Olympia Business Watch

Hello? Is anybody in Washington (DC) listening?

Well, the president"s nationally televised Health Care Summit is over. Now what?

Frank Luntz, who has spoken to AWB's Policy Summit and is nationally recognized for the focus groups he conducts with real people on TV to get their views, predicts that President Obama and the Democrats will use the so-called "nuclear option" to pass their trillion dollar health-care reforms. Today, Luntz appeared on the Imus Show. Watch the first 1:15 of the interview here. 

Wall Street Journal Columnist Peggy Noonan summarized the path forward this way:

 "What the meeting made clear is what the Democrats are going to do -- not step back and save the moderates of their party but attempt to bully a bill through Congress."

Then there is the cost of Obama Care:

"Mr. Ryan, the Wisconsin Republican, posed the fundamental question: 'Should people in Washington decide exactly how this works and what you can and cannot buy?' We thought the GOP acquitted itself fairly well, noting the irresponsibility of using Medicare cuts to float a new entitlement when the status quo has $37 trillion in unfunded liabilities. They also focused on smaller, incremental reforms that might do some modest good."

What about our health insurance premiums, the Wall Street Journal asks?

"One fact is that the Congressional Budget Office estimates that premiums in the individual market would jump by 10% to 13% in 2016 because the government will mandate that consumers buy richer benefits than they otherwise would. Mr. Obama eventually conceded that point but said these mandates are simple consumer protections, 'Yes, I am paying 10% to 13% more because instead of buying an apple, I'm getting an orange,' Mr. Obama said. "We want competition, we just want some minimum standards."

Back to Luntz to wrap this up. Luntz had 26 people from Philadelphia in a focus group to discuss the summit. It was equally split between Democrats and Republicans and balanced for all of the relvant factors needed to have a fair cross-sample. Here is what they collectively said, loud and clear:

1. They all knew what reconciliation was, and universally said: DON'T DO IT!
2. President Obama and Congress: START LISTENING TO THE PEOPLE AND DO WHAT IS BEST FOR THEM!
3. Start over and make changes we can afford that will make a difference.

Given what the president and Democrats in Congress may do -- jam their version of health care down people's throats -- you really have to wonder if they are listening. They will in November. That's what people universally told Luntz and that's what they're saying in the public opinion polls.

Hello? Is anyone listening inside the Beltway?

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

Manning: No sweet spot for Washington's budget woes

It's getting ugly in Olympia, said Jay Manning, chief of staff for Gov. Chris Gregoire.

And it's going to get uglier before it's done.

Manning offered his take on the struggle to close Washington's $2.8 billion budget shortfall Thursday during AWB's weekly Lobby Lunch meeting.

With less than two weeks to go until the scheduled end of the 2010 Legislative Session, lawmakers in the Democrat-controlled Legislature are proposing a variety of ways to close the budget gap, and searching for consensus on a plan.

Gregoire went first in the search for what WashACE coordinator Richard Davis called the "least bad alternative."

Her plan proposes a mix of budget cuts and $605 million in taxes, including new taxes on candy and soda, an increase in the cigarette tax and a tripling of the hazardous substance tax.

The Senate then proposed its plan, which includes a 0.3 percent sales tax increase and raises $940 million in additional revenue.

The House is expected to propose a plan to raise $857 million in new revenue, without a sales tax increase.

Business calls on lawmakers to end the raid on workers' comp trust fund

Starting a new farm worker intern program is not a bad idea.

Using money from the state's workers' compensation trust fund to pay for its administration is.

AWB's Kris Tefft and three others representing the business community called on lawmakers Thursday to stop the expansion of what has become a decade-long raid on the workers' comp trust fund.

The fund is supposed to pay claims for injured workers, but it has turned into something of a cookie jar for lawmakers.

The proposed pilot farm worker intern program contained in SSB 6349 would represent the latest assault on it.

Members of the business panel asked legislators in the House Health & Human Services Appropriations Committee to either find another source of funding for the intern program, or drop it entirely.

Where's the Government Reform?

That is the question The Olympian is asking in its editorial today.

Ever wonder why voters are cynical?  Do you suppose it is because any attempt at reforming the way government does business is watered down or buried in city hall, the courthouse, state capitol or Congress? As Puyallup Sen. Jim Kastama (D) put it, lawmakers in Olympia are just nibbling around the edges of inefficiency and waste.

From The Olympian editorial:

Last year the Legislature cut just 18 boards, out of more than 400 advisory boards and commissions spread throughout state government. This year, Gov. Chris Gregoire targeted 78 boards and commissions for elimination. The House has pared that back to 50 and the Senate’s most recent target was 41.

Even if those modest proposals are adopted, lawmakers and Gov. Chris Gregoire will have a hard time convincing voters that they have overhauled and streamlined state government. It’s time for an outside group to tackle the politically charged issue of government reorganization, similar to what the base-closure commission has been able to accomplish on the national level.

In late 2008, Gov. Gregoire asked a small group of us to meet and discuss ways to "transform" state government. We were suppose to find new innovations.  We had a few meetings and she made some initial recommendations to the legislature in her 2009 State of the State address and the effort evaporated.

Efforts to contract out, reduce the size and scope of government, and make government more efficient are met with a wall of anti-aircraft fire.  It is like watching an old World War II movie of B-17s dodging shells over Germany.   

Sen. Rodney Tom (D-Medina), vice chair of the Ways and Means Committee, was even more succinct: "It’s clear that there is no political will to pursue substantive government reform efforts. If this is our idea of reform, the public’s not going to buy it.”

He's right.  Ever wonder where Tim Eyman gets his ammo for the anti-tax initiatives? 

The governor and legislature have a budget shortfall of $2.7 billion and new tax proposals ranging from $600 million to nearly a billion.  Government must innovate, change and cost less.  The rest of the world makes that clear to us each and every day when they, for example,  build factories faster and with less expense to provide newer, cheaper and better products that American use every day.

Change is painful, as businesses on Main Street, corporations like Boeing, and working families are learning.  But it will happen, with or without, government.  Government is not exempt and our elected officials need to get serious about reforms or we will ALL pay the penalty. 

The question our elected officials need to ask is "Do we want to slide towards the abyss in which California itself?" It can happen here too!

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

 

Gregoire leads coalition calling for Boeing to land Air Force tanker deal

They're calling it a once-in-a-generation opportunity to create new American jobs.

A coalition aimed at rallying support for Boeing's bid to build the next generation of Air Force aerial refueling tankers kicked off Monday with a press conference in Washington, D.C.

Gov. Chris Gregoire, chairwoman of the U.S. Tanker 2010 Coalition, said there has been enough delay in the military's effort to build the new tanker, and she called on the Pentagon to award the $35 billion deal to Boeing.

"It's important that we keep Americans at work," Gregoire said. "Awarding Boeing the contract to supply our next fleet of tankers will ensure work for 40,000 to 50,000 people across the country."

The coalition consists of Gregoire and a bipartisan mix of governors from eight other states where Boeing would work on the tanker. Its list of supporters includes the Washington Aerospace Partnership, a coalition of more than 100 businesses and organizations, including AWB.

Brunell: Elected officials need to connect the dots on taxes

When elected officials consider whether to raise taxes, they often fail to connect the dots and do the math, AWB President Don Brunell writes in his weekly column.

Legislators need to focus on the total cost of taxes at all levels of government - federal, state and local, Brunell says.

Congress and the president are borrowing more money and plan to hike taxes and fees to pay for the trillions they are spending. State lawmakers want to hike taxes. Local governments are looking to do the same.

"We all recognize that the governor and lawmakers are between a rock and a hard spot," Brunell writes. Before they make any decisions, however, they need to look at the big picture.

Connect the dots ... and do the math.

Read the full column here.

Ticking Time Bomb: Unfunded Pensions

Today's front page banner headline in The Palm Beach Post reads:  "Pension gaps a 'time bomb'--many local governments lack assets to cover big payouts they face!" That may not be front-page news in Washington with the state's $2.7 billion revenue shortfall needed for the state to pay its bills between now and the end of June next year, but it is certainly an issue lurking in the back of the minds of many state and local elected officials these days.  Unfortunately, it is the victim of occasional reporting.

The Post surveyed 26 local Florida pension funds which revealed a $431 million gap between expected payouts and how much money is on hand for area firefighters, police officers and local government retirees. Unfunded pension liabilities have not gone unnoticed in our state either.  Last month, the Seattle PI reported:

The state's current operating budget deficit is $2.6 billion, a situation that has state lawmakers scrambling to find program cuts and tax increases to balance the ledger. But Republicans in the Legislature are sounding the alarm about another billion-dollar problem looming for Washington - the unfunded liability in the state's pension system. That number now stands at about $6 billion, they say.

"Pensions aren't a sexy way to spend money," said state Sen. Joseph Zarelli, R-Ridgefield. "To me it's an obligation. We have to pay that debt." The state's actuary and treasurer also say they're concerned about the situation.

The state retirement system -- which includes teachers and state and local government employees -- covers more than 300,000 active members and about 100,000 retirees.

Public pension underfunding is a TRILLION DOLLAR problem in our country.  According a report in Bloomberg: 

Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy. The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year.

The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.

While Gov. Gregoire and state lawmakers may no choice but to bypass putting money toward funding pensions this year, they need to be mindful the problem isn't going away. If fact, it will grow as more and more baby-boomers retire.  While they are determining the right balance between cuts and taxes to fill the $2.7 billion budget gap, they need to make sure they plan for the day when the "ticking time bomb" explodes. 

That is what is worrying the West Palm Beach City Commission which meets on Monday to figure out how to tackle a $40 million shortfall in the firefighters' pension fund. 

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

It's Time!

The Columbian reports that Washington Governor Chris Gregoire and her Oregon counterpart, Ted Kulongoski, are pushing forward with the Columbia Crossings project and want to start construction of the new, modern and safer bridge in 2012.  The new structure will have the capacity to meet our growing population and commerce needs.  It is essential to vibrant ports in Vancouver and Portland.

They are absolutely correct. It is time to stop talking and start pouring concrete and welding steel.  We, at AWB, have said that for the last two years.  As a member of the Columbia River Crossings Coalition, we've made that clear to our elected officials from Vancouver to Olympia to Washington, D.C.

The new I-5 bridge across the Columbia River connecting Vancouver and Portland needs to move ahead.  One of the two spans was constructed nearly 90 years ago and the other turned 50 in 2008. They are the only two drawbridges remaining on I-5.  They are narrow with no shoulders and if an accident occurs on either of the spans, motorists are plain out of luck. (Believe me, I was there when a paint truck overturned heading northbound during rush hour one Friday night and I-5 became a parking lot). 

The replacement options have been studied to death and now it time to act. (The Columbian Photo)

The two governors responded in writing to a group of local officials who wrote a letter warning the governors that they wanted more local control and a review of the design and financing of a 10-lane bridge, five miles of freeway improvements and a light-rail extension to Vancouver. 

But the governors rightly made it clear they intend to push the project forward toward construction beginning in 2012.  “Interstate 5 is a major economic corridor for both states and the entire West Coast,” the governors wrote in the letter dated Tuesday. “We feel strongly this project must move forward without delay.”

Good for them!  It is time to get on with the project!

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

Help employers put people back to work

This morning, you may have opened your local paper and found an ad like this (left). It's part of a broader effort by AWB, through its partnership with the Washington Alliance for a Competitive Economy (WashACE), to draw attention to the impact of tax and fee increases on already struggling Washington businesses. The campaign includes a postcard mailing, as well as online, radio and newspaper advertising.

One print ad features Keith Cash, owner of Abacus Fine Carpentry in Seattle. Keith contacted us in January about a steep jump in his unemployment insurance rates. His story is not unlike thousands of other businesses in our state facing the double whammy effect of higher UI taxes and workers' comp increases. Eric Brulotte, owner of Spokane Comfort Systems, is featured in our Eastern Washington ad. His rates have also skyrocketed.

Lawmakers in Olympia have already introduced more than 75 tax and fee increases this session. And yesterday, Gov. Gregoire weighed in with her own tax plans. Her proposal would raise about $605 million through taxes on everything from candy and gum to bottled water, cigarettes and petroleum products.In his post on the subject today, WashACE's Dick Davis calls it "the opening bid in a game likely to escalate."

Senate and House Democrats have yet to reveal their budget plans, which may be out next week. The feds are still considering their revenue options, as are many local municipalities.

As AWB President Don Brunell recently observed in his Washington Business magazine column, "It all adds up and the cumulative impact is devastating...Federal, state and local governments cannot act independently if we are to restore our economic vitality and create jobs...Connect the dots and do the math."

Lawmakers need to hear from businesses of all sizes -- Main Street shops, nonprofits, hospitals and major employers alike. Call your legislators toll-free at 800.562.6000 or take action online and tell them how your business is cutting costs and working to keep the doors open in this economy.

Tell them more costs will only make matters worse. Instead, let's find ways to help employers put people back to work. 

Hong Kong: Open for Washington Business

Recently, the Association of Washington Business and Hong Kong Business Association of Washington sponsored the Seattle presentation by Donald Tong, Hong Kong Commissioner or Economic and Trade Affairs, USA, from Washington,D.C., on business and trade opportunities in Hong Kong.  Tong said Hong Kong has the welcome mat out for business and tourists.

Don C. Brunell, AWB President and Donald Tong, Hong Kong Commissioner of Trade and Economic Affairs to the United States pictured at Seattle Luncheon

Tong said: "We strongly welcome you to visit Hong Kong for business or pleasure!"

Hong Kong is a 426 square mile city carved out of south China with 7 million people. By contrast, the Seattle Metro land mass is just shy of 8,200 square miles with 3.34 million people.  In fact, Hong Kong, one of the world's most densely populated cities, has more people that the entire State of Washington with its 71,342 square miles and has 6.66 million people.

Hong Kong leaders, like Tong, are proud of the label which it has worn for the last 16 years: "World's Freest Economy" by the Heritage Foundation and Wall Street Journal.

The report, titled "2010 Index of Economic Freedom", measured the degree of economic freedom of 179 economies worldwide by assessing 10 factors: business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. Hong Kong scores 89.7 this year, well above the world average of 59.4, said the report. Singapore and Australia come as the second and third with 86.1 and 82.6 points respectively.  Ireland, Switzerland, Canada, the United States, Denmark and Chile rounded out the Top 10 list.

The Heritage Foundation recognized that Hong Kong's competitive tax regime, respect for property rights, and flexible labor market, coupled with an educated and highly motivated work-force, have stimulated an innovative and prosperous economy.

Hong Kong is betting its future on four economic pillars:  financial Services, tourism, trading and logistics and professional services.  As a gateway to Mainland China, Hong Kong has the world's 3rd busiest container port handling, nearly six times greater volume than the ports of Seattle and Tacoma combined, and its airport is the world's busiest international air cargo hub which is good news for Boeing which just launched its mammoth 747-8 cargo jet.

The other good news for Washington is Hong Kong people love our state's wines. Over the last couple of years, U.S. wine imports have more than doubled and our state is positioned well to sell more.  In total, Hong Kong is Washington's 15th largest export destination valued at $982 million in 2008 and growing.

Washington is our nation's No. 1 exporter per capita, according the the 2010 WashACE Redbook.  Each of us gains $10,213 in economic activity from trade.  That is why AWB continues to strongly support free and open trade with Hong Kong and countries around the world.  Our state's future lies in our ability to be a focal port for world trade....and one of the key places we need to focus on is trade with is Hong Kong.

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