Washington Policy Center Blog

Planetary Emergency

Al Gore refers to climate change as a "planetary emergency."

Here is a state emergency announced today:

Meanwhile, Gov. Christine Gregoire declared a state of emergency this afternoon for more than a dozen counties as a result of the "relentless" snowstorms that have been pounding mountain passes and Eastern Washington for days."

This is not normal. And it just goes to show that Greg Nickels was right in 2005:

At first, Nickels said he was not distressed by these trends. "I think like most Americans I sort of said, 'So what? It would be nice if it were a few degrees warmer.' " But then he learned more about how Seattle's water and electricity supplies could be hurt by a shrinking snowpack. In meetings with Seattle's water and electricity department chiefs, Nickels said he heard repeated forecasts for below-average snowpack. Eventually he said he realized "we're never going to get average again."

We're certainly not getting average this year. In 2005 when we didn't have average, the Mayor decided to launch the US Mayors Climate Conference to combat global warming. What will the Mayor do this year?

Maybe this is a symptom of a larger problem...

I finally was able to read this great piece from Tuesday by the Seattle Post-Intelligencer's Bill Virgin on the increasing amount of business tax exemptions and credits. There are currently 567 tax preference items for major Washington state and local tax sources.

The Business and Occupations Tax (B&O tax = gross receipts tax) accounts for 161 of those exemptions -- the most of the 7 classifications of tax sources. The estimated savings to taxpayers for the B&O exemptions for the 2007-09 biennium? $8.6 billion. Interestingly, even though there are more exemptions for B&O taxes, it ranks 3rd among the exemptions that save taxpayers the most money. The 103 exemptions for property taxes save about $45 billion; Retail and Use Tax exemptions save $39 billion.

The state legislature is currently considering adding several more exemptions this year as well.

With so many exemptions, credits, deductions, etc., shouldn't policymakers consider the possibility that the tax code is not quite what it could be? A responsible tax system has a broad base but a small rate. The more exemptions that are enacted, the shallower the tax base and the higher the rate must be on the remaining taxpayers in order for government to collect what it "needs" in order to function.

I'm not advocating for the dissolution of all tax exemptions. Hardly. I think the number of exemptions show that lawmakers recognize that taxes have a negative impact on economic growth -- it also shows which industries they prefer to grow at the expense of others.

Let this recently-updated quadrennial report from the Department of Revenue stir up debate about alarming number of tax exemptions and of the need for a better tax system that encourages investment in capital and economic expansion across all industries. Not just ones that curry favor from politicians.

Recent deficit projection highlights need to trim waste from state budget

Yesterday’s news that the state will likely be facing a $2.5 billion deficit by 2013 due to the rampant growth in spending over the last four years reinforces the need to limit government spending to core functions.

At a press conference in Olympia yesterday, Washington Policy Center released The Washington State Piglet Book: Connecting the Dots on How Government Wastes Your Money.  Media, lawmakers, and legislative staff heard WPC's vice president for research Paul Guppy discuss several projects and waste items in the state budget, including:

• $2.5 million to a wealthy tribal casino
• $1.5 million for decorative lights on the Tacoma Narrows Bridge
• $1.5 million in wasteful spending at the State Motor Pool
• $442,000 for the short-lived “SayWA” tourism campaign
• $300,000 in Medicaid checks and pension payments to dead people

Some defend this practice by insisting that one lawmaker's pork project is another's priority project.  Others say it's just the price of democracy.  These are rather cynical views which enable lawmakers to skirt hard political decisions.  No one likes to say no, least of all when votes are needed.  This is reminiscent of 1930s Louisiana, when Governor Huey Long defended graft in the state Highway Commission by pointing out that at least Louisiana had the roads too, whereas in other states they just had the graft.

To help combat such waste, Washington state needs to move forward with two policy ideas:

1)  Launch the state's equivalent of the federal Grace Commission, which was put together in the early 1980s to comb the budget and review every earmark.

2)  Enact a searchable budget website where users can track state spending all the way down to the program level.  This kind of transparency exists in many states and is even debuting at the federal level as well.  The governor's office, the State Auditor, the Attorney General, and a bipartisan group of legislators support this idea.

The February 14th revenue forecast will probably show a slowing in revenue growth for the state, which will only add to the need for these reforms.

Projected costs may hold up budget transparency reform

The Olympian reports this morning that lawmakers support the concept of creating a searchable budget website but are concerned about the projected price tag of one of the proposals ($1.4 million):

"Not the right year to be asking for it, but the right idea," said Rep. Kelli Linville, D-Bellingham, on Wednesday. "It's public dollars, and the more transparency in the budget, the better."

The million dollar fiscal note is surprising in light of the experience of the states that have already implemented their versions of this reform.

The fiscal note for Texas showed “no fiscal implication to the State is anticipated” for its website.

Missouri's budget office said its website was done "within existing resources."

Then there's also the possibility of free assistance with programming and source code for the website from Microsoft and Google.

Even if the projected costs are accurate, I have to imagine that improving citizen access to details on the billons spent by government would rank high on the state’s priority list under government accountability efforts (much like the costs of complying with the public records law).

Time will tell if lawmakers share this view.

Hold on to your wallets

The state's supplemental budget debate just got a lot more interesting. Previous budget forecasts estimated a $621 million deficit by the end of the next biennium. According to a new report by the Senate Ways and Means Committee, the projected deficit has worsened. Richard Davis at the Association of Washington Business broke the news today:

"As we posted earlier, OFM has discontinued production of the familiar six-year budget outlook. Sen. Joe Zarelli subsequently asked the Senate Ways and Means Committee to make the forecast. The committee's projections are here and its methodology here.

By the end of the next biennium, in 2011, the outlook shows the General Fund running in the red by $937 million. Looking out to the end of the 2011-2013 biennium, the General Fund shortfall is $2.5 billion. The outlook also looks at the emergency reserve account and budget stabilization account, both of which would be drained (assuming the requirements to tap the budget stabilization account could be met)."

It is likely this bad news will only get worse on February 14 when the state's new revenue forecast is released. This situation illustrates the importance of limiting increases in the budget to ongoing revenue instead of using one-time money to balance the budget.

Earlier this session a bill was introduced (HB 2932) to require six-year budget outlooks be available following the adoption of a budget and quarterly revenue forecast. From the bill:

"No later than thirty days after enactment of each omnibus operating budget act, and no later than seven days after adoption of each quarterly revenue forecast under chapter 82.33 RCW, the state council on fiscal management shall present a three-biennium outlook on the state's operating budget."

In light of today's news it will be interesting to see if this proposal moves forward to help provide this type of information multiple times a year to help guide spending decisions.

Look before you leap

One of the more interesting debates happening in Olympia right now is how to pay for the paid family leave entitlement put into law last year. Count me as one of the naive individuals who thought the legislature was supposed to figure out the details of a program before adopting it.

Apparently last year's faith based punt on the family leave entitlement hasn't put a damper on some lawmakers' desire to adopt new programs without figuring out the details first. Consider the following statement from Senate Majority Leader Lisa Brown concerning the proposal to adopt a sales tax rebate for the state's low income.

According to The Olympian: “Senate Majority Leader Lisa Brown, D-Spokane, said it might be necessary to create the program this year but determine the amount of assistance next year when the state's budget outlook is clearer.”

The Yakima Herald is encouraging lawmakers to take a deep breath and not move forward with this type of faith based budgeting:

"The Seattle Times reported Friday that Democratic leaders in Olympia are pushing Senate Bill 6809, which starting next year would provide a sales-tax break for low-income families of as much as $470.

About 350,000 households in the state would be eligible for the proposed rebate, which calls for the state to provide a 10 percent match to people who qualify for the federal Earned Income Tax Credit . . . Projected hit on the state treasury: About $120 million every two years.

But that's not all. Even if it's approved, Washington residents would not be able to apply for the credit until next year because the state Department of Revenue hasn't even had time to determine just how much it would cost to administer the plan. It's expected to take several months for the state to set up a system to handle the paperwork involved.

The unknown costs of such an ongoing program are reason enough to shelve it.

Have state lawmakers already forgotten that an expected $1.4 billion surplus at the end of the current budget cycle is expected to turn into a deficit of as much as $600 million by the end of the 2009-2011 budget period . . . We said before the session began that this is not a good time for state lawmakers to embark on costly new programs -- including this election-year grandstanding.

If majority-party Democrats insist on railroading this ill-advised legislation through this session, then we would call upon Gregoire to heed her own advice about "save the surplus" and veto it to show that she meant what she said."

Meanwhile, The Seattle PI warns today that "Reality will bite state budget."

"Gov. Chris Gregoire and leading Democrats in the House and Senate have reached one early agreement in this year's budget negotiations: It's time for a reality check.

Anticipating a bleak revenue forecast, they've agreed to start looking for places to trim the $33 billion budget they passed last year. They say they want to have their priorities in order in case the slowing economy forces them to find efficiencies or even cut programs altogether.

"We're not taking for granted that everything that was budgeted last year is going to go forward this year," said Senate Majority Leader Lisa Brown, D-Spokane.

Neither she nor any other Democratic leaders provided specific examples of what might have to be cut.

Gone are the halcyon days of a skyrocketing real estate market and a ballooning economy that had led to back-to-back-to-back upward adjustments in the state's revenue forecasts.

And gone is the free and easy feeling about spending, the unflinching commitment to "targeted investments" that Democrats have enjoyed for the past three years.

The upcoming revenue forecast comes out on Valentine's Day, but given the circumstances no one is expecting a very rosy message from the state's top economist, ChangMook Sohn."

Spokesman Review: Demystify state budget

The Spokesman Review's Sunday editorial highlights WPC's proposal for a free searchable website of state spending and performance information. From the article:

"It's not that state spending isn't already public information, but digging it out in meaningful detail is enough to tax the skills and patience of most of us. In bill form, for example, the state budget is hundreds of pages long, and finding anything specific means poring over documents compiled and maintained by agencies and the Legislature.

A searchable Web site would bring all that information together, preferably in standardized format, and put it online where an interested resident could get speedy answers to plain-language questions.

No need to understand the intricacies of the legislative process. No need to speak the insiders' jargon.

The Washington Policy Center, a conservative, Seattle-based think tank and an outspoken advocate of the idea, notes that the Legislature will be spending some $71 billion over the current biennium.

Breaking that down into chunks that mean something to the average resident is possible, but only if lawmakers take advantage of available technology."

Previously the Everett Herald, Columbian and Tri-City Herald have called for Olympia to take action on this reform.

Lawmakers appear to be listening. Bipartisan bills have been introduced in the Senate (SB 6387 & SB 6818) and House (HB 2342) to implement this reform.

January 30 Press Conference: The Washington State Piglet Book

Join Washington Policy Center and the national group Citizens Against Government Waste on January 30th in Olympia for the release of The Washington State Piglet Book: Connecting the Dots on How Government Wastes Your Money.

The press conference is at 2pm in Hearing Room 3, Cherberg building.  Featured speakers will include WPC Vice President for Research Paul Guppy, CAGW Vice President for Policy David Williams, and Washington State Auditor Brian Sonntag.

State spending has grown by 33% over four years, and as budget deficits loom on the horizon, Washingtonians will be threatened with immense tax increases while the waste and misuse of tax dollars runs rampant.  The Washington State Piglet Book gives enough examples to make any Washington taxpayer cringe.

• $2.5 million to benefit wealthy owners of a tribal casino
• $142,000 to license animal massage practitioners
• The amount spent on one pork project, the Zero Energy House, is enough to pay all the monthly electric bills of 163 families in the Puget Sound area for a year.
• Can’t take it with you? The state paid $44,687 in Medicaid checks for services to dead people.
• Have you seen my laptop? The Department of Labor and Industries lost $180,000 worth of cameras, laptops and other equipment.  The Department’s control system consisted of asking fellow employees if they knew where missing equipment was.

The book will be distributed at the press conference.  Read the full Press Release here.  For more information, contact WPC Communications Director John Barnes at 206-937-9691 or jbarnes@washingtonpolicy.org.

The New Consensus on Climate Change

Global warming activists often refer to the scientific "consensus" on climate change as a justification for the costly government programs they advocate. The science, however, is still evolving, as is evidenced by this new study done by NOAA indicating that climate change may actually reduce the severity of hurricanes.

But even if there isn't a scientific consensus on the impacts of climate change, K.C. Golden of Climate Solutions and a member of the Governor's Climate Advisory Team cited another group whose testimony persuaded him when speaking to the State Senate last week.

"...our federal government has not stepped up and provided very satisfying answers to those questions. I was reminded as we just heard the companion bill in the House when I heard the voices of the [children] who came up insisting on solutions in a very clear voice, it isn't right that the federal government hasn't stepped up and offered solutions."

At the next legislative hearing on climate change, expect to see fewer NOAA scientists testifying and more children.

We Pay You to Reduce CO2!

Yesterday, we turned in our comments to the Washington State Climate Advisory Team.They released their draft recommendations in December, outlining their plan to reduce carbon emissions and strategies aimed at “transforming our economy and our lifestyles.” Washington Policy Center submitted our comments in three pieces: general comments; a discussion of jobs and the climate strategies; and a detailed analysis of one of the more expansive recommendations that calls for changes in growth management, building codes and even the name of the Department of Transportation.

You can read all three pieces here.

One serious flaw deserves attention. There is a summary chart in the draft listing the expected (although the draft says "guaranteed") reductions in greenhouse gas emissions. It projects a reduction of 272.3 million metric tons of CO2 and other greenhouse gases (GHG). It says that the net-present-value (costs - benefits, adjusted for time) of these reductions will be -$949 million, i.e. a savings of nearly $1 billion. They're practically paying us to reduce CO2! How can this be?

Well, one reason is that for some of the most expensive strategies they list the cost as "not quantified," and treat the NPV as zero. This, despite previously listing costs (slightly different from NPV) for three of the strategies at over $9 billion in November. In the December public draft these numbers are gone. Even if we accept that the NPV for these is difficult to estimate (which is the reason they give for removing the $9 billion), they should also remove the projected GHG savings for those strategies. They do not, leaving the impression that you can get 272.3 million metric tons of GHG reductions for the low, low price of negative $1 billion. This is misleading at best, dishonest at worst.

There are some elements of the proposal we believe are appropriate, such as the emphasis on looking at a range of incremental changes and the recognition that technology is key to reducing greenhouse gases.

The draft, however, is burdened by a very heavy reliance on political decisions and the hand of government. We have three general critiques of the draft:

• It is incomplete, leaving the most significant area of carbon reductions, transportation, to future decisions and planning.
• The economic estimates are very rosy. In a number of cases the cost estimates for the recommendations are low or artificially lowered.
• The greenhouse gas projections are often only targets and others are unlikely to materialize. The projections often are built on the belief that government can more effectively choose the correct direction of technology and investment than the market – an assumption that has shown time and again to be unsupportable.

The CAT meets again this Friday to discuss next steps and the draft recommendations. We'll see how their discussion goes.