Olympia Business Watch

New WashACE Brief Looks at Budget Gap

A new WashACE brief examines the impact of the latest revenue forecast on the state budget.

What Unions Want from the 2008 Elections

In this week's (June 21) The Economist magazine there is a story about America's labor unions and what they expect out of the 2008 elections.  Here is the checklist:

• universal health care and decent pensions
• protection against "callous" managers and foreign competition
• end to secret ballot elections in union organizing campaigns

The magazine reports the American Federation of State, County and Municipal Employees has linked up with MoveOn.org on an anti-McCain TV spot,  The message is "John McCain, when you say you would stay in Iraq for 100 years, were you counting of Alex?  Because if you were, you can't have him!"  The point is they are deviating from the traditional labor issues and going for the election win.  The Economist points out labor unions see a rare opportunity for Democrats to capture the White House and both houses of Congress.

Unions are sending people you trust to your door to get you to vote for Democrats.  The AFL-CIO is spending $53 million and expect to reach 13 million voters.  In Washington it is called their "Labor-Neighbor" program and it is designed to get people who support their candidates and issues to vote.

Unions are concentrating on 24 states and giving top priority to Ohio, Pennsylvania, Wisconsin, Michigan and Minnesota--the must win states for Barack Obama.

Finally, unions are catching up with business group spending.  According to the magazine, in 2000 firms and their workers outspent unions, 3 to 1.  In 2006, it was 2 to 1 and they are going all out.

All this activity is cascading down to the state level as well.  This is going to be a year where those who provide jobs need to be active and involved.   Here is the link:  www.economist.com.

More Woes for State Paid Family Leave

A couple weeks ago, we noted the first public call for repeal of our state's so-far unfunded, unadministered, unimplemented paid family leave benefit mandate coming from the editorial pages of the Walla Walla Union Bulletin. 

The UB's message was "[i]t's time for the Legislature to face up to reality and scuttle this unfunded, unnecessary paid family leave plan" because, among other things, "[t]he state's economy looks different than it did in early 2007."

This morning, the Vancouver Columbian picked up on this theme, with last week's downward revenue forecast its point of departure:

When state revenue forecasters announced on Thursday that the treasury will take a $167 million revenue hit over the next three years because of the economic slump, one of our first thoughts was the unresolved paid family leave bill. The only good thing that can be said about this turkey is that it’s unresolved. It should be dropped.

The paid leave program clearly fizzled in 2008 as needed implementation legislation was left on the vine when it became clear there was no political will to fund the program. 

And that was before a $2.5 billion budget gap started yawning. 

Some action must take place in 2009 -- there's a so-far unfunded mandate that benefits issue October 1st of next year.  But will the framework of the debate still be "how" -- or will it be, as these editorials suggest, "whether"?

 

California Dreaming

This entry comes from Grace-Marie Turner, president of the Galen Institute, Washington, D.C.  The Association of Washington Business (AWB) has had Grace-Marie speak about health care to our members on numerous occasions and most recently she was a presenter at the Washington Policy Center's health care forum in Seattle of which AWB was a co-sponsor.

In today's "Wake-Up Calls" which is Turner's web publication on health care policy, she talks about California's attempt at a single-payer Canadian-style health care system. 

California State Senator Sheila Kuehl (D-Los Angeles), chair of the health care committee, is pressing legislation to enact a health plan in which the state collects taxes to pay the health care bills for all Californians.  The state would then pay doctors, hospitals and other providers directly--hence the name "Single-Payer."  A better name would be "government run health care."

Gov. Arnold Schwarzenegger vetoed the plan earlier this year.

Sen Kuehl's single-payer, government-run health care, would be funded by a new 12% payroll tax and similar levies assessed on small businesses.  Even after collecting $167 billion to pay for the program, the state would be faced with $210 billion in health care bills the first year alone (2010).  To close the shortfall, the payroll tax would climb to 16% and projections are the rate would increase even more in subsequent years.   

Hopefully, our lawmakers and elected officials are doing the math and figuring out how much the Wisconsin and Massachusetts plans, which have a heavy role of government, cost before moving forward.  Then hopefully, they are looking at the benefits to people of their proposals. 

We will all be served well if they "Do the Math!" and build upon what is working and fix what is not.

Don C. Brunell, President (DonB@awb.org)

Revenue Forecast Coverage

Yesterday's announcement of slight slippage in state revenues may have rightly taken a back seat to Sonics v. Seattle, Obama v. Obama, and McLaren being tossed out at home. But, while lacking in drama, the forecast confirms what most of us know: Tough decisions will be required to balance next year's state budget.

Washington has not escaped the effects of the national slowdown. Although Steve Lerch, the interim director of the economic and revenue forecast council, believes we'll not be in recession, that's practically beside the point. Slow growth will not be enough to avoid a substantial gap between revenues and maintenance level spending - a gap reliably estimated at about $2.5 billion.

The Washington State Budget and Policy Center gets the structural deficit half right

The new revision does not significantly alter the fiscal challenges we face. As we have said before, these challenges arise from an ongoing structural deficit in which state revenue does not keep up with spending.

Maybe not half right, just backward. Lawmakers spent too much, too quickly, and no conceivable change in tax policy could keep up.

Jason Mercier, for the Washington Policy Center, has a suggestion for voters.

Perhaps the question candidates should be asked before the election is: "Do you plan to use budget restraint or resort to tax increases to fix the state's fiscal health?"

Chris Mulick live blogged the meeting for the Tri-City Herald, passing up an Eyman press conference and sharing the hassles of live blogging with readers. The PI's Chris McGann also provides blog coverage, as does Rich Roesler for the Spokesman-Review.

Rachel La Corte's AP story brings in the gubernatorial politics.

Gov. Chris Gregoire's Republican opponent, Dino Rossi, seized on the report to blame Gregoire for "out-of-control spending."

Gregoire said Washington was in better shape than most other states.

Brad Shannon also has a good story in the Olympian.

The next forecast comes out in September.

WSJ on Yesterday's Supreme Court Decision on Union Neutrality

A nice piece on the WSJ editorial page today about yesterday's victory for employer free speech, striking down California's attempt to prohibit employers doing business with the state from engaging in communications with workers about labor union matters.  The Journal's bottom line:

At least 20 other states have rules similar to California's on the books or plans to pass them. Chamber of Commerce v. Brown should shut down such antibusiness targeting, and the U.S. will be fairer for it.

US Supreme Court Strikes Down Cali Union Neutrality Law

On a morning when our own state Supreme Court got it badly wrong on an important employment case, good news from the other Washington: the US Supreme Court struck down, 7-2, a California law imposing union neutrality requirements on employers doing business with the state. 

This long awaited decision, Chamber of Commerce v. Brown, ought to tamp down the top legislative priority of unions here in Washington to establish a broader prohibition on employer speech than what even California envisioned.   Indeed, Governor Gregoire cited the pending decision of the court in this case as the primary reason for asking the labor side to withdraw its bill in 2008.

Writing for the majority, Justice John Paul Stevens -- conventionally thought to be the most liberal of the high court justices -- held that the federal labor policy contained in the National Labor Relations Act (NLRA) preempts the attempt of California to impose a rule that prohibits employers receiving state funds from using the funds "to assist, promote, or deter union organizing." 

The NLRA preemption doctrine that captured the court's attention forbids states from regulating conduct "that Congress intended to be unregulated because left to be controlled by the free play of economic forces."  Noting its view under prior case law that "Congress struck a balance of protection, prohibition, and laissez-fair in respect to union organization, collective bargaining, and labor disputes," the court determined California's law attempted to regulate within "a zone protected and reserved for market freedom."

The court further elaborated on the inherent right of employers to engage in "free debate on issues dividing labor and management", that this First Amendment right is enshrined in the NLRA, and that it reflects a policy decision "favoring uninhibited, robust, and wide-open debate in labor disputes" involving "freewheeling use of the written and spoken word."   The constitution, buttressed by the NLRA, provides this freedom; states cannot by legislation or regulation take it away.

The state AFL-CIO proposal in Washington is broader than the invalid California law.  It doesn't hinge on the receipt or use of state funds by an employer.  It bluntly prohibits any employer speech about union matters if it can be viewed as a "required" communication -- in a staff meeting, perhaps in a company-wide e-mail, and so on.  It is enforced (like California's statute) by a strong litigation deterrent attempting to make the state's judicial branch the ultimate referee of permissible workplace speech.

But the high court was clear today:  States are not free to regulate what Congress left unregulated in the NLRA.  "When Congress has sought to put limits on advocacy for or against union organization, it has expressly set forth the mechanisms for doing so."  The law "calls attention to the right of employees to refuse to join unions, which implies an underlying right to receive information opposing unionization."  And the NLRA "expressly precludes regulation of speech about unionization" so long as the communications do not threaten or promise anything to the employee. 

Our state unions may be busy between now and the 2009 legislative session testing arguments to distinguish their proposal from California's overreach.  But today's decision should put an end to Washington's union neutrality bill.

(Cross-Posted at the WashACE blog)

State Supreme Court Deals Blow to UI System, Employers

In a unanimous opinion that is nothing short of astonishing, the Washington Supreme Court this morning bluntly erased a thoroughly negotiated, battleground tested, foundational component of our state's Unemployment Insurance system -- its statutory provisions governing "voluntary quits".

The court held that the law didn't say what the Legislature, the Employment Security Department, the business community, and I'd say a vast swath of the labor community, have since 2003 understood it to say.   That is, a negotiated list of ten "good cause" reasons for leaving work voluntarily  while still maintaining eligibility for UI benefits is an exclusive list of reasons for voluntary quits.

Voluntary quits are an issue in unemployment insurance because the historical purpose of the system is to provide a social safety net with partial wage replacement for a temporary period that an individual is unemployed through no fault of his or her own, and is able, willing, and looking for work.  Allowing benefits for individuals who choose to quit work runs afoul of that purpose. 

But in a landmark 2003 compromise bill, the Legislature specified ten (and in 2008 added an 11th) clear reasons why a voluntary quit may still result in benefit eligibility.  Things like relocation of a military spouse, protection of family from domestic violence, certain substantial reductions in pay or hours, and so on.  This was the other half of legislation that fundamentally altered the collection of UI taxes from employers and addressed other benefit costs.  It was part of a business-labor compromise brokered by then Gov. Gary Locke and set against the backdrop of serious economic competitiveness concerns and the state's efforts to win assembly of Boeing's new commercial airliner.

AWB attempted to impress this point upon the court through an amicus curiae ("friend of the court") brief supporting the Employment Security Department.  But the court stated:

Amicus Association of Washington Business contends that the statutory list was intended to be exclusive and that exclusivity was "the finishing stroke of a multi-year public policy compromise between business and labor over the nature of the Unemployment Insurance system . . . and the eligibility for unemployment benefits for persons who voluntarily leave their job[s]." This may well be true.  Unfortunately, we have not been presented with compelling evidence of this underlying legislative purpose by either of the parties. 

Instead, we discern no clear intent from the legislative history. 

We thought the statute spoke for itself, but the court found it "awkward" and "ambiguous".  So the court swept aside the statutory list, but opened Pandora's box: individualized assessments of a claimant's "compelling personal reasons" for voluntarily leaving work regardless of the statutory reasons. 

This will likely be an administrative nightmare for the Employment Security Department both going forward and, potentially, having to reassess benefit claims since 2003 that were turned down because the voluntary quit did not fall within one of the ten reasons.   

And this indefinitely expansive new universe of potential voluntary quit benefits will result in heightened costs to employers facing a downward trending economy (yesterday's news: state unemployment now over 5%) and a system where Washington's job providers already pay the second highest UI taxes in the country.

The UI system has already become a hot topic for the 2009 Legislature because of a US Department of Labor determination that the Employment Security Department's tax collection system is out of conformity with federal law -- a problem the Legislature must fix.

Now, on the benefit side, today's decision elevates the voluntary quits issue to a similar prominence as the Department, stakeholders, and Legislature figure out whether, and how, to pick up the pieces.

(Cross-posted at the WashACE blog)

Boeing Wins a Big One

Today's good news is very good: The Government Accountability Office sustained Boeing's protest of the Air Force's award of the tanker contract to Northrup Grumman.

“Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman.  We therefore sustained Boeing’s protest,” said Michael R. Golden, the GAO’s managing associate general counsel for procurement law.

It seems certain to guarantee Boeing another shot at the contract, with better information and good prospects. Coverage in The News Tribune, the Puget Sound Business Journal, the Seattle PI, and  practically every other NW media outlet. (cross posted at WashACE.com)

Zarelli Calls for Hiring Freeze to Ease Budget Woes

State Sen. Joe Zarelli, R-Ridgefield, has issued a new "Budget Tidbit," making the case for a state hiring freeze.  He notes that since the February forecast

...Washington has lost jobs in the last three monthly reports,3 and recently the state’s forecast council revised downward our state’s economic and job growth projections for the next two fiscal years. Tomorrow brings the new quarterly state revenue forecast, potentially exacerbating the deficit projection.

I'm not sure about hiring freezes, but there's no question that Zarelli's recommendation conforms neatly with Denis Healy's First Law of Holes.