeting Wal-Mart, which involves 75,000 current and former employees of 46 Wal-Marts and 3 Sams Club stores in Washington.  The lawsuit alleges various violations like failing to provide proper meal and rest periods.

Certain areas of Washington employment law, like wage & hour, are in serious disarray, as Brinks and its new class action progeny amply demonstrate.  Meal and rest periods are an example of a legal topic freighted with great uncertainty for employers and workers as to their respective rights and obligations.  It is usually within subtle differences between state and federal law that the greatest traps for the unwary employer exist. 

These recent lawsuits are a sobering reminder of that. 

Planting the Paid Family Leave Seed in the Garden State?

Nationwide labor advocates and their supporters, successful at planting the seed of paid family leave here in 2007, look like they're on the verge of making New Jersey the third state in the country at the forefront of this new field of labor regulation.

Newsday.com reports on a speech Friday by N.J. Governor John Corzine to the southern New Jersey Chamber of Commerce, a policy speech pitching the idea to the New Jersey business community.  A local paper describes the governor as getting "the cold shoulder on the issue."  Why?  According to reports:

Ian D. Meklinsky, a Princeton labor lawyer, said New Jersey has nothing to gain by being in the forefront of this, and asked Corzine to wait until federal legislation is passed.

He also questioned the math for funding the bill that calls for an approximate tax hike of $1 per week for 3.9 million workers covered by the state's disability system. In return, they could receive two-thirds of their gross pay for 10 weeks a year, not to exceed $502 a week.

If one-third of the work force take 10 weeks paid leave, it would not take long to bankrupt the fund -- and to demonstrate a need to raise the tax, said Meklinsky.

Employers pay nothing into the fund, and do not pay the salaries of those on leave. They object, however, to long absences and in some cases, the financial drain of having to pay replacement help at higher wages.

Kenneth Ross, spokesman for Lockheed Martin, said family leave should be negotiated where possible, not legislated.

"This bill handcuffs employers, instead of allowing us the flexibility we need to balance corporate goals with employees' needs. I must agree to disagree with the governor," Ross said. 

While these arguments did not prevail here, we now will find out if the objections bear out as Washington's program faces important administration and funding questions in 2008, and then full implementation in late 2009.  Preliminary task force work on these matters, as state papers have noticed, is neither particularly encouraging nor without significant complexity.