Olympia Business Watch

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: Buying American products creates American jobs

With continued high unemployment, growing deficits and a sluggish economy, it's easy to think that a solution is out of reach.

But that's not the case, AWB President Don Brunell writes in his weekly column. By choosing to "Buy American," individual consumers can make a real difference.

Buying American is not anti-trade, but rather about consumer choice, Brunell says. He notes the case of Anders Lewendal, a Bozeman, Mont. contractor profiled by ABC News for building a home using only American-made materials.

Lewendal says that using just 5 percent more American products in construction projects would create 220,000 jobs. And yet the cost of his "all American" home was just 1 percent higher than homes built with materials manufactured offshore.

Former Cheers actor John Ratzenberger has become the face of the Buy American movement, and he's sounding the alarm about the shortage of skilled American laborers and craft workers that results from buying products from overseas.

It's not too late to turn things around. The Buy American movement shows that opportunities abound, Brunell writes. Even in the most dire situations.

Lawmakers say energy law fix in the works, but downplay scope

A bill is coming soon, perhaps as early as Wednesday, that could fix some of the flaws in the energy law approved by voters in Initiative 937.

Sen. Kevin Ranker, D-Orcas Island, chairman of the Senate's Energy, Natural Resources and Marine Wates Committee, made the announcement Tuesday during an energy panel at AWB's annual Legislative Day in Olympia.

But Ranker, who prefaced his comments by restating his support for the underlying goals of the initiative -- developing more renewable energy resources in Washington, and reducing the state's use of non-renewable energy -- cautioned observers not to expect radical changes.

"I have no intention of gutting 937 and turning it on its head," he said.

Rep. Dave Upthegrove, D-Des Moines, likewise stated his support for the initiative, and pleaded with the business community to display patience on the issue. "We won't be able to address everyone's concerns this year," he said.

A main concern of the business community is that, unless something changes, I-937 will lead to big increases in the cost of electricity in Washington. Low-cost power has been one of the state's main competitive advantages for years, but that's in jeopardy because of mandates on the state's utilities to increase the amount of power they use from renewable sources.

Sen. Kastama makes the case for a sustainable budget

Cutting programs and raising taxes might solve the state's immediate budget crisis, but it won't do anything to address the long-term problem.

Namely, expenses are rising faster than income.

Sen. Jim Kastama, D-Puyallup, explains the situation and -- and offers some solutions -- in a video to constituents. It's one of the best explanations we've seen for the state's seemingly never-ending budget woes.

He proposes eliminating some programs that have yet to be funded, addressing health care costs and making government more efficient. Whether or not you like those ideas, he makes a compelling case for doing something different.

"Even if we pass more taxes or make the cuts this year, the long-term projection in the state budget basically has to be dealt with, or else we will be in deficits every single year for the next five years," Kastama said.

Brunell: Thank goodness for farmers

With the holiday season nearly upon us, AWB President Don Brunell gives thanks to America's food producers, a group that leads one of the few bright spots in a persistently glum economy.

America's agricultural exports reached a record $127 billion this year and they are expected to grow another $2.3 billion in 2012, Brunell writes.

The sector got another shot in the arm last month, too, when Congress ratified new free trade agreements with South Korea, Columbia and Panama. Tariffs and trade barriers will fall as a result, and Washington state stands to be one of the biggest beneficiaries.

The trade agreement immediately wipes out a 24 percent tariff South Korea imposed on Washington cherries, reducing prices by 75 cents per pound.

It also phases out South Korea's 45 percent tariff on most apple varieties over the next 10 years and immediately eliminates that nation's 18 percent tariff on frozen potatoes.

"So while our nation and state struggle with record budget shortfalls and a skyrocketing federal deficit, it is good to start this year's holiday season with some good news," Brunell writes.

 

State revenue forecast mostly on target, but no cause for celebration

Washington's revenue outlook hasn't gotten any worse since the last forecast, Arun Raha, the chief economist, declared this morning.

But it certainly could.

The European debt crisis has the potential to become a banking crisis, and if that happened it could spread to U.S. banks, undermining the fragile recovery, Raha said.

"The risk scenario remains the same, heavily weighted to the downside," he said.

As it stands now, Washington has taken in $12 million less than expected since September, a drop that amounts to a half of one percent. The projected tax revenue over the next two years is $122 million less than previously forecast.

Boeing and software publishing both continue to do well, car and truck sales are improving and there are faint glimmers of hope in non-residential construction, Raha said.

Consumer spending is also "mildly encouraging," he said, but only because expectations were so low.

Consumer and business confidence remain weak, however, and unemployment is still a major problem. The nation's real GDP is finally back to pre-recession levels, but it's being produced with 6.6 million fewer jobs, he said.

 "We are in the aftermath of the Great Recession and nothing can be taken for granted," Raha said. "We've been here before in this recovery, only to be sucked back into the mire."

Brunell: GPS needs to control our skies, too

The GPS unit in your car is more advanced than the technology used by air traffic controllers.

That's something to think about the next time you're on a commercial airliner, AWB President Don Brunell writes in his weekly column.

It doesn't have to stay this way. Congress approved a new GPS air traffic control system known as NextGen in 2003, but it has yet to be fully implemented, partly because of the cost -- $40 billion -- and also due to bureaucracy.

Nevertheless, it's an investment well worth making, Brunell writes. Congestion and weather delays tied to the limitations of radar cost airlines and consumers almost $10 billion last year.

Some airlines are moving ahead. Alaska Airlines is using GPS to assist with landing at Juneau International Airport, and the company said it prevented 729 flight cancellations last year.

"This is an opportunity for the FAA to demonstrate that it understands the importance of efficiency, precise information and a timely response," Brunell writes, "in our air traffic control system and in our federal bureacracy."

Gregoire lays out $2 billion in possible cuts, kicking off difficult budget debate

Gov. Chris Gregoire introduced a list of possible state budget cuts Thursday totaling a little more than $4 billion, including some $2 billion that she has tentatively chosen to include in her upcoming supplemental budget proposal.

They range from eliminating the Basic Health Plan and the Disability Lifeline medical program to cutting 15 percent from higher education and increasing class size by two students in Grades 4 through 12.

Gregoire made it clear she didn't like any of the options, but she also said lawmakers are running out of choices. The $2 billion in needed cuts must come from just $8.7 billion of the state's total $32 billion budget, Gregoire said, echoing what she told AWB members last month at our Policy Summit.

Critics attacked the governor's proposal, saying it should have included options for new taxes in addition to proposed cuts. Gregoire said she will turn her attention to revenue next, but she correctly noted that despite showing some signs of life, consumers and businesses both remain nervous about the economy.

"We need to restore consumer confidence in our state so people will spend," she said. "We need to restore business confidence so they will hire."

Brunell: Deadbeat Illinois serves as a warning

The budget crisis is so bad in Illinois that the state has simply stopped paying its bills, AWB President Don Brunell writes in his weekly column. And this is after lawmakers pushed through huge tax increases.

Why should we care what happens in Illinois? Because it's a warning to us all.

Illinois is by no means alone in its fiscal crisis. The recession revealed systemic weaknesses in cities and states across the nation -- weaknesses that were masked initially by a strong economy and later by federal stimulus money.

Still, the borrowing and spending continues. And it's largely our fault. "We all want cuts, but not to our program," Brunell writes. "We call for fiscal restraint from our elected leaders but howl when our ox gets gored."

The solution, he writes, is to once again audit tax incentives and eliminate the ones that aren't paying for themselves, attracting new investments or creating or preserving jobs. Next, lawmakers need to jettison non-essential services or turn them over to the private sector.

And most importantly, lawmakers must streamline Washington's costly, complex and overlapping regulations.

"Simply put," Brunell writes, "the cost of permits is out of whack in Washington state and it is killing employers in the private sector, non-profit groups -- even other essential services like first responders, hospitals and schools."

Finally, Some (Dick's Deluxe) Good News!

Who's hungry for some good news -- and maybe a Dick's Deluxe? 

Congratulations to the Spady family on the successful launch of their newest DIck's Drive-In store in Edmonds. As you can see from the photo above, the iconic Seattle business continues to attrract fans of their famous hamburgers, fries and shakes. About 1,000 people showed up yesterday to participate in the grand opening. One woman reportedly camped out at 3 a.m. to be among the first in line.

The Edmonds drive-in is Dick's sixth restaurant, the first new Dick's restaurant in 37 years and the first to open in Snohomish County.The store is expected to bring new jobs to the area, which is always good news -- but even better in a lagging economy.

In addition to the store's pop culture status, the Spadys have also gained notariety for their commitment to their employees and their families with great benefits and educational scholarships. AWB's Daniel Brunell profiled the Spadys last fall in this What's Working feature in Washington Business magazine.

"Taking care of our employees is one of the key foundations of our business," Dick Spady, president and co-founder, told Brunell. "We're grateful to be in a position where we can create more jobs during a time when good jobs are hard to find."

If you can't make it there in person, you can always follow the restaurant chain on its Facebook page or Twitter account. (It's not as tasty, but still likely to be fun.) The restaurant has used social media actively during the construction of the new restaurant, hosting contests and encouraging fans to share photos of themselves at one of the existing stores. The new store's location was even decided in an online poll.

Jim Spady, Dick's vice president and son of namesake and founder Dick Spady, told the Seattle Weekly, "The outpouring of support and enthusiasm from the community for our local family business has been humbling and overwhelming. We could not have picked a better place to add 35 new jobs and to start building new friendships and memories."

With so much bad news dominating the news these days, it's easy to see why a $1.25 hamburger can evoke such positive feelings and enthusiasm in people of all ages these days. It's also a testament to the good will the Spady family has built with its customers, employees and the community since the first DIck's Drive-In opened in 1954 on NE 45th St., a mile west of the University of Washington. 

Congraulations again to AWB member Dick's Drive-Ins and to the Spady family for this exciting -- and mouthwatering -- grand opening event.