Olympia Business Watch

Washington state House of Representatives unveils their operating budget. (video)

 This morning the House of Representatives released their 2009-2011 operating budget. Like the Senate, there was a lot of tough and painful cuts made. Below is the complete video of the press conference via TVW. AWB will have a breakdown of the different budgets in the coming days.

Washington state Senate unveils operating budget (video)

Senate Democrats released their proposed operating budget yesterday, cutting $3.85 billion. This includes cuts to education, higher education and human services and would result in the layoffs of 7,000 to 8,000 public sector jobs. Facilities like McNeil Island Prison, Green Hill Juvenile Detention Center and the Yakima Valley School for the Developmentally Disabled are set to close down under the proposed budget due to their high operating costs.

Other key components of the proposal include:

• Using $3 billion worth of federal stimulus money to balance the budget. The proposal would also borrow about $750 million from different state accounts dedicated to construction.
• Raising $138 million by taking away the tax incentives for hybrid cars and for banks when they sell foreclosed properties. It would also add a few new tax incentives, like reducing the B&O tax for newspapers.
• Overall, the proposed 2009-11 budget submitted by the Senate Democrats only decreases state spending by $1 billion compared to the current budget.

It’s a mixed bag proposal. On the plus side, it’s a balanced budget with a fiscally adequate state emergency reserve fund. The budget also consolidates funds into the general fund account. Finally, the Senate did make some hard decisions in this budget with respect to education and social service programs.

Unions want "Employer Gag" Bill: AWB says bury it

Last week, union leaders met with Gov. Gregoire, Speaker Frank Chopp and Senate Majority Leader Lisa Brown--all Democrats--pressuring them to pass the Worker Privacy Act.  The state's three most powerful Democratic lawmakers decided to suspend consideration of the Worker Privacy Act (SB 5446and HB 1528), organized labor's top priority legislation for 2009. 

On March 11, Gregoire, Chopp and Brown issued a joint statement taking the bills out of future legislative consideration in response to a union lobbyist e-mail regarding the legislation and future political contributions.  The e-mail "raises serious legal and ethical questions," they wrote and was turned over to the state patrol to investigate whether criminal charges should apply.  They patrol subsequently said no criminal charges would be filed.

 

The Seattle Times reports: "Tensions have been high since the first days of the session, when the tanking economy made it clear lawmakers would have to cut billions of dollars out of the state budget. Things have only gotten worse since Democratic leaders earlier this month killed a worker-rights bill."

 

AWB believes the "Worker Privacy Act" or anti-employer gag rule billseverely tilts the workplace in favor of unions by cutting off employer speech about labor unions under the guise of regulating "political" or "religious" workplace communications. This bill is unnecessary because workers are already protected by state and federal law from inappropriate coercion by employers in matters of politics, religion, and unionization, AWB General Counsel Kris Tefft said. 

The bill is unworkable because it is so broadly and vaguely drafted employers will not know what they can and can't talk about - under threat of lawsuit - in the workplace. The bill is unconstitutional because, as the U.S. Supreme Court said last summer, states cannot infringe on a right of employer speech about labor unions that federal law protects from state regulation.

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

Labor Scores Big in House Committee As Anti-Business Bills Advance

March Madness was evident in the House Commerce & Labor Committee this morning.

After playing small ball with some inconsequential bills, the committee majority, led by Rep. Steve Conway (D-Tacoma), gave labor unions two game-changing free throws.  The committee moved ESSB 6035, the bill that would impose new restrictions and regulations on trade associations that operate voluntary retrospective ratings programs in workers' comp.  It then amended and moved SSB 5963, a delicate and heavily brokered effort to bring the state's Unemployment Insurance tax system back into conformity with federal law. 

Despite its anesthetizing pretexts of "disclosure," "sunshine," "transparency," and "accountability," just about everybody but the retro bill's most ardent supporters see it as an unconstitutional affront the free speech and association rights of voluntary groups and the small businesses that choose to join them.  (Editorial coverage in that regard here, here, and here).

Meanwhile, the labor amendment to the UI bill ruptures the business community compromise over tax reform by adding both a permanent benefit increase and a provision to the law greatly expanding the ability of workers to voluntarily leave work for personal reasons and still qualify for benefits.  This amendment imposes a regime that will lead to higher taxes for employers through more costly benefits and shifts more benefit money away from workers who lose their job through layoffs or through no fault of their own to those who choose to leave work for personal reasons. 

The shot clock is running, but these are far from slam dunks.  There is still a chance for the House to do the right thing and reject ESSB 6035 and the labor amendment to SSB 5963.

What About Taxes? Are They Really Needed?

In my weekly column which was published in The Columbian, Sen. Joe Zarelli (R-Ridgefield) asserts that if you breakdown the $9 billion revenue shortfall into components over time and consider other factors such as $3 billion in federal stimulus funds, tax increases can be avoided.

First, we should consider how we got here and be mindful that last month, our state's unemployment rate jumped ahead of the national average to 8.4%. When times were good, lawmakers spent money on all sorts of new programs and initiatives. Spending increases in the 2005-2007 and 2007-2009 biennia totaled $8.5 billion which is just about what the revenue shortfall is.

Richard Davis, coordinator for WashACE (Washington Alliance for a competitive economy), takes a page from Zarelli's proposal and expounds upon it in his column in The Morning News Tribune, Tacoma's daily newspaper. Davis writes:

"Consider the shortfall as the difference between available revenues and the ongoing cost of maintaining state operations. To get to a $9 billion hole, you must take the most conservative view of revenues and the most liberal view of costs.

We can cut the gap between forecast revenues and expenses by applying about $3 billion in federal stimulus money and tapping the $700 million rainy day fund. Then take a sharper look at spending. In addition to the cost of ongoing operations, the liberal view includes more than $1 billion in discretionary increases, mostly pay hikes. Forget them.

So now we have a $4.5 billion gap, far from trivial, but manageable, particularly when you consider that lawmakers increased spending $8 billion over the last four years."

The Governor and lawmakers in Olympia have their work cut out for them. We all are in uncharted waters with this economy and all of us, including President Obama, need to focus on fixing the economy and forget about all of the other new programs.  Putting people back to work and restoring prosperity to Main Street Washington (and USA) is "JOB ONE!"

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

State deficit is now at $8,862,000,000. (Video)

The projected state deficit for the 2009-2011 biennium has grown by $552 million according to the state Chief Economist Arun Raha this morning at a meeting of the state Economic and Revenue Forecast Council. This means the projected state deficit is nearly into the nine billion dollar mark.

To put that in perspective if take the 2008 population estimate, in order to pay off this projected deficit each Washington citizen would have to chip in $1345.25. Below is a video from TVW of the complete revenue forcast report.

Revenue forecast set for Thursday, March 19

Just a reminder: You can catch the state revenue forecast live on TVW (and via its Web site) at 10 a.m.  this Thursday, March 19. The presentation by State Economist Dr. Arun Raha will be held in the John A. Cherberg Building in conference rooms A, B and C on the capitol campus in Olympia.

We'll post links to the presentation materials once they're public. In the meantime, here's some additional not-so-good foreshadowing news on the economy: the state's jobless rate jumped to 8.4 percent last month.

 

Lawmakers Heading into the Home Stretch in Budget Discussions---Need to Fill $8.31 Revenue Gap

Lawmakers in Olympia begin week 10 of the 2009 session and face roughly a 25% revenue shortfall.  What that means is they are $8.31 billion short to meet 2009-11 expenditures if they don't change the way they have spent money.

Obviously, they have to change.  Joe Turner, The Morning News Tribune capitol reporter, wrote a good summary article in today's edition of the TNT.  It is worth reading   As example, Turner reports that raising the state portion of the sales tax from 6.5 to 7.5% would bring in $2.3 billion.  That gives you an example of how deep the problem is.

AWB's goal is to insure that the ultimate budget resolution focuses on revitalizing Main Street businesses to speed up the recovery and put people back to work, earning money and paying taxes.  The problems we face are deep, but not insurmountable if we all work together and find creative solutions. That's our goal.  While we may disagree at times on approaches, we are working to solve the problem bringing many of the  innovations and lessons we have learned over the last few years as our customers, markets and competition have changed.

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

Chinese Worried About U.S. Economy: Their Concerns Underscore the Need for The President and Elected Officials to Focus on Fixing the Economy

China has a $1 TRILLION investment in U.S. bonds and debt and is increasingly worried about America's financial crisis. According to The New York Times today:

"China has become increasingly vocal about what it perceives as Washington’s mismanagement of the global economy and financial system, joining a chorus of foreign critics of unbridled American capitalism. On Thursday, for example, France and Germany rebuffed American calls to coordinate a global stimulus package at the G-20 meeting, saying financial regulation should come first."

What the Chinese and others around the world are telling President Obama is get America's financial house in order and get the economy moving again.  Forget about all the billions in new government spending for climate change, health care and other programs.  Forget about union organizing legislation and focus on the economy PERIOD! Concentrate on how we are going to pay for our massive new government spending.

That was the subject of my column two weeks ago. That advice is good for states too---45 of which are running in the red.  Those running in the RED include Washington.

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

Worker Privacy Issue May Not Be Dead Yet!

Even though Gov. Chris Gregoire (D), Speaker Frank Chopp (D-Seattle) and Sen. Majority Leader Lisa Brown (D-Spokane) announced they have tabled the so-called: "Worker Privacy Bill" because of a labor union e-mail linking support for the legislation to campaign contributions, the issue may be on life-support in this year's session.  The action was taken after an e-mail from the Washington State Labor Council (AFL-CIO) was turned over to the Washington State Patrol to investigate.

The Seattle Times published a copy of the e-mail, which in part, said: 

"Union leaders would send a message to the State Democratic party and to the Truman and Roosevelt funds from the House and Senate that "not another dime from labor" until the Governor signs the Worker Privacy Act."  

According to The Olympian, Sen. Brown was reported to have said:  

"She said other proposals brought by groups involved in the worker privacy bill were not dead because of this situation.

"It is my expectation that the Legislature will continue to evaluate all proposals based on their individual merits, including proposals brought forward by the stakeholders involved in the Worker Privacy Act discussions," she said."

For more background on this issue, read Kris Tefft's blog entry.

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