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.

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.