Washington: A Balanced Budget Is No Longer Enough

Updated Jan. 11, 2012

A Seattle Times headline is perplexing. True, the headline –“Lawmakers open session, try to close $1B gap” – is a fairly accurate assessment of Washington state’s budget. Not to be laboriously repetitive, but the headline is worrisome. Once again the Legislature faces a budget crisis.

“The economy is the focal point of this year’s legislature as state lawmakers attempt to close a $1.5 billion shortfall in a $34 billion budget at the state capitol in Olympia,” blogged Don Brunell, president of the Association of Washington Business (AWB).

Mr. Brunell is known for his pragmatic reasoning.

“As they deliberate, they must be mindful that Washington is in the midst of an anemic economic recovery which is very fragile,” the AWB president added. “New costs to employers, especially those along Main Street, have a dampening effect on our ability to increase consumer confidence and bring people back to work.”

That’s my sense, too. But the Legislature routinely fails to prioritize first things first. The short-term priority is to balance the 2011-2013 budget. But as a priority, it’s secondary to a bigger quandary – government and budgeting reform, which are needed immediately, as well.

Instead, all budget discussions are about the short-term and relatively insignificant issues grab a disproportionate amount of attention.

Gov. Gregoire wants to focus on a new $3.6 billion transportation package, gay marriage, shorten the school year, abolish social services, release some prisoners before the sentences expire, and increase the state’s sales tax. House Speaker Frank Chopp, D-Seattle, also says same-sex marriage is a top priority.

A significant number of citizens wants to legalize marijuana. Some lawmakers want a statewide ban on plastic grocery bags.

Most of us in business agree education is a priority. But increasing taxes even for education isn’t productive as long as government/budgeting reform is ignored as a priority.

In addition to Mr. Brunell, another thoughtful pragmatist is Jason Mercier. Mr. Mercier is director of the Center for Government Reform of the Washington Policy Center.

Worth consideration is Mr. Mercier’s list of recommended reforms:

  • Enact a constitutional tax and spending limit (with two-thirds requirement to raise taxes) modeled after the original 1993 I-601 formula.
  • Remove as many of the restrictions on lawmakers’ ability to set spending priorities as possible (collective bargaining restrictions on compensation, federal mandates, assumption of auto-pilot budgeting on programs).
  • Reform competitive contracting. Allow agencies to make performance-based contracting more proactive (create a Competitive Contracting Council).
  • Provide the governor discretionary authority to cut spending.
  • Repeal unaffordable programs instead of suspending them.
  • Require at least a 5 percent reserve when adopting the next biennial budget.
  • Require updated four-year budget outlooks to be published after each state revenue forecast or budget adoption.
  • Require completed fiscal notes before bills can be acted on.
  • Phase in a defined-contribution retirement plan that gives state workers benefits that can never be taken away.

Amen. Yes, the Legislature should soberly balance the budget. However, unless the Legislature concomitantly reforms government and the budgeting process, uncertainty will never be alleviated for the state’s businesses and consumers.

From the Coach’s Corner, you might want to consider other public policy columns.

“There is an important sense in which government is distinctive from administration. One is perpetual, the other is temporary and changeable. A man may be loyal to his government and yet oppose the particular principles and methods of administration.”

-Abraham Lincoln

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

Washington State House Speaker Frank Chopp Obstructs Workers’ Comp Reform



Updated May 19, 2011


Reform is drastically needed for workers’ compensation in Washington state. Workers’ comp costs threaten to kill the state budget and business, as companies face the prospect of double-digit workers’ comp increases.

That’s been the judgment of this Seattle business-news portal, the Association of Washington Business (AWB), and other business leaders. It might surprise you to learn that most state lawmakers want workers’ comp reform, too.

But debate is being stymied in the Legislature. Bills would continue protections for injured workers without further decimating the state’s operating budget. Plus, reform would give the workers an option to take a lump-sum payment.

Yes, it would be voluntary. The idea is patterned after successful workers’ comp systems in our neighboring state, Oregon, and 43 other states. But reform is stalled. Yes, Washington remains in the Neanderthal Age while the reform ideas are continuing to work in 44 other states.

Why doesn’t common sense prevail?

“It is House Speaker Frank Chopp (D-Seattle) and a group of union and trial attorney supported Democrats in the House who are blocking a vote on voluntary settlements,” writes AWB President Don Brunell.

“Remember, the bill passed the Senate with a bipartisan 35-14 vote,” adds Mr. Brunell.  “Gov. Gregoire, in her press conference yesterday, again called for the legislature to address workers comp and said it is imperative to prevent another round of double-digit rate increases in 2012.”

Not only has Speaker Chopp and the Legislature failed to act in the best interests of the state in workers’ comp reform, state residents face the prospect of a suspension of most state-government services in the near future.

“There are only a few days left in this special session and there is no budget,” warns the AWB president. “What appears to be happening is a stalling tactic by the Speaker until the July 1 deadline approaches and then only leave time to address the budget.  The budget must be adopted by July 1 or state government shuts down.”

The issue has drawn the attention of the state’s largest newspaper – a brilliant Seattle Times editorial entitled, “Speaker Chopp: Who is running your House? | Kate Riley.”

Ms. Riley’s editorial astutely disparages the stonewalling by Speaker Chopp:

“Washington state’s Speaker of the House Frank Chopp is outvoted on much-needed workers’ compensation reform.

“You wouldn’t know it though, because he won’t allow a floor vote on the bill.”

Despite overwhelming support in the Legislature for workers’ comp reform, the newspaper sheds further light on the disingenuous behavior in the Legislature, specifically regarding a reform bill in the House:

“So, House leadership referred HB 2109 to the black hole of the House Labor and Workforce Development Committee. On this issue, it’s a ‘black hole’ because the Democratic majority on the committee is stacked with union-friendly members, including some who are labor officials in their own right.

“According to his bio, Chairman Mike Sells has been the elected secretary-treasurer of the Snohomish County Labor Council since 1976 — the position became full-time in 1998. Of the seven Democrats serving last year, five have 10-for-10 voting records on the Washington Labor Council’s 2010 Legislative Voting Record. One each scored nine and eight.”

So, organized labor is the culprit behind the scenes. The unions would rather see a hike in workers’ comp rates.

That’s unacceptable. What we need is Speaker Chopp’s empathy for Washington state’s overall welfare to accelerate economic recovery. Washington needs a healthy economic environment for the creation of jobs. Let’s join Ms. Riley is demanding a solution. Speaker Chopp: Who is running your House?

From the Coach’s Corner, here are workers’ comp resource links:

AWB: ESB 5566 Will Minimize Sting in Workers-Comp Rates

www.awb.org

www.enterprisewashington.org

 

“Now there sits a man with an open mind. You can feel the draft from here.”
– Groucho Marx

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

AWB: ESB 5566 Will Minimize Sting in Workers-Comp Rates

April 14, 2011

A bill – generally supported by employers and opposed by labor – will alleviate workers compensation rates in Washington state. At issue are reforms, especially allowing workers to receive voluntary lump-sum payments instead of pensions.

At this writing, ESB 5566 is stalled in a Washington State Legislature committee – the House Labor and Workforce Development Committee, which is chaired by Mike Sells, D-Everett.

That’s despite support from the Association of Washington Business (AWB) and former Washington and Oregon Labor & Industries Director Gary Weeks. Mr. Weeks has been quoted as saying voluntary settlements work in 44 other states and they save money – $1.2 billion by Washington L&I estimates.

“We have two weeks to go and while the prospects for passage maybe dim, it is never over until it’s over, as Yogi Berra would say,” says AWB President Don Brunell. “Keep contacting the Governor and House members.  If they say no, don’t give up because the answer is always no until it is yes.”

Mr. Brunell asserts the bill’s passage will alleviate the pain on business.

“Because without reforms such as incorporated in ESB 5566, we are likely to look at double-digit workers compensation rage increases in 2012,” he says.

“Some are saying 20 percent or higher,” he adds. “So while I know that killing voluntary settlements makes absolutely no sense, this all about politics.”

That’s my sense, too. Candidly, I’ve worked with Mr. Brunell and his fine staff in whom I have the utmost confidence.

From the Coach’s Corner, here are AWB’s tips on what you can do.

 

I cannot say that I do not disagree with you.”

– Groucho Marx

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For a complementary chat about your situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

AWB Has Right Solution to Mounting UI Costs Pounding WA Businesses

Updated – Jan. 14, 2010

The battle over high unemployment-insurance costs is raging in this year’s legislative session in Olympia – a debate over public-policy fairness.

Businesses led by the Association of Washington Business (AWB) are asking for a bill that will lower unemployment insurance costs (UI) for employers scheduled to increase an average of 38 percent this year. But a consortium of unions is actually trying to increase unemployment checks as a condition for lowering the UI costs. Unions want employers to underwrite more than $60 per child each month in UI costs for unemployed workers.

“While their goal is well intended, remember Washington employers pay the entire unemployment premium and over the last two years in the worst recession since the Great Depression, UI costs have skyrocketed – some by more than a thousand percent and many in triple digits,” wrote Don Brunell in a post as president of AWB.

“Washington employers pay the nation’s 5th highest unemployment insurance rates.  Our state’s unemployment benefits are 2nd highest in the country,” he added.   “And, workers compensation benefits in Washington are 5th highest, according to the 2011 Competitiveness Redbook produced by the Washington Alliance for a Competitive Economy.”

So, it boils down to a question of fairness. Unions should instead consider paying part of the onerous premiums.

AWB practices what it preaches and Mr. Brunell provided this recommendation:

“A system along the lines of what AWB put in place several years ago for long-term care,” he wrote.  “AWB provides a basic policy for long-term care for the people who work here.  If they chose to add a family member to the plan, they pay a small premium for that coverage.  It is fair and it works.  That would be an innovative approach to consider for UI.”

He pointed out Washington businesspeople and other residents already have a heavy tax burden:

“…I posted a Olympia Watch post based on Tax Foundation findings showing that Washington’s ‘Tax Freedom Day’ is April 15, not April 9,” wrote Mr. Brunell. “In other words, when unemployment insurance and workers compensation taxes are added in, Washington families and employers pay a higher than average tax load and work an extra 6 days for the government.”

The AWB president agrees – the welfare of Washington’s children should be taken into account.

“Refocusing the issue is important.  It is about kids and families.   AWB believes it is better for Washington workers and their families to have jobs.  Relying on unemployment payments is no way for families to manage their finances.  Besides, those benefits are time limited.  Taxes and costs of doing business drive location and hiring decisions for Main Street businesses and large factories.  Global competition is fierce and real.  This isn’t about tradeoffs.  It is about stimulating jobs.”

Mr. Brunell’s conclusion is valid. On a personal note, I recently became aware of the plight of two unemployed workers, who are a world apart in their self esteem and philosophy about receiving unemployment benefits.

One worker who was unemployed for two years told me he was appreciative of a job offer from Boeing. He accepted the job even though it requires a commute well in excess of 50 miles one way each day. As a family man, he’s thrilled to have a future with a world-class company – even though it nets $300 a month less than he received in unemployment benefits.

The other person is staying on unemployment because he receives about $100 a month more in benefits than a recent job offer would net him.

These two examples underscore what is wrong with the exorbitant UI system in Washington and the ominous, ever-increasing entitlement attitudes of some workers. The Legislature must alleviate the financial pain of businesses for the creation of jobs.

From the Coach’s Corner, you can stay current with the moderate recommendations of Mr. Brunell and his illustrious staff at AWB’s site, www.awb.org.

How to Alleviate Business Uncertainty in Washington State



 July 25, 2010


Washington state is comparatively healthy. But don’t tell that to most employers. They won’t buy it. Washington state has lost more jobs, 16,000, in the past year than 41 other states.

Unemployment rates are a huge drag holding back economic development. There are many reasons why job creation is sputtering.

Actually, it’s symptomatic and related to many economic problems. The overall common denominator is uncertainty – from declining sales revenue, threats of a double-dip recession, tax increases, and unproductive public policies.

Yes, Washington faces another $3 billion shortfall.

A July Op Ed piece in the Seattle Times by State Auditor Brian Sonntag made an excellent case for decreasing the size of state government and improving its inefficient budgeting process.

“We need to resize government’s footprint to reflect what it can and should do, balanced with what it can afford to do,” Mr. Sonntag wrote. “We will not get there unless we stop, now, the petty partisan bickering that erodes citizens’ trust in government and inhibits meaningful solutions to our greatest challenges.”

A frequent complaint on this site is the mega unfunded public pensions. Mr. Sonntag points out Washington state public pensions are skyrocketing and $8 billion is unfunded.

“Our work at the Office of State Auditor uniquely positions us to understand the state’s broad financial condition,” Mr. Sonntag explained. “For example, we know even in good economic times as well as bad, the state has not systematically funded all its long-term financial obligations.”

It’s not just the unfunded aspects of pensions, which I contend are too generous vis-à-vis the retirement plans available in the private sector.

Mr. Sonntag cited a related example: “A $4 billion liability in the health-and life-insurance benefits paid to retired public employees without any accumulation of revenue to pay for it.”

Political “courage” and “leadership” is needed, he wrote.

“It is time to end the current era of political polarization and extreme partisanship. We must transform government together,” he asserted. “We must put aside the premise of ‘I’m right, you’re wrong.’ We must do what is right instead of doing what makes the other side look bad.”

His points are astute and accurate. The tendency, as it is at the national level, is to focus on personalities and not principles. It’s time to stop shooting the messenger instead of the message, and to be honest in campaigns.

For example, it took legal action by the Association of Washington to clean up the ballot title for Referendum 52. To win passage of $505 million in bonds for energy-saving school construction projects, the wording would have tricked voters into extending the new tax on bottled water. A Thurston County judge ruled that the phrase, “job creation,” was disingenuous and removed it from the ballot title.

Alleviating uncertainty

Voters have an opportunity to start implementing solutions this fall. The most salient is transparency and voter protection against disingenuous taxation. In essence, Initiative 1053 will again require a two-thirds majority on any legislative tax increase, and approval by voters.

I-1053 must be passed. Plus, voters have to make it clear to lawmakers that they will not put up with any more games.

Three times voters have passed this protection, and each time the Legislature has circumvented it.

Initiative 1082 deserves voter approval. It would pave the way for private insurers in Washington state workers’ compensation.

Liquor sale privatization is important, too, in I-1100. It would end the state’s monopoly on liquor sales and put it in the hands of the private sector. That includes the 1,500 state-liquor employees.

The class warfare implications of I-1098 are troubling. That’s the income tax on the affluent. A similar 2010 measure in Oregon has failed to help that state’s economy.

Another opportunity to alleviate uncertainty is to comment at two remaining events: The Governor’s Committee on transforming Washington’s Budget. So far, only the special interests advocating the status quo are showing up to comment.

The final two hearings:

  • July 27, 7-9 p.m. in Vancouver – Washington State University-Vancouver, Administration Building Room 110, 14204 NE Salmon Creek Avenue.
  • July 29, 7-9 p.m. in Spokane  – Spokane City Hall, City Council Chambers, 808 W. Spokane Falls Boulevard.

Will you participate.

Meantime, productive public policy will do a lot to alleviate concerns about business uncertainty, and will make it easier for businesspeople to solve their declining sales revenue.

From the Coach’s Corner, admittedly, I haven’t budgeted the time to review the dozens of initiatives on the November ballot, but have read a few others.

For some levity, here are two extreme initiatives:

  • I-1079 – “This measure states that it is an act to require state and governmental agencies, publicly owned companies, and non profit groups to pay all mandatory overtime at the rate of three times the employees’ hourly rate.”
  • I-1069 – “This measure would require the Seal of the State of Washington to be changed to depict a vignette of a tapeworm dressed in a three piece suit attached to the lower intestine of a taxpayer shown as the central figure. The seal would be required to be encircled with the following words: ‘Committed to sucking the life blood out of each and every tax payer.’ The illustration would be selected from submissions submitted by taxpayers.”

And to see dozens other public-policy columns, visit this section.

More Voters Say Washington State is Headed the Wrong Way

 

May 24, 2010

Washington state is headed south when it needs to go north. That’s what a larger percentage of voters is saying.

Disapproval ratings have significantly increased over the last six months, according to a new University of Washington poll. In fact, it’s a 16 percent increase in voter disapproval ratings – 44 percent of respondents believe Washington is “seriously on the wrong track.”

The double-digit increase in disapproval ratings – up from 38 percent in Oct. 2009 – was reflected in the nonpartisan academic poll, The Washington Poll. Forty-one percent say Washington is “going in the right direction.” Fifteen percent answered “don’t know.”

Voter opinions appear to coincide with the state’s economy. Sixty-two percent say “jobs/economy” will be the most important issue in the Nov. 2010 elections.

Twenty-seven percent cite healthcare reform as the No. 1 election issue.

Regarding the performance of Gov. Chris Gregoire, 17 percent “strongly approve” and 27 percent “somewhat approve.” But her disapproval ratings as a Democratic governor are higher than her approval ratings. Seventeen percent “strongly disapprove” and 30 percent “somewhat disapprove” of her performance.

Sen. Patty Murray, a Democrat, is favored by 42 percent while 39 percent indicate they’ll vote Republican.

When pitted against potential Republican candidate Dino Rossi, she holds a narrow 44 to 40 percentage lead with a margin error of 3.9 percent. The margin of error in the other contests is only 2.8 percent.

Thirty-five percent favor the income tax initiative on well-to-do state residents. But another 17 percent who lean yes also say they could change their minds, and another 10 percent are undecided. Meantime, 23 percent oppose it. Another 5 percent who lean no, say they might switch. Two percent who are undecided lean no.

Overall, the Legislature received an approval rating of 36 percent but netted a 43 percent disapproval rating.

Conducted in early May, 1,252 registered voters were surveyed in the poll sponsored by the Washington Institute for the Study of Ethnicity, Race & Sexuality at the University of Washington School of Social Sciences.

To view the polling data: statewide, and the party and region.

Certainly, these results are not a surprise. The economy has been worsened by bad public policy. Again in the 2010 session, the Washington State Legislature violated standards of transparency, hiked taxes by $800 million, and failed to take prudent steps to head off another multi-billion dollar deficit in the near future.

What’s needed is reform for good government.

From the Coach’s Corner, to stay current on how state politics affects business, and for a wealth of data and information, visit these sites: www.awb.org, www.businessinstitutewa.org and www.enterprisewashington.org.

Why Washington Wage Study Creates Brouhaha

 

May 10, 2010

A Washington State Department of Personnel’s survey is unproductive as a public policy tool. The recent study indicated that 82 percent of state workers are underpaid and 18 percent are overpaid. However, as an objective, scientific document it fails to be credible.

A salary survey should help insure compensation is high enough to attract applicants and correspond to the law of supply and demand. Pay and benefits should be equitable and should entice performance. At the same time, a compensation study should help prevent unnecessary costs by analyzing the relative worth of the jobs.

Compensation studies should be performed scientifically – comparing compensation in the government with what’s paid to workers in the community. That includes all benefits.

So, does the study reflect fairness to taxpayers? No.

Sixty percent of the study compared state government with local governments, which have skyrocketing payrolls in Washington state and have left the private sector behind. So, naturally, state salaries will pale in comparison with such pay scales.

More than 60 percent of the study gauged state worker salaries against other union salaries. That’s even though the majority of citizens do not have union jobs, which pay on average 15 percent higher wages.

Compared to the aggregate number of employers, the study only examined the relatively few private sector jobs at Amazon.com, Boeing and Eddie Bauer (which filed for bankruptcy in 2009).

So, the survey’s comparisons were terribly skewed. But please don’t take my word for it. Here’s the survey.

Further, the study did not even bother to include total compensation. State worker retirement pay, pensions, are the highest around; on average 74 percent higher than available in the private sector. So are the healthcare benefits. So much so, the state retiree health benefits, the last time I checked, were unfunded by $7.9 billion. (There are numerous other columns on this and related subjects in this Public Policy section.)

As we all know by now, the state lawmakers heaped $800 million in new taxes and relied heavily on federal government bailouts to offset the state’s $2.8 billion in red ink. Plus, the legislators failed to require efficiencies to prevent another looming budget crisis of the same magnitude in two years. And this means that money expended on the bloated state payroll was cut from taxpayer services.

The Washington Federation of State Employees’ union, www.wfse.org, is already using this so-called study to demand even higher salaries and benefits.

Meantime, if you want to comment, here’s the personnel office number to call: (360) 664-1960.

From the Coach’s Corner, the Association of Washington Business is contesting the wording of Referendum 52 in the Nov. 2010 election. It would allow the state to sell $500 million in bonds for green school projects.

To finance it, the recent legislative session’s new tax on bottled water would be implemented permanently. In filing the ballot title challenge, AWB is calling for transparency of the financing tool imposed by lawmakers.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.