Olympia Business Watch

Brunell: Rising gas prices threaten our economic recovery

Just as the economy is starting to move again, rising gas prices threaten to put on the brakes, AWB President Don Brunell writes in his weekly column.

AAA is reporting gasoline prices are at the highest point ever for this time of year and experts are predicting $4.25 per gallon by late April.

The rising gas prices lead to higher costs for virtually everything we buy because just about everything that's produced uses refined petroleum somewhere along its journey to market.

The spike is due to a host of factors, including the seasonal shut down of refineries so they can switch from their winter fuel blends to the more costly summer blends mandated by EPA.

In addition, several refineries have closed, the recent fire at BP's Cherry Point refinery further reduces supply, and Iran has cut off oil supplies to England and France.

There is no quick fix to any of these problems, but there are things that America can do to reduce the chance that this happens again.

Perhaps the most important thing, Brunell writes, is for political leaders from President Obama on down to understand the link between a stable energy supply and a strong economy.

Obama plan to replace owls for owls in the Northwest woods

When your Barred Owl cousin--the East Coast bully---tosses you out of your nest, just call your Uncle, Sam, and tell him to come over with the shotgun. While the more aggressive Barred Owl may call it "squatter's rights," the timid Northern Spotted Owl see it as the feds evening the score by whacking a few rude relatives.

According to the Associated Press, the Obama Administration is moving forward with a controversial plan to shoot Barred Owls to save the imperiled Northern Spotted Owls on 24 million forested acres in Washington, Oregon and Northern California.

Hints of the plan came last year when Dept of Interior released its report: "Improving Strategies to Assess Competitive Effects of Barred Owls on Northern Spotted Owls in the Pacific Northwest"--a fancy title on a report aimed at shooting some.

Since the 1960s, Barred Owls have been expanding their range westward from the eastern U.S. They are generally a little larger than Northern Spotted Owls share the same environment. In other words, they like the neighborhood and assortment of groceries at the local market.

But the bottom line is Barred Owls are more aggressive and out-compete Northern Spotted Owls leading to decreases in Northern Spotted Owl populations.

Administration officials acknowledge that the plan to kill Barred Owls creates an ethical dilemma, but say an experiment on private land in Northern California has shown promising results. Northern Spotted Owls have returned to historic territories after Barred Owls were removed.

The government set aside millions of acres of forest to protect the Northern Spotted Owl, but the bird’s population continues to decline — a 40 percent slide in 25 years.

The latest plan to kill barred owls is not the first time the federal government has authorized killing of one species to help another. California sea lions that feast on threatened salmon in the Columbia River have been killed in recent years after efforts to chase them away or scare them failed.

Interior Secretary Ken Salazar also called for "ecological logging" in some of the habitat area to improve the health of the forests. Former President George W. Bush proposed a similar strategy before leaving office in 2008, but the courts nixed it.

So what impact does the plan have on loggers, forest managers and mill owners? The American Forest Resource Council, a forest industry group, was skeptical that so-called ecological logging would produce a significant amount of timber or jobs. At the same time, the plan has the potential to double the amount of acres designated as critical habitat, said Tom Partin, the group’s president.

Hopefully, those in rural communities most impacted by the latest owl scheme will have their say before it is implemented.

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

Good news for a Sunday---citizen action works to solve problem, helps people and saves taxpayers money

SUNDAY BLOG

With all of the bad news, how about some good news for a Sunday.  It comes via an article that CB Hall wrote for Crosscut on the efforts of citizens in the Olympia-Lacey area who built and maintain their Amtrak train station.  No help came from the federal government or Amtrak.

Twenty-five years ago, Amtrak patrons traveling to or from Washington's capital city — which the tracks bypass — had to contend with a station designated as East Olympia. In a recent interview, Lloyd Flem, Olympia resident and dean of Washington state's passenger rail activists, recalled the station as “a little three-sided shack. ... The potholes in the parking lot would sometimes be a foot deep — no restrooms, no nothing. It would have made maybe a half-way decent farm stand.”

The station, adjacent to a gated road crossing, was also very dangerous. “There were several people killed at East Olympia, in several accidents,” said Bob Bregent, a locomotive engineer from Olympia who managed Centennial Station's construction. “People would go around the down gate and they'd hit a freight coming on the other main track. They thought they only had to circumvent the passenger train stopped next to the crossing.”

The tipping point came when one incident provoked a passenger to speak out, helping bring about action. In a letter which reached the Thurston County Commission, it was reported that:  "Late one night in 1986, Amtrak's Los Angeles-Seattle Coast Starlight train, running way behind schedule, dropped off a wheelchair-bound man at the East Olympia shack. No one was around, and the often-vandalized pay phone apparently wasn't working. The man spent the entire night at the station, helpless."

Then Thurston County Commissioner George Barner decided enough is enough. Barner decided to take action, convening a meeting that led to the founding of the nonprofit Amtrak Depot Committee. 

Thurston County donated a highway maintenance depot, two miles northeast along the Burlington Northern tracks from East Olympia, and a local farmer contributed some adjacent land, giving the station a site of some five acres. Some 2,500 paving bricks were sold at $35 to $50 apiece, while marble plaques were minted for larger, business donors. The local contractors' trade association donated time and material. An architect contributed drawings. Bregent would show up with half a dozen volunteer nail-pounders on Saturdays and Sundays.

The station and adjoining park-and-ride cost, depending on the accounting one consults, between $600,000 and $1 million, exclusive of all the donated labor and materials. The federal government — meaning Amtrak — didn't put in a dime. In comparions, an Amtrak station in Stanwood, minimal in design and opened in 2009, cost roughly $5 million dollars, all of it public money. The budget for the new Sounder-Amtrak station in Tukwila is $18 million.

By replacing the lean-to at East Olympia, Centennial gave Amtrak ridership in and out of Olympia a major boost. How much money the station project has thus put in Amtrak's coffers no one can say, but the presence of anytime-we-are-needed volunteers has certainly removed any need for Amtrak to install its own paid staff, as the station's traffic volume would otherwise have called for. That saves Amtrak about $150,000 a year, according to Rich DeGarmo, a retired pharmacist who supervises the 60 volunteers who operate Centennial Station.

The Amtrak system has at least three stations run by volunteers — including the Kelso-Longview depot, where Olympia's volunteers, aided by the 40-page training manual they have written for new workers, helped get the volunteers going in 2011. A station in Missouri also runs on volunteers.

As we have to tighten our belts to reduce our federal deficit, the folks in Olympia-Lacey and Kelso-Longview are solving problems and helping their fellow citizens using their own elbow grease and time. Isn't that what America is all about?

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

What's behind skyrocketing prices at the pump

This week we have seen prices dramatically increase at the pump.  For example, early Monday morning I drove from Vancouver to Olympia.  Along I-5 I noted the average price was $3.79 for a gallon regular. Today, when I filled up in Vancouver it was $3.99.   That's 20 cents a gallon in less than a week.

What's up?   Or, better yet what is causing the price to go up?  

I wrote about it in my column this week and the Wall Street Journal was quite pointed in its criticism of President Obama's response when he addressed the issue during a speech in Miami.

Here is what Jack Gerard, president and CEO of the American Petroleum Institute had to say:  "Those causes are simple: Because we are in a world market for crude oil, the continued turmoil in oil-producing regions is putting supplies at risk just as worldwide demand for crude oil and the products made from it is increasing. This combination of rising demand and reduced supply has pushed prices higher.

The price of diesel or gasoline is directly tied to what refiners pay for the crude oil from which they are made. That price has been between $105 and $120 a barrel. This means that for every gallon of gasoline, $2.50 to $2.85 goes toward paying for crude oil. Excise taxes add another 49 cents a gallon on average (as much as nearly 70 cents a gallon in some states).

So the cost for the fuel per gallon is already at $3 or more even before adding the cost of refining, transporting and selling the fuel at the retail station."

Gerard continued:  "American producers and refiners are producing more oil and petroleum products, reducing our reliance on imports. We are also consuming less. Without these two factors, today’s prices might be even higher.

Clearly, then, the formula for lower prices is greater production and wiser use of energy. That is why we are encouraging consumers to be more mindful about energy use – and that they demand that policymakers encourage greater U.S. production of oil and petroleum products,"  Gerard concluded.

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

Health Care Pathway a hit at Washington Business Week

The health care pathway at Washington Business Week (WBW) is one of the most popular and fills up rapidly.  So high school students interested in participating in this year's one week camps at Gonzaga or Pacific Lutheran universities need to apply now.

The Gonzaga program runs from July 8-14 in Spokane and Pacific Lutheran health care week is August 5-11 on the campus in south Tacoma. (There is an eight-minute video produced by Coldiron Communications, Vashon Island, which give you a flavor for Health Care Week).

Washington Business Week started at the Association of Washington Business (AWB) in 1975 and AWB remains the founding sponsor. In the last 36 years, more than 50,000 students and teachers have graduated from the summer program alone. Today, 26 states and Australian have adopted the Business Week program.  Washington Business Week staff runs the Alaska and Poland business week programs.

Washington Business Week is funded through voluntary contributions from AWB members, graduates, service clubs like Rotary and Kiwanis, locat chambers of commerce and other interested citizens.  To contribute, log on to Washington Business Week and you can help on line.

America's national debt: the compelling reason to act

Sen. Jeff Sessions (R-Alabama) is the ranking Republican member of the Senate Budget Committee and has been an outspoken critic of the President when it comes to addressing our mushrooming national debt.

Session's office released a chart showing the current federal debt costs each citizen of the United States $44,215 today and will rise to $75,000 by 2022 if the current course of federal spending continues.  The chart came from the International Monetary Fund (IMF).

The most shocking part of the chart is the fact the America's per capital or individual person's share of the debt is higher than a citizen in Greece, Ireland, Spain, Italy or Portugal--Europe's most debt ridden nations.   It is those nations that we are closely watching because collapse of any one would have a dramatic impact on our economic recovery.

The National Debt on January 1, 1791 was just $75 million dollars. Today, it rises by that amount every hour or so.  You can track the running debt clock.   Each taxpayer's share of that debt is now $136,044 and growing.  That is a big concern because the average American household takes in $63,091 per year. 

When I started writing this blog posting, our national debt was $15,386,746,232  and now it is $15,386,750,747. Go to the clock and figure it out when you read this.  It is scary!

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

 

Remember George--humble soldier, statesman, farmer and patriot!

Today marks the 280th anniversary of the birth of George Washington---our nation's first President, commanding general in the Revolutionary War, a plantation owner and statesman. His bust is centered squarely in the middle of the green field of our state's flag. Our state proudly wears his name.

I remember Feb. 22 well because it was also my maternal grandmother's birthday and she would be 123 years old today, but we lost her in 1966. She was a homemaker and my grandfather was a plumber. They came to Butte from Wisconsin and Iowa and scraped by and raised 13 children in a small three bedroom home.

Richard Davis, president of the Washington Research Council and an insightful columnist for The Herald, The News Tribune and at times, the Puget Sound Business Journal, wrote of the virtues our our first President and lamented that it would be wise for our current elected officials and politicians to pause and reflect on the George Washington's values.

 Davis wrote:  "Children used to memorize fragments of Henry Lee's funeral oration, in which he said of Washington, "First in war -- first in peace -- and first in the hearts of his countrymen, he was second to none in the humble and endearing scenes of private life; pious, just, humane, temperate and sincere; uniform, dignified and commanding, his example was as edifying to all around him as were the effects of that example lasting."

"These are tense times – and the right time to take a moment to remember the beliefs and virtues of America’s indispensable man," Davis concluded.  

By all accounts, George Washington was a humble man. My father, who was a small town mayor, master electrician, garbage business owner, and faithful husband and Dad, was a humble man as well. He told us you can't collect trash two nights a week for 20 years and not have a sense of humility. Time and again, he'd remind us that  "Nobody is ever criticized for being too humble!"  

He may have picked that up from studying George Washington in grade school....and by the way, my grandmother's first name was Martha.

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

The letter to the editor a governor never wants to read

If you are the governor of a major industrial state, the last thing you want to read is that your state can't attract a new plant from your state's flagship manufacturer. But that is exactly what Gov. Pat Quinn, D-Illinois, saw in the Chicago Tribune on Feb. 12.  It was an opinion piece by Caterpillar CEO Doug Oberhelman telling readers that while Caterpillar is bringing jobs back to America, they would not be in Illinois. Caterpillar Inc., is headquartered in Peoria.

That was not the news Quinn wanted to hear and responded that he was disappointed in Oberhelman's remarks and decision.  Quinn and state elected officials have been trying to change the state's image. (Last October, my column talked about Illinios serious financial problems).

Caterpillar Inc. has deep roots in Illinois. Over the years we've employed tens of thousands of Illinoisans, including the 23,000 working here today, but when it came to closing a plant in Japan and moving it to the United States, Illinois was not in the running.  Instead the 1,400 jobs and new $200 million state of the art manufacturing plant will be located in Athens, GA, Oberhelman wrote.

Here is what Mary Bell, Caterpillar's vice president of Building Construction Products division had to say about the decision:  “The Athens site was selected from among dozens of locations considered due to its proximity to the major ports of Savannah and Charleston, a strong regional base of potential suppliers, a positive and pro-active business climate and a good pool of potential employees with manufacturing experience.”

As to why not Illinois, Oberhelman wrote: "Illinois has not done what is necessary to balance its budget. Major credit agencies have downgraded the state's bond rating. The state passed some changes to workers' compensation last spring, but it wasn't enough."

"Illinois will still be among the most expensive states in the nation for workers' compensation insurance. Our own comparison of workers' compensation costs showed Illinois was far more costly than neighboring Indiana, which is consistent with a comparative study by Oregon, which also shows Illinois is much more expensive than Indiana, Iowa and Kansas in workers' compensation insurance rates."

Losing a Caterpillar new plant in Illinois would be just like Washington losing a Boeing plant. There are some warnings in Oberhelman's letter that governors and state legislators around the country, including Washington, cannot ignore.

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

 

Brunell: No more Band-Aids for the state budget

The small dose of good news that came out of last week's state revenue forecast doesn't change the long-term problem, AWB President Don Brunell writes in his weekly column.

As it is now, the state budget is unsustainable.

Without systemic changes, lawmakers will be dealing with growing budget deficits every year for years to come, something that Sen. Jim Kastama, D-Puyallup, illustrated in a video presentation.

Raising taxes isn't the solution. Even if legislators boost taxes by a billion dollars, the 2017 budget will still have a $4.4 billion deficit, Brunell writes.

Limping along and hoping the economy improves on its own isn't a good strategy, either, even though Washington has a long history of doing this.

The Seattle Times warns against "kicking the can down the road."

"Starting off $2 billion in the hole has become a usual thing with the Legislature," the paper writes. "It is the wrong thing to do."

The right thing to is to overhaul the budget and figure out how the state can live within its means.

"That's a real solution," Brunell writes," that will foster economic growth and create jobs."

Small business still not hiring full-timers: skeptical about fragile economic recovery

In a Wells Fargo/Gallup national poll of small business, seven in 10 owners say they would hire temporary, contract, or part-time workers. The national survey was taken during the same period in which AWB polled its members about how they see business now and in the year ahead. Despite a better outlook on the economy, small business owners remain cautious about the economic recovery.

A majority of respondents to AWB's survey described their company as either “fairly healthy” or “very healthy,” but a disconcerting one-third said their business is “not very healthy” or “not healthy at all.” Nearly 70 percent said they do not expect to add employees in the next 12 months. AWB commissioned Moore Information to conduct the poll.

Both surveys found that costs of health care and government regulations are causing small businesses concern. Since both polls were taken, the price hikes of gas at the pump are responsible for people cutting back on spending.

To fully recover, business, particularly small business, must increase the hiring of full-time workers.

Rising gas prices threaten the fragile recovery....but there is something our political leaders can do about it

SUNDAY BLOG:

Just as our economy is starting to recover and employers are adding jobs, rising costs for gasoline, avialtion fuels, and diesel are threatening to dampen it.

According to AAA Fuel Gauge Report, the national average for a gallon of gasoline was $3.54 on Saturday, but don't expect it to drop soon. To the contrary, Tom Kloza, chief analyst at the Oil Price Information Service recently forecast gas prices will hit a $4 national average by Memorial Day and could even approach $5 a gallon in certain regions.

Prices go up in spring mainly because refineries temporarily shut down to flush out winter fuel blends and prepare to make more expensive summer blends, said Jessica Brady, spokeswoman with AAA Auto Club South. Summer blends are required by the Environmental Protection Agency to help reduce smog-forming tailpipe emissions.

To make matters worse, Brady said, several refineries worldwide have shut down, which has limited gasoline supply.

Brian Milne, editor of Refined Fuels for the commodity research firm Telvent DTN, said two refineries in the Mid-Atlantic area have permanently closed and a third will shut down by the summer. Also, European refiners export a significant amount of gasoline to the United States, and Switzerland-based refiner Petroplus recently closed five of its refineries because it could no longer fund their operations.

Then there is the matter of the BP refinery at Cherry Point fire Friday afternoon which slowed refining. No one knows for sure what that impact will be, but BP is a critical part of our fuel supply processing 230,000 barrels of crude each day when operating at normal levels.

While refining capacity is part of the reason petroleum producers are going up. There is the matter of crude oil supply interruptions and our inability to explore for new sources in the United States and in our coastal waters.

International tensions over Iran's nuclear weapons program has energy traders nervous. Iran is the second largest producer of crude in the Mideast. To give you an idea of the impact, last year amid revolutions in North Africa and the Middle East, gas prices spiked 3.5% in January 2011 and kept rising nearing $4 a gallon in May. Those higher prices tricked through to other goods and dragged on consumer spending causing a slow down in economic growth and hiring.

CNN Money reports Inflation picked up slightly last month, as rising gas prices took a bigger bite out of consumers' wallets. Rising prices at the gas pump were a key factor, increasing 0.9% during the month, the Labor Department said.

So what is the solution?

We need to have adequate refining capacity which can compensate for the loss production if a hurricane shuts down the Gulf of Mexico region refineries, a fire hampers BP at Cherry Point, and to meet growing demand.

Second, we need a stable supply of crude for our domestic reserves and from our friends like Canada. That means expediting approval of the expanded Keystone Pipeline through the Midwest.

And, our political leaders from President Obama down to local elected officials need to understand the ties between a stable and reasonable priced energy supply on our economy, jobs and hard-working families---average people who are trying to feed their families, pay their bills and save some money for their kid's college educations.

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

Washington Business Week in Poland

Washington Business Week will be back in Poland for its fourth consecutive summer. Poland Business Week started as an outgrowth of the Seattle-Gdynia sister city relationship in 2008 and has now spread to three Poland cities--Gdynia, Gdansk and Boleslawowo. All are along the country's northern Baltic coast.

The Poland Business Week program has the strong backing of the U.S. Embassy in Warsaw as well as Boeing, Microsoft and several Polish businesses. Piotr Grodzki, founder of Speednet, a Gdynia based software company, has been deeply involved in the Poland Business Week program which last summer graduated over 250 Polish students and teachers.

Again this summer Washington business leaders, students and educators will serve as company advisers and mentors for the program. Those Washingtonians are all veterans of Washington Business Week.

Poland Business Week is also drawing international attention. Educators from Denmark and Italy came to Gdansk last summer to learn more about the program hatched at the Association of Washington Business in 1975.

Roadkill Caucus members say they've gained respect

The Roadkill Caucus has gained a measure of respect in the Legislature since flexing its muscle last year during the battle over workers' compensation reform.

They won the fight, helping to bring about legislation that immediately halted what had been a steep and steady rise in workers' comp insurance rates.

Now the loose-knit band of moderate Democrats is attempting to force their fellow lawmakers to quit over-spending and adopt serious budget reform.

But even with their growing influence, it won't be easy.

That was the message three members of the group -- Sen. Steve Hobbs, D-Lake Stevens, and Reps. Deb Eddy, D-Kirkland, and Christopher Hurst, D-Enumclaw -- delivered Thursday at AWB's weekly Lobby Lunch meeting.

It's not an easy task, in part because of the vague-sounding nature of budget stability.

But it was made even more difficult this week by the otherwise good news that Washington's caseload forecast declined and its revenue forecast ticked upward, if slightly, for the first time in ages.

State health purchasing exchange must provide choice of insurance

Under the federal health insurance reforms, more commonly referred to Obamacare, states either must develop their own health insurance purchasing exchange or the federal government will impose its exchange with strong government control over the insurance market.

The Association of Washington Business is working to insure that our state has an exchange with choice. That is why we lobby for open-market exchanges as opposed to a state government directed health purchasing exchange.

Open-market exchanges are like a virtual marketplace where all insurers in the state compete side-by-side, allowing consumers to select from a broad variety of plans, coverage levels and prices. The emphasis is on competition and maximum consumer choice. The American Medical Association recently endorsed this model of health exchange.

The Washington State legislature is in the process of adopting the state's exchange and the Washington State Senate has passed SB 6440 which helps ensure access to affordable, quality health insurance options inside and outside of the new state-run health care exchange. Now it is time for the state House to do the same.

The bill would direct the Insurance Commissioner to identify at least five states for establishing reciprocal agreements, allowing the purchase of individual and small health insurance policies between those states and Washington. Only comprehensive plans could be sold and they must comply with the federal employee health benefit design--a health plan familiar to thousands in our state already. High-deductible, low benefit and catastrophic plans would not be allowed.

 

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Signs of life in 2012 governor's race

Although the 2012 November elections seem as distant as clear skies and 70 degree temperatures, there has been a fair amount of state political news of late. In particular, the race for governor. 

Last Monday, Democratic gubernatorial candidate Jay Inslee released his economic plan at events in Seattle and Spokane. According to Inslee, it's the first of several policy announcements to come from the campaign. Education is reportedly the next issue he will address in a second briefing plan.

In an interview with KING 5's Robert Mak Sunday, Inslee touted the plan's focus on key industries like life sciences, green energy, agriculture and aerospace. The plan also touts tax relief for small businesses, offering a B&O tax credit for small businesses that hire new employees and B&O relief for start-ups in biotech, clean energy and information technology.Inslee would also offer tax credits for investments in aerospace manufacturing and research. Alhtough Inslee's plan does not offer specifics on the price of these proposals, he told Mak:

"In the long run their cost is zero. In the short run, we're going to target them and make sure they're not any larger than the state budget can handle."

Watch the full interview by Mak with Inslee here:

Over at MyNorthwest.com, reporter Linda "The News Chick" Thomas recently interviewed both candidates (read/listen to the Inslee profile here and today's conversation wtih Republican Attorney General Rob McKenna here). Both conversations provide insight into what has motivated them personally and glimpses what they each hope to accomplish as governor.

Then today, pollster Stuart Elway released the findings from his latest poll on the race, which finds McKenna with a nine-point lead over Inslee (margin of error is plus/minus five). The poll of 405 registered voters found 45 percent of respondents would "definitely" or "probably" vote for McKenna, compared with 36 percent for Inslee.

For us at AWB, it's all part of the run up to what will be the first formal debate between the two candidates for governor on June 12 at the Bing Crosby Theater in Spokane.

AWB has a long history of hosting a debate for the state's top office holder, dating back to 1992 between candidates Mike Lowry (D) and Ken Eikenberry (R).

The debate will give AWB members and supporters from both campaigns an opportunity to hear in person the positions and perspectives of both candidates before a live audience. This year, Northwest News Network correspondent and TVW host Austin Jenkins will serve as moderator for what should be a lively debate about the future of Washington state. 

Brunell: Social Security is the hot potato no one wants to touch

The $15 trillion national debt is receiving plenty of attention in Congress, but another looming crisis has slipped below the radar, AWB President Don Brunell writes in his weekly column.

Social Security.

Social Security is running almost $50 billion in the red each year, and any attempt to fix the system elicits a howl of protests that stops politicians in their tracks.

Remember when President George W. Bush put Social Security solvency on the front burner after his re-election in 2004? The resulting firestorm of opposition forced him into silence, and nobody had dared to suggest changes since, Brunell writes.

But something has to give. Social Security worked back in the '30s, when the average life expectancy was just 58 and when there were roughly 16 workers for every beneficiary.

Today, people are living longer and retiring earlier. And there are just 3.3 workers for every beneficiary.

"If we don't change our attitude about adjust the program and reducing our benefits, Social Security won't be around for our kids and grandkids," Brunell writes. "And it will be our fault."

B&O tax collection complications hamper small business

With the Washington Legislature heading into its final weeks, it is doubtful that lawmakers will approve Gov. Chris Gregoire's (D) plan to simplify the way state and local Business and Occupation (B&O) taxes are assessed and collected.

The Governor agreed with the Association of Washington Business (AWB) that B&O tax regulations and assessments should be standardized like our state's sales and use taxes. She proposed to have the state collect the tax and then rebate the local B&O taxes back to local governments.

But major western Washington cities, led by Seattle, have balked and used their leverage with ways and means committee chairmen in the House and Senate to bottle the bill up.

Newspapers and business journals across Washington have carried Don Brunell's op-ed piece, like the one in the Wenatchee World, calling for passage of the Governor's plan. However, even though the plan is a good, solid one and would go along ways towards making it easier, less costly, and more consistent to file and pay B&O taxes, it doesn't appear as though B&O tax simplification will pass this year and that is a doggone shame.

Passage would start Washington down the path toward shedding our image of an overregulated state.

Pensions, Health Care costs will eat states' alive unless changed.....and, at a time when people's health insurance premiums are sharply rising

SUNDAY BLOG

Last week, folks from the Pew Center on the States gave thoses of us attending our annual state chamber of commerce leaders meeting a preview of their upcoming report on the impact of the future costs states are incurring for pensions and health care for people who work for government. While not released yet, researchers at the Center project multi-trillion shortfall between tax and revenue collections in the states and future health care and pension obligations.

While the final numbers have not been released, there is one striking number that was. That is states will have to have an average 12% revenue growth rate to meet their future pension and health care requirements unless they lower their pension and health care costs.

That news came on top of reports yesterday that one of the chief economists President Obama used to project costs of health insurance premiums under federal reforms 17 months ago (more commonly referred to as Obamacare) is reversing field on his projections.

According to the Daily Caller, Massachusetts Institute of Technology economist Jonathan Gruber, who also devised former Massachusetts Gov. Mitt Romney’s statewide health care reforms, is backtracking on an analysis he provided the White House in support of the 2010 Affordable Care Act, informing officials in three states that the price of insurance premiums will dramatically increase under the reforms.

In 2010, Gruber said premiums would be lower than normal under Obamacare.

During his presentation to Wisconsin health officials, Gruber revealed that while about 57 percent of those who get their insurance through the individual market will benefit in one way or another from the law’s subsides, an even larger majority of the individual market will end up paying drastically more overall. “After the application of tax subsidies, 59% of the individual market will experience an average premium increase of 31%,” Gruber reported.

So what does this all mean to lawmakers in state capitols, like Olympia, who face stifling shortfalls in revenue collections and, unlike Congress, must balance the budget?

State Sen. Jim Kastama (D-Puyallup) believes he and his colleagues must make difficult choices this year as opposed to patching the budget, raising some taxes, and heading home in early March. With little appetite by voters to raise taxes and with the looming cost obligations to our states in the years ahead, Kastama is correct in his call to action.

When Pew finally releases its new report on cost projections from state pensions and health care alone it will be sobering. It will be almost impossible to achieve the 12% state revenue growths each year for the next half decade while there will be increasing financial pressure on working people, employers and families to pay for growing health care premiums.

There really is a limit to what people can afford to pay in taxes, fees and government-mandated programs. That is reality.

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

Transportation plan all about tolls, biding time

Any thought of going to voters with a major gax tax proposal was scuttled early in the legislative session, leaving lawmakers to ponder more modest fee increases -- and begin laying the groundwork for something bigger in a few years.

That was the message delivered Thursday by the leaders of the House and Senate transportation committees during AWB's weekly Lobby Lunch meeting.

The foursome -- Sens. Mary Margaret Haugen, D-Camano Island, and Curtis King, R-Yakima, and Reps. Judy Clibborn, D-Mercer Island, and Mike Armstrong, R-Wenatchee -- emphasized how well they work together despite party differences.

"Transportation isn't partisan," Clibborn said.

And they called on business leaders to join with them in backing the next major transportation initiative.

Whatever it is likely won't come until 2014. It's not wise to run a gas tax proposal in an off-year election, Clibborn said.

Whenever it arrives, it will almost certainly include a gas tax component -- although Armstrong would like to look for other funding options.

Tax simplification hearing shows cities would rather kill bill than compromise

Sen. Ed Murray said he was led to believe the two sides fighting over a plan to streamline collection of state and local business and occupation taxes were coming together.

That's why Murray, chairman of the Senate Ways & Means Committee, scheduled a last-minute hearing Tuesday on a substitute version of Senate Bill 6176, the governor's proposal to make the state the central collection point for B&O taxes.

But the sign-up sheets in the committee hearing room suggested otherwise, Murray, D-Seattle, said at the start of the hearing.

And the testimony from representatives of several cities confirmed it.

"I don't think we are anywhere near a good relationship," Seattle City Councilember Richard Conlin said when Murray pressed him about the nature of the negotiations.

Testimony from Randy Lewis, the Westport city administrator, further confirmed that the cities are more interested in stopping the legislation than they are in making it easier for small businesses to pay their B&O taxes -- regardless of what they may be telling lawmakers in private conversations.

"This bill takes away local control of our tax system," Lewis said -- incorrectly.

Brunell: When it comes to taxes, keep it simple

For Washington employers, paying taxes can seem like playing a game with 50 different sets of rules, AWB President Don Brunell writes in his weekly column.

It's anything but simple.

Gov. Chris Gregoire is trying to make it a little less complicated. The governor wants to make the state the single collector of all local and state business and occupation taxes, similar to how the state currently handles state and local sales taxes.

Some cities are pushing back against the governor's proposal saying they will lose money as a result, but Brunell notes that Gregoire is rejecting their claims.

"These horror stories of how they're losing money? No They're not," Gregoire said.

"If we ever need a reform that helps business," Gregoire said, "this is it."

Tax incentives pay off

SUNDAY BLOG:

Earlier this week, Jason Hagey wrote a blog about AWB's manufacturing study and posted it on Olympia Business Watch. It covered the points made in my January 11, 2011 The Columbian column talking abut California bleeding manufacturing jobs---one reason is that state does not have a sales tax exemption for manufacturers when the purchase machinery and equipment or for repair and replacement parts.

Thankfully, over the years, Washington has long understood the value tax incentives bring to the state, but for a short time in the early 1980s when the governor and lawmakers were under the gun to balance the state budget, they mistakenly abolished those incentives.  The ones the wiped out were put in place In 1971, following massive layoffs at Boeing, state lawmakers created the Economic Assistance Authority to attract industrial investments.

It worked. The EAA incentives were pivotal in Crown Zellerbach’s decision to modernize its mammoth Camas pulp and paper mill where 3,000 people worked, instead of expanding a newer mill in Oregon. The EAA included a sales tax exemption on new pollution-control equipment — roughly half of the modernization cost — a sales tax deferral on the entire project and a B&O tax credit on the other half of the costs. In 1978, with the incentives in hand, Crown began the five-year modernization project despite a deep recession with double-digit unemployment, inflation and high interest rates.

AWB has been updating the manufacturing machinery and equipment, repair and replacement parts and research and development sales tax exemption. That last finding released a week ago was underscored by a new Policy Brief from the Washington Research Council that concluded elimination of the retail sales and use tax exemption for machinery and equipment would immediately cost the state 7,400 jobs. After five years without the M&E exemption, Washington would lose more than 22,300 jobs, the brief stated..

But in 1981, when Republicans took control, the state was in a financial hole. Republican Gov. John Spellman, House Speaker Bill Polk, R-Bellevue, and Senate Leader Jeannette Hayner, R-Walla Walla, faced plummeting state revenues, much like the situation we face today.

Desperate to bring in much-needed cash, Spellman and Republican lawmakers repealed the EAA tax incentives. That one decision added $10 million to the cost of the Camas modernization project, and even though Spellman and lawmakers later restored the EAA credits for the Camas facility, the damage was done. Since then, Crown Zellerbach and its subsequent owners have concentrated their investments outside Washington. Interestingly, more than half of the $425 million CZ spent was to reduce pollution in the pulp and papermaking process.

In 1995, Democratic Gov. Mike Lowry and a bipartisan group of legislators restored sales tax exemption on manufacturing machinery and equipment with spectacular results.

For example, an Association of Washington Business survey of 150 small manufacturers showed they invested more than $250 million in the first year alone. Over the first decade, it added $81.5 billion to the state coffers, generated more than $16.5 billion in income and created nearly 285,000 jobs.

So what would happen without the M&E?  WRC concludes that 22,300 jobs would be lost, $365 million worth of annual investment in equipment and software would go away, $2.3 billion in annual manufacturing output would be lost and $1.6 billion of annual personal income.

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

Indiana becomes first Rust-Belt 'Right to Work' state

On Wednesday, Indiana Gov. Mitch Daniels (R) signed legislation making Indiana the first "Right to Work" state in the industrial heartland of America.

The legislation, which bars union contracts from requiring non-union members to pay fees for representation, makes Indiana the first state in more than a decade to enact "Right to Work" legislation and the only one in the Midwestern manufacturing belt to have such a law.(Before Indiana, Oklahoma was the last state to enact "Right to Work" legislation in 2001).

Even though Indiana is the 23rd state to adopt "Right-to-Work," the law is more prevalent in the South and West than it is in the Midwest. South Carolina and Kansas are "Right to Work" states.  Washington is not, but our neighbor Idaho is along with Nevada, Utah, Arizona and Wyoming in the West. 

According to the Christian Science Monitor: "Right-to-Work" supporters also say the measure promotes the individual liberty of workers, giving them the choice whether or not to join a union – and perhaps more importantly, pay membership dues.

Many union workers don’t agree with the politicking associated with organized labor and they should have the right to withdraw their dues in protest, says Mark Mix, president of the National Right to Work Committee, a nonprofit advocacy organization in Springfield, Va.

Recently, the U.S. Chamber of Commerce released its report identifying states which have good, fair or poor business climates when it comes to labor and employment law and regulation. "Right to Work" was identified as a positive factor contributing to Idaho's good rating while lack of "Right to Work" was identified as contributing to Washington's poor rating.

Losing "Right to Work" is controversial and emotional. Thousands of union members gathered inside the Statehouse chanted "Shame on you!" and "See you at the Super Bowl!" as the vote was announced. Thousands more amassed outside for a rally that spilled into the Indianapolis streets, already bustling with Super Bowl festivities, hoping to point a national spotlight on the state.

Indiana AFL-CIO spokesman Jeff Harris said protesters planned to hand out leaflets before Sunday's game. Daniels said this week that it would be a "colossal mistake" for union protesters to disrupt Super Bowl festivities and that any such move could backfire on them.

Welcome to the first day of session, Hewitt says, on Day 25

Now that the state Senate has voted to legalize same-sex marriage, maybe lawmakers will turn their attention to balancing the budget.

That's clearly the hope of Sen. Mike Hewitt, R-Walla Walla, who began his remarks Thursday at AWB's  Lobby Lunch meeting by welcoming everyone "to the first day of session!"

In fact, lawmakers are now four weeks into the session -- seven weeks if you count last year's second special session -- and there has been "very little movement on the budget whatsoever," Hewitt said.

Other issues, he said, have "totally taken time away from what we need to do in a short, 60-day session."

The lunch meeting not only followed the Senate vote on same-sex marriage, but it also coincided with the release of the House Republican caucus's education budget.

Rep. Richard DeBolt, who joined Hewitt and Rep. Joel Kretz, R-Wauconda, at the meeting, said that after years of proposing a separate, stand-alone education budget and getting nowhere, he's pleased to see it finally get a hearing in committee.

Washington manufacturers share concerns about workforce, power rates

Last year, staff from AWB and its nonprofit affiliate, the AWB Institute, toured the state, meeting in focus groups with representatives from dozens of manufacturing companies.

It was the first tour of its kind and it led to a new report, Challenges & Opportunities for Manufacturers in Washington State, and a first-ever manufacturing industry policy agenda, as well.

"We wanted to get first-hand knowledge directly from our manufacturers about what's working and where there are opportunities to help," said Amy Johnson, a consultant for the AWB Institute.

The meetings took place between August and October and included representatives from 70 small, medium and large manufacturers in Everett, Mount Vernon, Moses Lake, Pasco, Spokane and Vancouver.

Among the findings outlined in the report:

• Power rates must remain competitive. Manufacturers are concerned about rising electricity rates as a result of the Initiative 937 renewable energy law, and say that changes are required in order to remain competitive with other states.
• State and federal regulatory issues must be addressed. While regulations and oversight are necessary, manufacturers report that Washington's current regulatory environment makes it difficult to expand or locate here.
• Jobs are going unfilled due to a shortage of skilled workers. The training system has failed to keep up with today's increasingly high tech and automated manufacturing industry. Also, younger workers lack a work ethic.
• Tax incentives play a vital role in the growth of Washington's manufacturing sector and must be protected.