Olympia Business Watch

Timmons: 'Manufacturers want to create jobs'

Manufacturing in the United States continues to offer some of the best-paying jobs, but increasing regulatory burdens and skyrocketing business costs are rapidly threatening to erode the industry and our nation's competitiveness according to Jay Timmons, president and CEO of the National Association of Manufacturers.

Timmons was at Suncadia in Cle Elum Sunday to address members of the Conference of State Manufacturing Associations. AWB, the state chamber of commerce and manufacturing association, hosted the event; AWB President Don Brunell is the current chair of COSMA.

In an interview, Timmons shared his optimism about the industry, but was pragmatic about the challenges facing manufacturing and the country's businesses as a whole. While keeping one eye on the other Washington and the debt crisis ("it's a perfect example of the mess in Washington [D.C.]"), Timmons was frank about the vulnerability of our country's manufacturing industry.

"Other countries are salivating at the prospect of taking away our mantle of economic leadership, so they’re offering incentives, they’re making the regulatory regimes in their countries less burdensome, they’re lowering taxes –- they’re doing everything right while we’re doing everything wrong."

Both Democrats and Republicans in current and previous administrations and sessions of Congress share in the blame, in Timmons' eyes, for the state of the nation's competitiveness climate. Continued increases in corporate taxes, energy and regulatory costs have made it 18 percent more expensive to do business in the United States than in other parts of the world, and that's after you take out the costs of labor, he added.

"But those other costs that we can impact from Washington [D.C.] and the states are the things that are driving up costs of doing business and making manufacturers make decisions they don’t want to make.They’re patriotic Americans. They want to create jobs here in this country, they want to manufacture products here in this country, but unfortunately, they’re being forced by our own federal government to look elsewhere in order to be competitive."

Fix I-937 soon, before Wash. loses a competitive advantage

The House Environment Committee took up Initiative 937 when it met Wednesday for a work session, fulfilling chairman Rep. Dave Upthegrove's promise to address the issue during the interim.

It was the first time this committee had a highl-level discussion of Washington's renewable portfolio standard since the issue was transferred from the House Technology, Energy and Environment Committee. AWB's Chris McCabe was one of five stakeholders invited to testify during the meeting, which served as something of a baseline discussion of the issue.

McCabe noted that AWB represents a diverse mix of members on the issue, including small-business owners, commercial and industrial rate payers, rural electric cooperatives, investor-owned utilities, and independent power producers. As lawmakers discuss what to do about the I-937 -- which contains "unrealistic, unachievable standards" -- it's important to keep ratepayers in mind, he said.

Most utilities will have little trouble meeting the first mandate from I-937, which is to obtain 3 percent of their energy supply from renewables starting next year. But they will have considerable trouble meeting the next mandate, which is 9 percent of energy from renewables by 2016, not to mention 15 percent by 2020.

That will translate into much higher power costs, which will threaten Washington's long-held competitive adavantage over other regions of the country.

AWB has several ideas for how to fix the measure, McCabe said, noting that one of them -- House Bill 1515, sponsored by Rep. Jeff Morris, D-Mount  Vernon -- would have expanded the area from which utilities could obtain renewable energy. That bill failed to get a hearing.

The 2012 legislative session will give lawmakers another chance to fix I-937, but time is running out.

Health tab to hit $4.6 trillion in 2020 with shift to more reliance on government financing

The nation's health care tab is on track to hit $4.6 trillion in 2020, accounting for about $1 of every $5 in the economy, reports Medicare's Office of the Actuary. 

The study found government, already the dominant player because of Medicare and Medicaid, will become even more important. By 2020, federal, state and local government health care spending will account for just under half the total tab, up from 45 percent currently. As the health care law's coverage expansion takes effect, "health care financing is anticipated to further shift toward governments," the report said.

How much is that?

Including government and private money, health care spending in 2020 will average $13,710 for every man, woman and child.  By comparison, U.S. health care spending this year is projected to top $2.7 trillion, or about $8,650 per capita, roughly $1 of $6 in the economy. Most of that spending is for care for the sickest people.

The federal government's analysis found that President Barack Obama's health care overhaul would only be a modest contributor to growing costs, even though an additional 30 million people who would be otherwise uninsured stand to gain coverage.

The main reasons that health care spending keeps growing faster than the economy are the high cost of medical innovations and an aging society that consumes increasing levels of service.

Many of the newly insured people under the health care law will be younger and healthier. As a result, they are expected to use more doctor visits and prescription drugs and relatively less of pricey hospital care. Health care spending will jump by 8 percent in 2014, when the law's coverage expansion kicks in. But over the 2010-2020 period covered by the estimate, the average yearly growth in health care spending will be only 0.1 percentage point higher than without Obama's overhaul.

 

I-1053 legal challenge could make voters ask 'What's the use in voting?'

Voters could not have been more clear last fall on Initiative 1053, The Columbian editorial board wrote yesterday in response to the legal challenge brought this week against the measure.

In Clark County, home of Rep. Jim Moeller -- one of the dozen Democratic lawmakers who signed on as plaintiffs -- the initiative passed with a 71.3 percent approval, the paper writes.

The Columbian brings up the statistic after noting that Moeller's Web page includes this statement: "A big part of my job -- by the far most important part -- is listening to what Vancouver and othe Clark County folks have to say regarding the issues before us."

On I-1053, the people have spoken. Loud and clear. And with respect to a supermajority vote of legislators to raise taxes, they have spoken several times.

Is Moeller listening selectively, the paper asks?

Every time lawmakers overturn the will of the people, they risk alienating them -- possibly to the point that voters give up.

The paper concludes with this warning: "Legislators who disagree certainly have their right to pursue a legal remedy, but that doesn't make them right. And they do so at their own peril, as voters justifiably ask: 'What's the use in voting, if our voice will just be ignored?'"

 

I-1053 opponents want one judge to overrule a million-plus voters

As expected, a group of Democratic lawmakers and education leaders filed a lawsuit yesterday challenging the constituionality of Initaitive 1053, the voter-approved measure requiring a supermajority of the Legislature to raise taxes.

It is their right, obviously, but the plaintiffs will have a hard time demonstrating standing before the court, just as they have had in four previous supermajority challenges, said Kris Tefft, AWB's general counsel. Even if they do clear that hurdle, they will have to prove the two-thirds requirement is unconstitutional "beyond a reasonable doubt."

At its heart, the two-thirds supermajority requirement is a political mechanism that can be lifted by lawmakers, either by a two-thirds vote in the first two years after the initiative or by a simple majority after that. Indeed, the Legislature has voted to both lift and and impose the two-thirds requirement several times in the past.

And while it's true that this lawsuit represents a different tactic than previous lawsuits, in the end it still asks the court to absolve the Legislature of the political issue of whether to abide by a two-thirds vote requirement.

There's a bit of irony here, too. The plaintiffs -- who were unable to defeat the matter at the ballot box -- are now asking one judge to invalidate a law passed by millions of voters.

On the web:

AWB Statement on I-1053 Court Challenge

The Seattle Times: Suit targets Eyman tax initiative's two-thirds vote requirement

The Olympian: Suit targets Initiative 1053, tax-hike rule

Washington State Wire: Dems Challenge Stiff Two-Thirds Vote Requirement for New Taxes

 

Brunell: Broken promises carry unwelcome consequences

Raiding dedicated accounts is nothing new in Olympia, AWB President Don Brunell writes in his weekly column.

It's what lawmakers do when they get desperate.

In 2009, they were desperate to close a $9 billion budget gap, so they agreed to an innovative deal proposed by the Washington State Hospital Association in which hospitals volunteered to tax themselves. The state could use the tax collections to qualify for federal matching funds, keep some of the money for the state's general fund and return the rest to the hospitals in the form of higher Medicaid payments.

But just a year later, state officials passed a law that diverts more of the federal funds into the state coffers, prompting the hospitals to sue the state.

It's similar to what happened to Crown Zellerbach in the 1980s. The company was halfway through with construction on a modernization of its old Camas pulp and papermaking facility when state lawmakers wiped out an account that the company was relying on for the project.

The project was eventually grandfathered, but it cost an extra $25 million.

Now the hospitals are in for a bruising court battle that will cost money that would otherwise be going to patient care, Brunell writes. And there are important principles at stake -- "namely that elected officials should follow the law and keep their promises."

Romney health plan's skyrocketing costs harbinger of what's to come under Obama plan

One of the pillars of the sweeping federal health-care reform jammed through Congress last year by President Obama, then House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nevada) was establishing state-run health exchanges similar to the exchange in Massachusetts, The Health Connector. The Connector was pushed through the Bay State's legislature in 2006 by then Republican Gov. Mitt Romney.

Massachusetts enacted landmark health-care reform legislation that promised to extend health-care coverage to all citizens while significantly lowering costs. The law imposes mandates on residents to obtain health insurance and on employers with 11 or more employees to provide health insurance for their employees. It also expands Medicaid coverage and establishes a health insurance subsidy program. Additionally, it creates an insurance exchange, the Massachusetts Health Insurance Connector, which helps individuals who are not eligible for Medicaid purchase competitively priced health plans.  

The law did not bring about a promised reduction in health care expenditures. Rather, it permitted the state legislature and governor to expand health insurance coverage to almost all residents, while imposing more than $8 billion in new health care costs to the federal government and on state residents and businesses. The impacts have been particularly hard on small business.

Recently, Boston's own Suffolk University Beacon Hill Institute released a report on the high price for Massachusetts' health reforms. The study finds that over a five-year period the following has resulted:

• The federal government has spent an additional $2.418 billion on Medicaid for Massachusetts;
• Private health insurance costs have risen by $4.311 billion over the period;
• State health care expenditures have risen by $414 million over the period;
• Over this period, Medicare expenditures increased by $1.426 billion
• For a total cumulative cost of $8.569 billion over the period; and
• The state has been able to shift the majority of the costs to the federal government.

At a time when the United States has exhausted its credit limits, the federal government cannot bail out every state's health exchange. It's time to change the federal law.

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

Brunell: No perfect solution to energy needs

Could rolling brownouts be part of America's future? What about laws that limit how much electricity you use, and homes equipped with sensors that allow regulators to remotely turn off your energy-hungry appliances?

Scenarios like this might not be as far-fetched as they seem, AWB President Don Brunell writes in his weekly column.

Over the years, legislators and regulators have steadily reduced the the supply of affordable energy in the U.S. while the population and demand for energy has continued to grow.

Crude oil has become a pariah. Coal, which provides half the electricity in the U.S. and the world, is a perennial target. Here in Washington, activists want to breach the four dams on the lower Snake River, cutting back on clean, renewable hydropower. Natural gas, once touted by coal opponents as the cleanest fossil fuel, is now under attack. Alternative energy sources such as solar and wind may not provide more than 10 percent of total power supply.

"So we have some tough choices to make," Brunell writes. "Politicians and ideologues should step aside and let the scientists and engineers develop innovative solutions that provide for the future of our nation -- or it could be 'lights out.'"

Business Week on Facebook

Washington Business Week has added a Facebook challenge for students attending its one week summer camps at Western Washington, Gonzaga, Central Washington and Pacific Lutheran universities.  Students compete to see how many "likes" that they can recruit to their individual company/clinic websites.

Each group of 10 students, called a company, sets up its website and tells their family, friends and fellow students about it. They also manage their sites as well. It is an advertising, marketing and branding exercise which is new this year, but very popular with students.

"Thirty years ago when I first became involved with Business Week, there were no cellphones, I-pads or texting devices," Association of Washington Business (AWB) President Don C. Brunell said.  "We'd urge the students to bring quarters so they could call home and let their folks they arrived in Ellensburg and were safe in their dorms at Central Washington University.  Now the pay phones are gone and students now text one another." 

Brunell was a clinic adviser last week at Gonzaga's Business Week program in the health care pathway.  It really is interesting thinking about all of the changes since the program began in 1975 at AWB.  AWB remains the founding sponsor.

Jump on line and find out what is happening this week with Washington Business Week.

 

Policy Summit: Seattle Times Q&A with Kimberly Harris, Puget Sound Energy CEO

The Seattle Times published an interview recently with Kimberly Harris, CEO of Puget Sound Energy and a panelist at AWB's upcoming Policy Summit.

Harris, described as a "policy and strategy geek," was the second lawyer hired in Puget Sound Energy's new legal department after the 1997 merger of Puget Power and Washington Energy, the article notes.

The interview touches on everything from energy efficiency and electric cars to wind power and dams.

Harris predicts big changes for the electric utility industry in the next decade.

"They say if Edison walked down the street, he would understand the business because we're still providing service in about the same way we did 100 years ago," she said.

Check out the full interview here.

Harris is scheduled to join Alaska Airlines CEO Bill Ayer and Premera CEO Gubby Barlow for a panel discussion Sept. 21 at the Policy Summit titled "How Washington CEOs See the Next Five Years." Mike Flynn, former editor and publisher of the Puget Sound Business Journal, will moderate the panel. 

Coincidentally, the intro to the Times interview quotes fellow panelist Ayer, who sits on Puget Sound Energy's board.

You can find out more about the Policy Summit on the website, including the agenda, a list of speakers and how to register. Follow the discussion before and during the event on Twitter at @awbsummit.