Pension Reform: Washington Labor Leader Is Right – It Is ‘Class Warfare’


Union leader Greg Devereux was right about a debate in the March 2012 special session of the Washington State Legislature. A budget proposal to reform the lavish pension system for Washington state public employees was an indicator of class warfare – between the have-nots and the ruling class.

The have-nots: The countless stressed business owners, the financially burdened self-employed, under-employed workers, job-seekers, retirees struggling to survive, and others.

The ruling class: Washington state, county and city public employees, their union leaders and many politicians. In other words, public sector employees who profit from the system.

Mr. Devereux, who opposes government-employee pension cuts, is executive director of the Washington Federation of State Employees. He made the class warfare accusation, which was reported by The News Tribune (TNT) in an article entitled, “Are pension cuts ‘class warfare’ or ‘reform’? Lawmakers differ.”

Actually, pension reform has long been an issue. The Washington Policy Center once suggested passage of a constitutional amendment to solve the issue (See Common Sense Needed for Washington State Pension Reform).

Pension reforms were also advocated by State Treasurer Jim McIntire in 2010.

Washington state lawmakers are still getting sore toes from kicking the budget can down the road. Following an unproductive legislative session, the state Legislature was called into a second special session supposedly to balance the state’s budget.

You’ll recall the legislative session didn’t result in a balanced budget. Nor did the fall 2011 special session of the Legislature.

A major stumbling block: The lucrative pensions paid to 40,000 public employees. Public employees receive on average 74 percent higher pension benefits than workers with retirement plans in the private sector.

Republicans introduced a plan that would save $2.3 billion over 25 years. One component would have omitted a $143 million pension payment to reduce liability, and funds the payment after reducing benefits to future state workers.

“It’s a big net gain for taxpayers, and an excellent example of the sort of policy changes we should be making to improve the state’s long-term financial outlook,” TNT quoted Sen. Joseph Zarelli, R-Ridgefield.

TNT reported the proposal includes these provisos:

  • Creates future savings by eliminating an early retirement benefit for state government and school employees hired after July 1.
  • Leaves intact the law that requires new state workers, teachers and school employees to pick from second- and third-generation pension plans.
  • Earmarks any savings to pay down the $3.2 billion of unfunded liability in the older Public Employees’ Retirement System Plan 1 and Teachers’ Retirement System Plan 1 that closed years ago to new workers.

As expected, Gov. Chris Gregoire didn’t like the skipped payment component of the proposal.

But here’s the irony: You’ll recall she has signed such budgets in previous years.

The good news is that Gov. Gregoire supported Sen. Zarelli’s ideas that would leverage savings to pay older pension plans. She also warned she’d veto or won’t sign many of the passed bills into law until lawmakers compromise on a balanced budget.

Not to just pick on the Washington state lawmakers, go to Google News. You’ll see countless stories about public employee pension plans that are plagued by overgenerous benefits and chronic under-funding.

You’ll also see the Zarelli proposal did not originate in Washington state. New York gets it and will reduce benefits for new public employees. The lawmakers recently passed pension reforms saving $80 billion over the next three decades.

This was the Washington State Legislature’s third shot at balancing the budget. Will the third time be the charm? No.

As of March 8, 2013, Washington state pensions had an unfunded gap of $31 billion, according to Seattle Times business reporter Drew DeSilver:

An analysis by The Seattle Times suggests that the system’s promised benefits are much bigger, and its real assets smaller, than official numbers indicate.

The analysis, using market-based data and methods, pegs the total gap between the present-day value of future benefits and assets on hand at more than $31 billion.

Meantime, Mr. Devereux needs a cup of coffee. A strong cup. Otherwise, in his class warfare, he won’t get his wish. There isn’t enough tax revenue among the have-nots to fund his members’ lavish pensions.

From the Coach’s Corner, here’s a public policy question: Will State Lawmakers Heed New SBA Data, Small Business Concerns? 

“Ancient Rome declined because it had a Senate, now what’s going to happen to us with both a House and a Senate?” 

-Will Rogers

 

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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.

 

WPC Hits Target, but Will Washington State Legislature?



Dec. 7, 2011 –


The clock is ticking. The state government spends $41 million each day but the Washington State Legislature has made little, if any, progress in its 30-day special session to solve a $2 billion deficit. Meantime, Office of Financial Management Director Marty Brown sent an email to lawmakers warning them action is needed – now.

No floor votes. Nada. Nothing.

At the request of Gov. Chris Gregoire, the special session started Nov. 28. The state is scheduled to spend more money than it will have for policies, programs and salaries.

Earlier, the governor proposed a half cent sales tax increase to raise about $500 million. The events prompted this Biz Coach piece: Budget Debate: Will Legislature Read Seattle News Media Headlines?

Actually, more than balancing the budget, the state needs to reform government for a healthy economic environment.

“While it’s true that state revenues are projected to grow by $2 billion over the previous budget cycle, this time there’s no federal bailout to prop up past overspending,” said a WPC press release.  “Some in Olympia are talking tax increases, yet our state’s fragile economy, and especially small businesses, are struggling to survive as it is.”

The Washington Policy Center (WPC) has some ideas worth adopting – the suggestions were sent in a  letter to Governor Gregoire.

WPC’s recommendations:

  1. Provide the governor discretionary authority to cut spending. Adopt performance-based Priorities of government budgeting to control the rate of spending growth.
  2. Restore the legislature’s ability to amend collective bargaining agreements.
  3. Direct state managers to use more competitive contracting.
  4. Repeal unaffordable programs instead of suspending them.
  5. Bring state employee health care premium contributions in line with those of the private sector.
  6. Ask state lawmakers to set aside a 5 percent reserve when adopting the next biennial budget.

Following its statewide conference to discuss small business issues, WPC sent the legislature these recommendations:

  1. Revisit the voluntary settlement agreement as passed by the state Senate in 2011 – $1.2 billion
  2. Reform the displaced worker retraining program
  3. Simplify sales taxes by using an ‘origin based’ tax (as opposed to a ‘destination based’ tax) and creating a flat rate for out-of-state businesses
  4. Review regulations to ensure that Washington rules don’t exceed federal regulations
  5. Enact Tort Reform
  6. Do no harm in transportation policy – do not reduce road lane capacity
  7. Do not follow Seattle in enacting statewide paid sick leave

From the Coach’s Corner, see WPC’s Coverage of the special legislative session here.

Here are related columns:

“There’s no trick to being a humorist when you have the whole government working for you.”

Will Rogers

 

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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.

Why the Sales Tax Debate Erupts in Washington State

Nov. 22, 2011

The buzz in Seattle and other Washington locales is over another attempt to raise taxes.  Yes, Gov. Chris Gregoire wants to raise $500 million via a temporary half-cent increase in the state portion of the sales tax to offset continued budget deficits to prevent more state government cuts in spending.

Either the Legislature could pass the increase providing it passes with a two-thirds majority in an upcoming special session. If it can’t, the Legislature can pass a referendum bill by the end of this year for voter approval.

Gov. Gregoire’s request also threatens to risk relations with Oregon and neighbors by repealing their sales tax exemption when traveling and shopping in Washington state.

Washington’s sales tax debate request follows four developments:

  1. Failure by public officials to practice good stewardship of existing revenue.
  2. Lack of jobs – nearly a double-digit unemployment rate.
  3. Businesses are struggling.
  4. Washington’s two-thirds vote requirement for tax increases – demanded by voters in four referendums.

No. 1 – the sales tax increase request is not a surprise to watchdogs in the wake of years of overspending. For years, analysts have been warning about public policies, including in this space as long as two-and-a-half years ago when this portal was launched (Analysis: Steps for Economic Success in Washington State).

Part of the problem stems from furtive policymakers and the failure to answer the right questions: Why Not Transparency for Good, Open Government in Washington State?

No. 2 – 314,700 people are unemployed in Washington state out of the 3.5 million-person workforce. In October, 4,600 jobs were created in government, education, health services, manufacturing and wholesale trade.

No. 3 – With many of the new jobs in government and education, it underscores the point about the state’s business climate. The tech sector in Seattle is doing well. But ask any business owner or manager if their companies are better off now than they were in 2006 before the recession.

No. 4 – It seems unlikely the Legislature will be able to pass such an increase, but will authorized a vote of the people thanks to I-1053, which was passed last year after the Legislature circumvented the three previous voter-approved referendums (I-1053: Critical to Washington State Businesses and Workers).

The Secretary of State’s timeline for the sales tax debate:

  • Dec. 30 – Last day for Legislature to pass tax referendum bill for March 13 election
  • February 10 – Military and overseas ballots mailed for March election
  • February 21 – Mailing of voters’ pamphlets begins for March 13 election
  • February 24 – Regular ballots mailed for March 13 election
  • March 13 – Election Day

“There will be plenty of time to debate the merits of the Governor’s tax proposal but one thing isn’t open for debate, I-1053 is working exactly the way voters intended by providing them the opportunity to ultimately decide this important question,” writes Jason Mercier of the Washington Policy Center.

He offers this proviso:

“To help ensure this opportunity continues in the future, if lawmakers are going to send voters a proposed tax referendum they should also put a constitutional amendment enforcing the four-time voter approved two-thirds vote requirement for tax increases on the ballot,” he writes.

“This would provide the public and businesses with predictability about whether this tax protection will exist from year to year and clarify whether or not the four-time approval of the voters for this policy was a fluke or actually reflects their consistent and ongoing desire for lawmakers to build a strong public consensus on the need for any proposed tax increase,” he explains.

Agreed – tax increases would be unnecessary if the public officials worked to improve the business climate and performed to voter expectations. Tax increases are never temporary in Washington and the economic environment isn’t improving.

From the Coach’s Corner, Washington state has budget woes and high unemployment because legislators don’t ask the right questions, such as What Do Small Business Owners Need from Washington State Policymakers?

“Be thankful we’re not getting all the government we’re paying for.”

-Will Rogers

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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.

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