Updated – Feb. 1, 2012
The healthcare debacleÂ is going to the U.S. Supreme Court, in part, thanks toÂ ruling by an Atlanta federal appeals courtÂ and the Standard and Poorâs downgrade of the U.S. credit rating last August.Â In reality, theyÂ were positive developments.Â The two evensÂ represent reproachesÂ to the federal governmentâs behavior and performance.
While sustaining the bulk of the so-called reforms, thankfully, the 11th Circuit Court of Appeals ruled that Congress unconstitutionally required Americans to buy health insurance or pay a stiff fine. Most businesspeople feel differently about the law (How Healthcare Law Would Affect Small Business, and Healthcare Reform Increases Costs to Workers, Study).
Despite disingenuous claims by the Obama Administration, S&Pâs downgrade was justified. In pandering to political cronies nearly all in Congress from both parties, has spent an obscene amount of money on unwarranted hometown pork and earmarks. Politicians must now stare at a huge red flag.
Another reason why the courtâs health-law ruling is encouraging:
One of the opinions was written by Judge Frank M. Hull. He was appointed by a Democrat â President Bill Clinton in 1994. He was joined by Chief Judge Joel F. Dubina, who was appointed by Republican President H.W. Bush.
Until Judge Hullâs decision, lower court rulings were rendered along party lines. Republican appointees invalidated the health-law, and judicial appointees by Democrats upheld it.
“This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives,” wrote Judges Hull and Dubina.
“We have not found any generally applicable, judicially enforceable limiting principle that would permit us to uphold the mandate without obliterating the boundaries inherent in the system of enumerated congressional powers,” they also wrote.
Yes, there more legal challenges in the courts, including Virginia and the District of Columbia.
But this ruling was the most salient. The opponentsâ case was pursued by attorneys general and governors from more than half of the states â 26. Other plaintiffs included the National Federation of Independent Business and two individuals.
Again,Â the U.S. Supreme Court will rule on the case.
The Atlanta court’s dramatic ruling might influence the pricing of insurance policies. The Obamacare requirement guaranteed funding via the consistency in the mega pool of policyholders. Now, insurance companiesÂ started to hikeÂ premiums — just as predicted here at The Biz Coach.
Politically, thereâsÂ also a different landscape. Perhaps the Supreme Court might agree with the Atlanta court. But any legislative attempts by Congress to sidestep such a ruling would be unwise. Thatâs because the Democrats no longer enjoy being the majority in both houses of Congress. Republicans are unified against the law.
States governmentsÂ are carrying out the lawâs reforms. There has been a lot of angst about the costs in implementing the law. Many of the statesâ politicians complain their rights have been trampled.
Even though the remaining portions of Obamacare were untouched by the Atlanta court, the ruling also appears to torch them. Why? The mandate to buy insurance is a source of the lawâs funding, which has now been disrupted.
Only one source remains as a funding source â a decrease in Medicare benefits. Democrats have been disingenuous. They conveniently omit the devastation to recipients of Medicare.
Letâs hope the entire baggage in Obamacare is at-risk. It was clearly unconscionable for Congress to require Americans to buy private products.
The Great Recession may have technically ended but not for most businesspeople and consumers. Thatâs why the S&P downgrade and court ruling are beneficial. The reproaches help to end the expansion of the over-extended Federal government.
The reproaches also hold the promise of enhancing the economy by alleviating economic uncertainty for 14 million unemployed Americans and employers. Companies have been reluctant to hire, in part, because of the expense of Obamacare.
Hereâs a better strategic plan: Balance the budgetÂ without increasing taxes on everyone. Make it feasible for startups and other businesses to hire and expand.
Economic and politicalÂ freedom are two of America’s sacred liberties.
From the Coachâs Corner, here are related public policy columns:
âGiving money and power to government is like giving whiskey and car keys to teenage boys.â
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 donât you contact him today?
Progressively moreÂ every year, many Americans, especially public officials,Â demonstrate they need to review the reasons for Independence Day and why we celebrate the fourth of July.
It is, of course,Â a national U.S. holiday that commemorates the adoption of our unique Declaration of Independence on July 4, 1776.
Thomas Jefferson was inspired to write the historic document between June 11 and 28, 1776. He eloquently stated the convictions of Americans. They werenât new ideals expressing the desire for liberty. John Locke and others beat him to it.
However, too few Americans appreciate the risks of those 57 men who signed the Declaration of Independence â making freedom possible for all us. In the 21st century, the Fourth of July is a holiday of festivities and fireworks for Americans.
The Declaration of Independence was written as a list of grievances against the King of England, and has been cited as a list of timeless principles.
It was written and signed amid the American Revolution â the most significant event in our history. The first shots were fired in April, 1775. The war would last eight years.
It inspired the meaning of this phrase, âthe shot heard round the world.”
Coincidentally, the fourth of July has other significance. Two signers of the Declaration of Independence who were elected president, Mr. Jefferson and John Adams, passed away on July 4, 1826 — the 50th anniversary of Independence Day. Fifth President James Monroe died July 4, 1831. Thirtieth President Calvin Coolidge was born July 4, 1872.
For most Americans, itâs a fun holiday. Across the nation are barbecues, baseball games, carnivals, ceremonies, concerts, fairs, family reunions, fireworks and political speeches. The holiday is a heavy travel day for many Americans.
Allegedly, as a document, the Declaration of IndependenceÂ is still cherished as an avowalÂ of freedom from tyranny. Do we honor it? Are we truly independent? No.
Those type of events challenging royalty more than two hundred years agoÂ â catalysts for the American Revolution and the Declaration of Independence â are prevalent today.
On a personal note, July marks the anniversary of this portal with business-coaching columns in eight categories.Â Seeming countless assaults on the economic and political liberties of businesspeople prompted dozens of public policy columns.
In the last three years, conditions have worsened. Numerous crises are looming again this Independence Day. They include the ObamaCare debacle, trade deficit, credit and home foreclosures, high unemployment and an enormous national debt.
At the very least, they threaten to financially imprison our children and grandchildren for decades. Worse, they threaten this nationâs future.
Much isÂ prompted byÂ dysfunctional public policies by the âruling classâ â thatâs how one of this portalâs frequent readers describes many public servants at the local, state and federal levels. I ageee.
âNow, even the deviancy of the old nobility is becoming more commonplace, as once they were given land by the sovereign, upon which to live well,â the reader wrote in an e-mail. âNow they are given government pensions and benefits.â
He laments we keep electing the same people with the sameÂ damaging political, and in many cases, self-servingÂ philosophies.
That goes for the White House, too, with a $39 million payroll (White House discloses wide-ranging staff salaries).
Meantime, thereâsÂ little statesman-like behavior in budget talks.
Ironically, the Republicans were responsible for countless earmark and pork legislation during the Bush Administration. President Bush failed to veto even one pork billÂ during his first six years in office.
Another indicator of why our liberty is threatened by another recession.
On another front, the Federal Register has a compilation of all federal business rules and regulations.Â A 2010Â check revealed it contained 81,405 pages of regulations.
Actually, the abuses of our liberties comprise a much longer list than discussed here.
Certainly, businesspeople from Bernard Madoff to Enron executives have let us down. But there are a lot hardworking, diligent business folks. However, politicians wonder why such businesspeople feel shackled.
Hence, the question: When are we going to affirm the Declaration of IndependenceÂ with economic patriotism to validate the principles of Independence Day?
From the Coachâs Corner, actually, all of this fiscal chaos from disingenuous behavior suggests the U.S. ConstitutionÂ is under fire, too. Itâs worth re-reading.
âAncient Rome declined because it had a Senate; now what’s going to happen to us with both a Senate and a House?â
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional.Â Click here to see his management services.Â For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, pleaseÂ contact Terry.
More than 50 percent of small businesses report they face three dangers â tax regulations, healthcare costs and poor disaster planning â according to an insurance company study. Nearly 33 percent cite government regulations as a salient obstacle to their success.
However, most respondents said back in 2011 theyâre optimistic about revenue growth and hiring workers.
Thatâs according to a nationwide study by the Travelers Institute, which is the Washington, D.C. public-policy arm of the Hartford-based Travelers Companies.
The organization embarked on a campaign.
That was toÂ spotlight the public-policy issues that are perils to small businesspeople — as well as the solutions.
“Travelers is committed to being a constructive participant in the public policy dialogue with regard to important issues facing our industry,â wrote Jay Fishman, the Travelers chairman and CEO on the instituteâs Web site.
âWe hope to contribute to solutions on a wide range of issues that face our customers, our agents and brokers, and the communities we serve,” he added.
Conclusions from the small-business survey:
- More than 60 percent are over-burdened by tax-related issues, government compliance and mounting healthcare requirements
- Half of them cited health insurance
- 47 percent said licensing, permitting and inspection issues are an unnecessary weight
- 52 percent indicated government regulations depress small business
- More than half arenât prepared for a disaster
More insights from the institute:
- Regulatory costs for small businesses are 36 percent greater per employee than big business
- Regulatory burdens — 33 percent of respondents cite the federal government; Â 34 percent for state and 16 percent for local or county
- Costs for coping with federal regulations – companies employing fewer than 20 workers spend $10,585 per employee per year but companies with 500 or more employees spend $7,755 per employee per year
- Tax compliance costs to small business â $18 billion annually
- The nation has 27.3 million small businesses
- 600,000 new businesses are started each year
- The tax code has four times more words than the Bible
The study included the opinions of 600 small-business owners, employing 50 or fewer people in 2011.
My sense: Travelers is on the right track, and is to be commended. Over-zealous government regulation is a threat to our collective political liberties, which is also a menace to our economic liberties. Let’s wish the institute luck, and remember we must all participate in the public-policy process.
From the Coachâs Corner, here are four resource links:
- 11 Strategies to Keep your Small Business Floating above Water
- How to Ease Debt-Collection Headaches
- Step-by-Step Solutions for a Company Turnaround
- 19 Tips to Protect Your Core Assets from a Disaster
âIf you have ten thousand regulations you destroy all respect for the law.â
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.
A lost art in leadership has almostÂ come to the rescue of marketers and consumers, alike.
Long ago, it was a pleasure to watch politically opposite leaders â President Ronald
Reagan and House Speaker Tip OâNeill â work congenially. Another example from Congress and the Presidency was Gerald Ford.
The focus was onÂ principles, not personalities.
Yes, I met all of them. As a young broadcast journalist, I separately interviewed Mr. Reagan before he became president, Mr. OâNeill when he was Speaker of the House, and I broke the story nationwide about Mr. Fordâs plans after leaving the White House.
Â Â Â Â Â Â Â Â Â
Â Â Â Â Mssrs. Reagan, O’Neill and Ford
They were indeed leaders. Political compromise was taken for granted in those days. Since then, however, it’s become a lost art.
However, we experienced a partial, joyful return to yester-year in April 2011 after the bipartisan bill entitled, Commercial Bill of Rights, was introduced by political adversaries — then-Sen. John F. Kerry (D-Mass.) and Sen. John McCain (R-Ariz.).
With Mr. Kerry now the Secretary of State, someone needs to step up to fill his void.
Where are the Reagans, O’Neills and Fords now?
By way of explanation, changes in commerce and the Internet have led to debate.
Admittedly, as a consumer, online privacy is a concern. Trust is important. Consumers have a basic right to protect themselves against predators.
Conversely, my marketing side has been concerned by over-reachingÂ of consumer advocacy groups in discussions over do-not-track legislation. Marketers have understandably been worried about the loss of visitorsâ data. That is, until now.
(Disclosure: Visitors data is used for data to make this business portal as relevant as possible. It indicates which articles are popular and those that arenât, and from where visitors come and how long they spend here. Tracking makes it possible for advertising to be inserted adjacent to certain content that interests users. By using key words, readers are able to find helpful information and insights.)
But the bill is a cavalry ofÂ sorts coming to our rescue. It requires a code of conduct, but do-not-track legislation is excluded.
In this digital age, much of the economy depends on it.
âAmericans have a right to decide how their information is collected, used, and distributed, and businesses deserve the certainty that comes with clear guidelines,â said then-Sen. Kerry.
âOur bill makes fair information practices the rules of the road, gives Americans the assurance that their personal information is secure, and allows our information-driven economy to continue to thrive in todayâs global market,â he added.
The billâs basic components:
- Accountability and security â marketers must use security
measures for data.
- Access, consent, correction and notice of information â clear notice must be given to consumers as well as their right to opt-out.
- Constraints on data â Marketers are restricted on the data they collect to enable transactions or to provide services.
- Enforcement will be provided by the Federal Trade Commission (FTC) and the Attorneys General in each state.
- The FTC will be allowed to approve programs by nongovernment organizations to monitor initiatives providing safe harbors or protections.
- The Department of Commerce will help coordinate safe harbor applications for privacy and sharing of information.
Sounds good. Today’s politicians need to learn from history.Â Letâs get it done, and encourage more bipartisan leadership!
From the Coachâs Corner, here’s an article about an American statesman who showed leadership in a bipartisan way:Â Five Attributes of Leadership Are Needed Now
Change is inevitable, except from a vending machine.
-Robert C. Gallagher
Â Â __________
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional.Â Click here to see his management services.Â For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, pleaseÂ contact Terry.
Updated – Jan. 14, 2010
The battle over high unemployment-insurance costs is raging in this yearâs legislative session in Olympia â 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.
âWhile 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 â some by more than a thousand percent and many in triple digits,â wrote Don Brunell in a post as president of AWB.
âWashington employers pay the nation’s 5th highest unemployment insurance rates. Â Our state’s unemployment benefits are 2nd highest in the country,â he added.Â Â âAnd, workers compensation benefits in Washington are 5th highest, according to the 2011 Competitiveness Redbook produced by the Washington Alliance for a Competitive Economy.â
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:
âA system along the lines of what AWB put in place several years ago for long-term care,â he wrote.Â âAWB provides a basic policy for long-term care for the people who work here.Â If they chose to add a family member to the plan, they pay a small premium for that coverage.Â It is fair and it works.Â That would be an innovative approach to consider for UI.â
He pointed out Washington businesspeople and other residents already have a heavy tax burden:
ââŚI posted a Olympia Watch post based on Tax Foundation findings showing that Washingtonâs âTax Freedom Dayâ is April 15,Â not April 9,â wrote Mr. Brunell. âIn 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.âÂ
The AWB president agrees â the welfare of Washingtonâs children should be taken into account.
âRefocusing the issue is important. Â It is about kids and families.Â Â AWB believes it is better for Washington workers and their families to have jobs.Â Relying on unemployment payments is no way for families to manage their finances.Â Besides, those benefits are time limited.Â Taxes and costs of doing business drive location and hiring decisions for Main Street businesses and large factories.Â Global competition is fierce and real.Â This isnât about tradeoffs.Â It is about stimulating jobs.â
Mr. Brunellâs 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, heâs thrilled to have a future with a world-class company â 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 Coachâs Corner, you can stay current with the moderate recommendations of Mr. Brunell and his illustrious staff at AWBâs site, www.awb.org.
Jan. 12, 2011
Washington state legislators have been formally asked to become transparent —Â to practice accountability for good, open government. The request was in the form of a letter from State Auditor Brian Sonntag, a Democrat, and Attorney General Rob McKenna, a Republican.
In fact, Messrs. Sonntag and McKenna have asked lawmakers for a constitutional amendment to improve legislative transparency â actually, itâs an idea from the Washington Policy Center (WPC â www.washingtonpolicy.org).
The Sonntag-McKenna letter states:
âIn the spirit of open and accountable government, we support a proposed constitutional amendment to create greater legislative transparency.Â The attached proposal, recommended by the Washington Policy Center, would prohibit blank bills from being introduced or voted on by the legislature.Â While the use of âtitle only billsâ is a rare procedure, the public concern substantially justifies eliminating their use entirely.Â The proposal would also require a minimum time for public notice of bills before a legislative hearing or action on the bill.Â
These basic reforms will build the public trust and ensure that government is open and accountable to the public.Â Please give your support to this proposed constitutional amendment.â
Accountability and transparency have long been issues in Washington.
âDuring the 2010 Session lawmakers routinely waived legislative rules requiring five-day notice before holding a bill hearing; provided inadequate notice of the time, location and topic of public hearings; held hearings on bills with no text; and voted on bills the same day details were made publicly available,â wrote Jason Mercier, director for the Center for Government Reform at WPC.
âThe rush to vote on the budget and tax bills without allowing meaningful public comment or adequate review time by lawmakers led to mistakes in the bills,â he added.
Actually, the 2010 legislative session was one of only many in which lawmakers ignored the principle of good, open government. Thatâs why the state has a severe budget crisis. Iâve been warning about these issues for many years.
Appropriately, Mr. Mercier said the WPC makes these specific recommendations:
- Require 72-hour public notification before any bill could receive a public hearing
- Prohibit title only bills (no public hearing or vote should occur on a âghost billâ)
- Prohibit votes on final passage until the final version of the bill to be approved has been publicly available for at least 24 hours.
Yes, reform is critical. The lack of transparency and good, open government have adversely impacted state businesses, their workers and customers for years. The WPC, and Messrs. Sonntag and McKenna have admirably worked to protect Washingtonians.
Memo to state officials: Please do the right thing.
From the Coachâs Corner, the stateâs government needs a fundamental cultural and structural change in the way it conducts its business in order to perform the will of the voters. This Biz Coach business-news portal was designed primarily to provide business-coaching â proven solutions for maximum profits. But a disproportionate number of columns have been necessarily devoted to stop the chicanery of the stateâs Legislature and agencies.
As a review, a sample from 2010 includes:
Dec. 5, 2010
Consumers have slowed their holiday online spending after setting a record of $16.8 billion for the first month of the all-important selling season for retailers. Thatâs according to research firm comScore.Â
comScore says the Â 2010 12 percent growth-rate over 2009 slowed to 9 percent after Cyber Mondayâs record $1.028 billion in purchases. The spending for the next three days â $911 million, $868 million and $850, respectively â showed a clear subsiding in spending by consumers.
âWe believe this softening is attributable to retailersâ heavy discounting and promotional activity during the earlier part of the holiday season [through Cyber Monday], which pulled some consumer demand forward, resulting in a mild hangover effect in the days immediately following Cyber Monday,â said comScore chairman Gian Fulgoni.â
|2010 Holiday Season To Date vs. Corresponding Days* in 2009
Non-Travel (Retail) Spending
Excludes Auctions and Large Corporate Purchases
Total U.S. â Home/Work/University Locations
Source: comScore, Inc.
|November 1 â December 3||$15,041||$16,803||12%|
|Thanksgiving Day (Nov. 25)||$318||$407||28%|
|Black Friday (Nov. 26)||$595||$648||9%|
|Cyber Monday (Nov. 29)||$887||$1,028||16%|
|Week Ending Dec. 3 (Nov. 27 â Dec. 3)||$4,724||$5,163||9%|
*Corresponding days based on corresponding shopping days (November 2 thru December 4, 2009)
âWe may see another week of this effect before late season discounts and buying by procrastinators gives the season a final spending surge,â he added.
Unfortunately, for small retailers, comScore reports most of the spending benefits the 25 largest retailers. Their revenue jumped 20 percent compared to much slower growth for small retailers. The big 25 gained 4.2 percent market share to 67.8 percent. Thatâs probably because they have more financial resources for promotion.
|Analysis of Spending Growth Among Top 25 Online Retail Sites
Nov. 1-29, 2010 vs. Corresponding Days in 2009
Total U.S. â Home/Work/University Locations
Source: comScore, Inc.
|Â||Spending Growth||Dollar Share|
|Top 25 Retailers||20%||63.6%||67.8%|
|Small and Mid-Tail Retailers||0%||36.4%||32.2%|
Social media continues to influence many shoppers, but not all, according to comScoreâs survey of 500 respondents. Thirty-three percent said recommendations from friends are important to them, but 24 percent disagreed while 43 percent didnât comment.
|Q: âHow much do you agree with the following statement? Recommendations from friends on social media sites are a great way to get gift ideas during the holiday season.â
November 24-29, 2010, n=503
Total U.S. â Home/Work/University Locations
Source: comScore 2010 Holiday Survey
|Response||Percent of Respondents|
|Neither Agree nor Disagree||43%|
Consumer-product reviews followed by expert-product reviews, respectively, were influential.
But with dire unemployment news and decreased government revenue, my sense is that a tepid economy is still a factor. A combination of spending by affluent shoppers and heavy discounting are responsible for the initial online-spending growth rate. The economy is still difficult for the majority of consumers.
This also means governments at all levels need to borrow strategic planning strategies from successful businesses. It’s past time for them to adopt public policies with balanced budgets for the benefit of their constituents.Â
From the Coachâs Corner, for some quick tips to boost your Web-site sales, see 10 Tips to Optimize Your Web Site for Higher Sales.
Sep. 22, 2010
You’ve heard the rhetoric. Initiative 1098 , the controversial income-tax proposal, has become one of the most divisive issues in Washington state.
It would impose a 5 percent tax rate of $200,000 on individuals and $400,000 on couples with a 9 percent tax rate on $500,000 for one person and $1 million on families. The stateâs share of the property tax would be lowered by 20 percent and the business and occupational tax would exempt 118,000 more companies.
Bill Gates, the c0-founder of Microsoft, joined his father Bill Gates Sr. in advocating passage of I-1098. Notable opponents include Microsoft CEO Steve Ballmer and Amazon.com founder Jeff Bezos. Â
Ironically, as an economic development tool, the stateâs Department of Commerce has a Web site (www.chooseWashington.com) that states Washington has a âFavorable Business Environment.â One of the advantages: âNo income tax in Washington.â
So what’s the impact of I-1098?
Â The Citizensâ Guide to Initiative 1098 is a policy brief by written by Paul Guppy. Heâs the vice president for research at the highly respected think tank, Washington Policy Center. Itâs voluminous and thought-provoking with heavy documentation.
To summarize, here are Mr. Guppyâs 10 salient conclusions:
1. Initiative 1098 Creates a New Way to Tax. Essentially he believes it does nothing to fix the inequities of the state sales tax, which is regressive for businesses and low-income families.
2. The Income Tax would Likely be Extended to More People. Is this a surprise? No.
âUnlike past efforts, Initiative 1098 is drafted as an ordinary law, not as an amendment to the state constitution, Mr. Guppy writes. âThis makes it easier for the income tax to be extended to more people in the future. The legislature could change Initiative 1098 in the short-term with a two-thirds vote, and after two years could change it by a simple majority vote, just like any other part of the legal code.â
3. Income Tax Revenue May Not Go to Promised Purposes. He cites Washington Secretary of Stateâs data that indicates the Legislature has over-ridden 30 voter-approved initiatives.
âLawmakers often divert tax revenues from their intended purposes,â he explains. âThis year the legislature transferred tax revenue totaling more than $1 billion from 33 dedicated trust accounts, some created by voter initiative, and spent those funds on general programs.âÂ
4. More Money Will Not Help Public Schools. He points out school children will not learn more.
âTaxpayers contribute over $10 billion per year toward the education of slightly less than one million public school students in Washington,â he writes. âPublic school districts currently spend an average of $10,100 per student per year, the highest level in state history.Â
âThe largest budget item, comprising 83 percent of spending, is devoted to salaries and benefits. The statewide average for teacher pay with benefits is $79,200,â he asserts. âAverage pay with benefits for school administrators is $117,000.â
He adds Seattleâs school spending of $12,746 per student annually has increased more than a third since 2005.
âIn Seattle average teacher pay with benefits is $92,100. Average administrator pay with benefits is $106,900,â he adds.
5. Initiative 1098 and the State Economy. He lists numerous examples how the initiative would hinder the stateâs economic climate.
âBy enacting an income tax, Washington would be giving up a significant competitive advantage in relation to other states,â he advises. âWashington has a high sales tax. Adding an income tax means Washington would join the states that impose all the major forms of tax on their citizens.â
6. Some Residents would Leave Washington to Avoid the Income Tax. He points out a new income tax would be the fourth-highest in the U.S.
âHigh-earners targeted by the tax would suddenly have a strong financial incentive to move out of state,â he writes. âA change in residence would include pulling investments out of the state as well, since Initiative 1098 would tax non-residents who derive income from Washington businesses. In a survey of business owners and their views of Initiative 1098, 1.8 percent of respondents said they planned to leave Washington if the income tax measure passes, even though this was not one of the survey questions.â
He cites New Jersey and Minnesota as examples where high-income residents felt compelled to leave for greener pastures.
7. Initiative 1098 would Reduce Charitable Giving. Because the controversial proposal would be higher than the federal tax and would be applied to adjusted gross income, he writes the affluent would fewer funds for charity.
âAdjusted gross income includes wages, salaries, tips, interest income, rental income, capital gains, income from pensions and retirement accounts, and alimony payments received by divorced spouses,â he suggests. âAdjusted gross income is calculated before the taxpayer is allowed to lower his reported income by claiming deductions such as the federal standard deduction, the child tax credit, the dependent care credit, local property taxes, motor vehicle taxes, mortgage interest payments, contributions to retirement accounts and donations to charity.â
That means that $2.2 billion next year and $11.1 billion over the next five years would not be available for nonprofit giving.
8. Initiative 1098 and Tax Fairness. He writes, contrary to proponentsâ claims, the proposal is unfair â 98 percent of the stateâs population would escape an income tax.
âInitiative 1098 is not unbiased or impartial in its treatment of Washington citizens,â he explains. âIt specifically targets a minority, as defined in economic terms, to shoulder the full cost of a new tax, while using state power to redistribute the benefits to others.â
9. State Income Taxes Do Not Lead to Fiscal Stability. He points out Oregon, New Jersey and California all have major budget woes despite an income tax.
âOregonâs personal income taxes â based on 2009 returns due on April 15, 2010, were down by $472.3 million, or 16.4 percent less than the previous year,â he writes.
âDuring the strong economy lawmakers increased state spending by over 33 percent in a single four-year period,â he reminds us. âAccess to a new revenue stream would likely encourage Washington lawmakers to return to enacting large, permanent spending increases in each budget cycle. When economic activity slows or declines in recessionary years, personal incomes fall accordingly, and leave income tax states like Oregon and California with far less revenue than officials expected to receive.â
10. Initiative 1098 is Unconstitutional under Current Case Law. Opponents argue passage of I-1098 would be thrown out by the courts.
From the Coachâs Corner, you can visit the Defeat 1098 campaign here.
Sept. 16, 2010
So now we have further confirmation that Washington state isÂ long overdue in launching a prudent approach to public policy and budgeting.Â Officially, the stateÂ forecasts another $1.4 billion shortfall until June, 2013. That means red ink totaling at least $4.5 billion.
âThe governor has already responded to this forecast by authorizing across-the-board cuts, but that simply isnât the most thoughtful approach available,â said state Sen. Joseph Zarelli, R-Ridgefield, in a press release.
âOn one hand she says she wants the next state budget to reflect the priorities of government and Washington values; on the other hand she has ordered cuts to the current budget that allow little if any consideration for priorities and values,â he added.
Sen. Zarelli also raised the salient question:
âWhat sense does it make to cut services for our most vulnerable citizens by the same percentage as the stateâs efforts to promote tourism?â
His suggested alternative to across-the-board cuts?
âIt would be better for the Legislature to convene for a short special session, because we can do things the governor canât. We can make policy and structural changes that would focus the available revenue on the most essential services, and leave enough in reserve to get the state through June, when the biennium ends. We can also adopt reforms that would help when itâs time to write the 2009-11 budget,â wrote Sen. Zarelli.
To more than 50,000Â state workers, heÂ e-mailed this request:
âWe hope you will take the time, either at work or at home, to submit your savings ideas here. Your ideas will be routed directly to us.â
How does theÂ Office of Financial Management explain the budget shortfall?
“Revenue for the current budget period, 2009-11, is projected to decrease $770 million, resulting in total projected General Fund revenue for the biennium of $28.5 billion. Revenue for the next budget period, 2011-13, is projected to decrease $669 million, resulting in total projected General Fund revenue for that biennium of $33.4 billion.
‘With this drop in revenue, our current budget is now projected to be in the red,’ said Marty Brown, director of OFM. ‘We will enact cuts to address this problem while we look for ways to transform the budget and address shortfalls for the next budget period.’
The forecast projects an ending fund deficit for 2009-11 of $516 million, which includes $4 million in the rainy-day fund.”
Ouch, but it’s not surprising news. As a business-performance consultant, the state’s dubious policymaking and budgeting have been frequent topics here.
What is shocking has been the stateâs lack of transparency in budgeting and thatÂ many electedÂ officials — excluding State Auditor Brian Sonntag —Â have been late to the solution process and have not solved these predicted and lingering problems. That’s inadvisable public policy and budgeting.
âDespite still projecting revenue growth of nearly $5 billion between 2009-11 and 2011-13, a budget shortfall exceeding $4.5 billion is projected for the next budget due to a structural spending imbalance and the carry forward costs of programs in the current budget,â said Jason Mercier, the director of the Center for Government Reform at the Washington Policy Center.
âThis budget crisis makes it imperative for legislative leaders to bring lawmakers back to Olympia to solve this problem in a thoughtful way,â said Mr. Mercier. âFailing to do their job until the 2011 session convenes in January would be the ultimate abdication of their legislative responsibility to balance the budget.
âIf lawmakers continue to refuse to balance the budget they should at least call a short special session to change state law to allow the Governor to make discretionary and rational cuts while leaving up to a one percent reserve,â Mr. Mercier concluded.
Well said, as usual. Actually, Mr. Mercier and Sen. Zarelli have long expressed their public policy and budgetary concerns.
Since 2001, The Biz Coach column, at three Seattle media Web sites, has warned that Washington stateâs economy has been too valuable and/or too-fragile to gamble with costly unknowns.
This Web site was launched July 29, 2009. Youâll find countless archived Biz Coach public policy columns with warnings and solutions including, the initial column, Analysis: Steps for Economic Success in Washington State. Not to be gauche, the columnâs ideas are valid today. Itâs past time to reboot â before itâs too late.
From the Coachâs Corner, for more background information and sound ideas, here are four resource links:
- The stateâs revenue forecast
- State Auditor Brian Sonntagâs performance audit work plan
Updated Aug. 17, 2010
Today is Washington state’s Primary Election Day. Be sure to vote.
Meantime, there are valid reasons why Washington state public officialsâ pleas of poverty and and justifications for tax increases have fallen on the deaf ears of most businesspeople. The overwhelming majority of companies â large, medium and small â have had to resort to cost savings.Â But only recently in mid-2010 have state leaders finally admitted state government needs to be downsized by as much as 7 percent across-the-board in the wake of declining revenue and continuing forecasts of $3 billion deficits.
However, for years, many of us have warned about the stateâs propensity to spend wastefully in the face of multi-billion- dollar unfunded state pensions and $3 billion deficit forecasts. Again this year, the Legislature bypassed voter protections on transparency, and raised taxes by $800 million. In the last decade, there have have numerous Biz Coach columns about court cases and shell games by public officials in violations of state spending limits. But we’ve been ignored by public servants, which infuriates the electorate concerned about economic health and job creation.
Ironically, there have been numerous published reports of fiscal waste, mismanagement and abuse. That means if efficiencies were ever implemented– including the best-practices in fiscal management recommended by the state auditor —Â there would be enough tax revenue.
For example, the state was overcharged $306,000 for supplies by Office Depot in 2009, according to the state auditor. But the stateâs Department of General Administration denies itâs overspending. We have to wonder how badly the other agencies are misbehaving.
The contract with Office Depot is part of a $24-million deal that includes other state agencies, institutions of higher learning and local governments.
The agency is part of a list of other state agencies also in denial, especially the Department of Social and Health Services (DSHS), and the Washington State Department of Transportation (WSDOT) and the ferry system.
As a business-performance consultant who has solved the financial headaches of public and private-sector clients since 1992Â â often by not even having to look at numbers â just observing people at work â I have also interviewed State Auditor Brian Sonntag.
As Iâve written before regarding public policy, Iâve witnessed tons of waste at DSHS, WSDOT and the Washington State Department of Personnel.
My sense also is that Mr. Sonntag is a stellar public servant, and I would point a finger at Office Depot for not adhering to the contract rates, as well as at the Department of General Administration for being lazy in due diligence.
This summer, we finally heard about the flawed worked of state employees that caused two freeway projects in Tacoma to be torn down and rebuilt. It resulted in $1.5 million in more waste and no accountability. That wouldn’t fly in the private sector at most companies.
Donât forget about the KING 5 series on mega millions in waste and inefficiency in the state ferry system.
Also, I’dÂ ignore the disingenuous arguments in the $2 million Initiative 1098 campaign to start a state income tax. An income tax would soak the rich â many of the very people who hire workers and make investments.
A state income tax has not helped two states where I spend a lot of time: Oregon and California.
An income tax here would send a negative message to prospective employers around the globe that might consider establishing a presence in Washington. Why would anyone want to harm our potential to grow the economy and create jobs?
Another thought: Should this income tax pass this year, state officials will find excuses to broaden the income tax to include middle-income taxpayers, too. Have you ever known a tax not to expand orÂ even disappear?
Now comes the disingenuous allegation in two state reports claiming that voters should not privatize liquor sales because they would cause shortages.Â That’s bunk. Not only willÂ we put a governor on the unfunded pensions of 1500 state liquor employees, the number of privatized liquor outlets will expand 10-fold. That enhances tax revenue — it doesn’t decrease it.
Please forgive me for being a tad gauche, but youâre best advised to consider all the government waste and mismanagement, as well as the candidates’ philosophiesÂ before going to the polls or returning your absentee ballot.
Courtesy of Enterprise Washington, here are two research resources:
- Reviewing candidatesâ answers to the Enterprise Washington & WashACE Candidate Questionnaire, accessible through the GROW Voter Guides.
- Viewing incumbent candidatesâ legislative voting records.
May Washingtonians decide on a business-friendly environment on Aug. 17 and in Nov.
From the Coachâs Corner, this Web site has more than 50 national and Washington state public-policy columns regarding the governmentsâ adverse impacts on the economy and business climate in this section.