Olympia Business Watch

Galloping Gertie stars in anti-cap and trade ad

The national debate over greenhouse gas reduction took on a Northwest flavor this week with the unveiling of a new ad starring Galloping Gertie, the original bridge across the Tacoma Narrows.

American Solutions for Winning the Future, a group led by former House Speaker Newt Gingrich, launched the ad entitled "The Breaking Point" today. The ill-fated bridge serves as a metaphor for the troubled American economy.

As the bridge twists and turns in the wind, the narrator warns that the Waxman-Markey bill - which seeks to create a cap and trade system for carbon emissions - is a national energy tax that could push the American economy to its breaking point.

With a vote on the bill possible this week in Congress, the narrator urges viewers to call or write their congress person "before it's too late."

AWB President Don Brunell weighed in on cap and trade in a recent column, making a similar argument. Brunell called cap and trade a $650 billion tax on all Americans.

(He just didn't use Galloping Gertie to help make the case.)

No need for special session, say lawmakers Alexander, Linville

State Reps. Gary Alexander, R-Olympia, and Kelli Linville, D-Bellingham, agree that Washington legislators should not convene for a special session this year, despite growing budget woes.

Linville told a meeting of the AWB’s Governmental Affairs Council that Gov. Chris Gregoire should use her limited authority to trim the budget enough to get through until January when the Legislature meets again for a regular session.

Earlier in the day, Victor Moore and Marty Brown from the governor’s office raised the possibility of a special session depending on the severity of an expected drop in state revenue. A new quarterly revenue forecast is due Thursday.

“There’s no reason to call us back,” Linville said. “The plate always gets more full when we’re in town.”

Alexander agreed, saying “I don’t see any reason for a special session. It just opens the door to more problems than good.”

The lawmakers also agreed on other budget issues, including that the current budget is unsustainable barring a big turnaround of the economy, and that it relies heavily on one-time funds including federal stimulus funding.

Alexander estimated that Washington will face a minimum $8 to $10 billion shortfall in the 2011-13 budget given current conditions.

“It’s not only a current problem,” he said, referring to Thursday’s revenue forecast. “We need to start planning how we deal with the next budget.”

The pain is statewide

Unlike the last recession, today's economic pain is equally shared whether you are in Seattle or Spokane, according to Al Ralston, president, Washington Research Council.  The WRC is an independent, non-partisan public policy research organization based in Seattle. Ralston briefly addressed members of AWB's Government Affairs Council today on the state's economic climate. Among his observations:

• Washington's new unemployment rate -- 9.4 percent -- now mirrors that of the nation, and that figure is "probably going to lag  for awhile." 
• The six areas of strength for our state during the last economic expansion were aerospace, software, buisness service, construction, health care and agriculture. Of the six, only health care is continuing to expand as of now.
• June's revenue collections will include $166 million in unexpected property tax revenue. Absent that, collections would have been $70 million below the forecast (due out tomorrow).
• The state is still producing revenue, just not at the rate it was after the last recession. Despite warnings that spending was unsustainable, lawmakers were "not able to put on the brakes," Ralston said.

Despite recent reports that Washington is likely to lead the charge nationally out of the recession, Ralston echoed comments by this morning's speakers -- OFM's Victor Moore and the governor's policy director, Marty Brown -- that the recovery for our state will likely be a slow one.

Governor's office bracing for half billion dollar revenue shortfall

Victor Moore, budget director for Gov. Chris Gregoire, told a meeting of the AWB's Governmental Affairs Council Wednesday that he's preparing for a shortfall of at least $500 million when the state's quarterly revenue forecast is released Thursday.

"That's kind of my low-end number on the damage tomorrow," Moore told the group.

The expected decline in revenue combined with a large rise in demand for social services could require the Legislature to hold a special session later this year, something that neither Moore nor Marty Brown, the governor‘s legislative liaison,is excited about.

Caseloads for Medicaid and general assistance have increased significantly as the economy has worsened, raising costs by "hundreds of millions," Moore said. "More people qualify for Medicaid and general assistance," he said.

Officials are making various contingency plans based on the size of the revenue decline, but the governor is limited by law in the ways she can adjust spending, Moore said.

AWB helping guide 'huge change' for businesses that re-sell goods and services

Joe Turner writes about changes in the state's business resale certificate program in today's (Tacoma) News Tribune, something that AWB is watching closely for its members.

On Wednesday, Rob Rice from the Department of Revenue will address the AWB's Tax and Fiscal Policy Council for a preliminary stakeholder meeting on the new law, which is aimed at increasing sales tax compliance.

Starting in January, businesses that purchase items or services for resale or wholesale must have a valid seller's permit in order to avoid paying sales tax. The system will replace the current resale certificate program.

State officials estimate the change will bring in an additional $100 million in revenue.

But it will mark a significant shift.

Turner writes: "It's a huge change that will affect about 56,000 retailers and 19,000 wholesalers in Washington. Overall, some 190,000 businesses are going to be notified of the upcoming changes."

As part of the stakeholder group, AWB will work to make the transition as seamless as possible, said Amber Carter, government affairs director.

More information from the Department of Revenue is available here.

Brunell: Cap-and-trade is really a $650 billion tax on all Americans

President Obama's "cap-and-trade" proposal is really a $650 billion tax hidden in the form of higher energy costs, AWB President Don Brunell writes in his column this week.

The figure is the estimated amount of money the system would bring into the government over 10 years. Industries and energy producers would have no choice but to pass those costs along to customers in the form of higher energy prices, he writes. Working families would be hit hardest by the inevitable jumps in natural gas, electricity and gasoline prices.

"Cap-and-trade has been in effect in Europe since 2005," Brunell writes. "It has crippled countless businesses while doing virtually nothing to reduce CO2 levels. Before the U.S. jumps into something that jeopardized our entire economy, lawmakers should slow down and ask some hard questions."

No new taxes, but plenty of fees

The Seattle Times takes note on its Politics Northwest blog that even though the state Legislature did not raise taxes this year, it did hike many fees.

Education bore the brunt of the increases, but people in other sectors will see fee hikes, too, including plumbers, electricians and funeral home operators.

Washington state isn't the only government looking to generate revenue through increased fees. The New York Times reported recently that cities are increasingly turning to fees instead of taxes to plug budget gaps, as well. One Florida city has even begun billing accident victims for police and fire response. The article notes:

Politicians tend to regard fees as more palatable than taxes, and more focused too. If a state needs to finance an infrastructure to oversee fishing, why shouldn’t fishermen foot the bill? But groups like the nonpartisan Tax Foundation in Washington worry that governments are now using fees to shore up budget shortfalls rather than cover specific costs incurred by specific users.

Amber Carter, government affairs director on tax and fiscal issues for the Association of Washington Business, said there needs to be a nexus between a fee and the activity it supports, as well as accountability for how the money that it generates gets spent. In some cases, business owners may support fees, Carter said. "But that does not take away from the pile-on effect," Carter said.

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.

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.