In the frenzy of global challenges and big public issues we sometimes loose the strength to embrace stillness. In times of difficulty, we turn inward to family and friends for quiet support and non judgmental love. During some of our most difficult times, many of us turn to art purely for the sake of art, the value of pensive reflection, the joy of curiosity.
Art inspires, embraces, challenges and breathes soul into life. Sometimes it just lifts us up. Sometimes it’s eloquence inspires and sometimes it disappoints, but it usually makes us think and engage.
Recently Betty Winfield, a constituent in our district, approached me at a Magnolia community meeting and in writing with a simple idea so gentle, subtle and soothingly delicious that I had to chuckle at its elegance: Let’s artistically paint the iconic grain elevator and silos along the Seattle waterfront at Pier 86.
She wrote, “Pier 86 is the noteworthy sea entrance to Seattle, Elliott Bay. The silos are prominent for cruise ships, tour boats, the Clipper and ferries as well as any sea traffic after they round the Magnolia Bluffs. This site could be our Statue of Liberty, our Eiffel Tower, our welcome to the region’s amazing scenery. The structures there could be a destination stop as much as the Fremont Troll and the Big Wheel. Elsewhere, silos have been painted, had vinyl wraps, had moving visual images and have greatly been improved the sites, even as a tourist draw (San Francisco Pier 92).
King 5 picked up the idea here.
I absolutely love the idea on every level, and I’m all in to help.
The next time you’re chatting with an official from the Port of Seattle and City of Seattle, tell them that art outlives politics and to get on board with Betty’s idea.
Your partner in service,
Recently I had a chat with a senior official in state government who made a rather surprising comment about the potential of marijuana revenue as a major contribution toward solving our budget challenges. I thought the remark was a casual, even flippant comment until I realized this person was actually rather serious. This person was simply unaware of the amount of taxes generated by marijuana. I realized it would be helpful to remind those inside and outside of government of the context and numbers associated with marijuana revenue to keep it all in perspective.
For the first time, the state’s Economic and Revenue Forecast has built in assumptions around marijuana revenue for the current biennium (which ends July 1, 2015) and the next biennium for the 2015-2017 time frame. The current revenue assumptions from the sale of licensed cannabis products are now expected to be $6.9 million in the current biennium and $60.1 million in the 2015-2017 biennium, according to the counsel. As recently as June, the state was projecting $0 in the current biennium and $22.9 million for the next two-year period.
The Seattle Times’ headlines imply huge dollars will flow, but the details suggest a more modest approach. The 2017-2019 projections, $119 million for the General Fund and $285 million for non General Fund dedicated usage, are merely projections and should not be booked, tagged or prematurely spent.
The revenues are not, however, free for the taking despite multiple claims on the cash. The Initiative, I-502, has a few things to say about the use of proceeds that played a role in the campaign, something that budget writers and advocates alike need to keep in mind.
Here is the division of proceeds for marijuana excise tax revenues, per I-502. An important caveat is that retail sales tax and B&O taxes collected on marijuana sales would be separate and all proceeds from those two sources would go to the General Fund.
The use of proceeds are:
50% State Basic Health Plan Trust (now to be utilized for health care-related services)
18.7% General Fund – State
15% DSHS – Substance Abuse Programs
10% DOH – Marijuana Education & Public Health Program
5% – Health Care Authority – Community Health Centers Contract
0.6% University of Washington – unspecified
0.4% Washington State University – short & long-term affect research
0.3% Building Bridges Program grants
It’s still all a small sum in the aggregate picture of a $36 billion state budget, and is hardly a major new source of revenue to begin to support the state’s paramount duty of public education and other services until we know much, much more. More importantly, we are only at the beginning of assessing the implications of legalization and need to better understand the policy issues associated with youth, drug treatment services and other public and private sector costs and considerations. Simply, it would be irresponsible to begin siphoning off revenues to programs and services unrelated to the initiative and the public’s expectations. Moreover, local governments are clamoring for a share of state government’s portion, a debate that will surface again in Olympia in 2015, and that could reduce further the resources if done for expediency and political considerations rather than evidence-based policy reasons.
The medical marijuana market, which remains totally unregulated, continues to be an important factor impacting I-502 revenues. It remains to be seen how the state revenue will unfold given the strong medical interests that have gained market strength and that consider medical and recreational marijuana as two almost unrelated markets rather than one broad market.
The legalization of recreational marijuana usage for adults is a historic policy experiment with global market implications that warrants public support but cautious government implementation. In order to ensure the responsible rollout of the product in a fashion aligned with the will of the people, state government has a public responsibility to spend the money as the public intended in a slow, cautious and measured way. The dollars are few but the symbolism and policy implications are large.
One day the revenues from the legalization from marijuana may exceed expectations and serve broader public purposes. Other states and nations are certainly watching our little corner of the nation for clues. For now, we here in Washington–and other states–should proceed with thoughtful caution and ensure that the first dollars are protected from political raiding and are used strictly for marijuana-related costs, drug impacted policies and health care services.
Your partner in service,
The state Supreme Court’s ruling holding the state in contempt for making insufficient progress toward the constitutional directive to adequately fund public education is historic. That ruling is a reflection of more than our Legislature’s political will. It is a reflection of whether we have the courage as a representative institution of government to tackle the most difficult, structural policy issues facing our state together and put conscience and constituents above politics.
In the context of our state’s political subculture, it is hard and difficult work. In the context of world affairs, people display great moral courage everyday. And we can, too.
The profound challenge facing the 2015 Legislature is to force into the open an elevated dialogue, study and discourse about education, taxes and budgets that goes beyond simplistic rhetoric of tax increases or draconian budget cuts. It is to resist political elbows against traditional adversaries and appeal to our higher nature as colleagues, friends and loyal policy opponents.
The Court reminds us that we are left with little choice but to work together across political philosophies and outside of traditional frameworks. As Democrats and Republicans, urban and rural, we are left with few options other than to exhibit the type of historic leadership as part-time citizen legislators that rarely occurs, is rarely demanded by a state and is thus rarely seen.
A grand education and funding bargain—recognizing a balance of evidence-based outcomes for education and sufficient resources to accomplish the job– is indeed possible. Today, Washington is in the bottom third of states in the level of education funding at approximately $9,800 per pupil. Funding McCleary at $1,800 more per pupil would bring the state to slightly under ‘average’ at approximately $11,600. (A good description of the legislation underlying the McCleary case is presented by Rep. Ross Hunter here).
I was, therefore, particularly disappointed in the Washington Policy Center’s immediate response to the Court’s ruling. The right-learning think tank, which I frequently utilize along with left-leaning policy think tanks for research support, instantly slid into a frenzied, almost frothy attack on ‘billions in tax increases‘ without context, depth or acknowledgement of the systemic and legal issues facing our state.
Just as we need bold leadership from legislators to meet this unprecedented challenge, we need stakeholders, advocates and interest groups to raise their game as well.
A more dignified and mature approach outside of party or ideology is represented by the measured, thoughtful response to crisis often exhibited by former Gov. Dan Evans during the years of serious social disequilibrium in which he served as our only three-term governor. The Seattle Times’ editorial review of the historic ruling also showed thoughtful reflection.
We need more funding for education and we must ensure that those dollars achieve meaningful improvements in outcomes for our one million school students. Simultaneously, we must acknowledge that even the best-educated child will struggle to succeed in a crumbling community. We need a “kids and community” budget not one that that pits schools against the wide range of community services and supports needed to enhance quality of life for our seven million residents.
For some Democrats, the challenge will be to move outside of the comfort zone when it comes to spending and how the dollars flow. For some Republicans, the challenge will be to move outside of the comfort zone when it comes to taxes and how the dollars flow. For the media, the challenge will be to take the time and energy to elevate the dialogue to educate the public and not merely appeal to the base instinct of public discourse. For some stakeholders, lobbyists and businesses, the challenge will be to see outside of the suffocating confines of self-interest.
As Justice Charles Johnson said in a comment from the bench during oral arguments, perhaps it is time to examine big ideas such as setting expiration dates for tax preferences, funding public education, and welcoming the Legislature to re-pass any tax incentives it chooses once the ‘paramount duty’ has been met.
This is, in effect, an idea many of us have championed with great resolve. It is not the panacea to reforming our state’s problematic tax code, but it is a step towards greater fairness and simplicity. If ever there was a substantive policy case to be made for hitting the ‘refresh’ button on our broader tax code, the Court has done so now.
We have approximately 650 tax exemptions, preferential rates and credits on the books in Washington. Many work well–either to reduce externalities or unintended consequences of our tax code–and can be easily and justifiable supported, but others are merely special interest carve-outs that would struggle to justify their continued existence if forced to prove their financial return on investment to taxpayers.
Today, the identification of who receives a tax incentive and the financial value of that incentive is public information in only 19 of 650 cases. In a state with a fierce attachment to transparency and public disclose of campaign cash and lobbying activities, doesn’t the public deserve better? How can a person or organization–government, think tank, elected official– make bold and dramatic claims of return on investment efficacy without knowing the truth of who receives how much benefit from tax preferences, or the contextual data of how much taxes are actually paid in such situations?
Preferential tax treatment decisions benefit nonprofits, local governments, hospitals, travel agents, agriculture, timber, technology, aerospace, out-of-state shoppers, oil companies and of course consumers and so many others. The complexity of tax policy calls on us to reexamine established assumptions, not to target any single category, company or group but to more fully and accurately understand the financial implications for our state of those past decisions.
In 2012, then-Rep. Glenn Anderson (R-Fall City) and I introduced sweeping legislation to place a rotating expiration date on nearly all tax preferences, incentives and credits over the course of ten years. The legislation played an important incremental role, I believe, in elevating the dialogue about our state’s addiction to tax incentives and set in a motion the Legislature’s embrace of a more rigorous financial and analytical review by legislators themselves. The bill helped frame a more substantive discussion of tax preferences in newspapers from Walla Walla to Seattle. It led directly to legislation I crafted with Sen. Rodney Tom (D-Medina) of incremental steps of transparency into tax preferences and set expiration dates and accountability measures of performance.
Closing tax preferences and incentives is not a magic or simplistic answer and any policy examination demands compelling data and policy rigor. But it is, if nothing else, at least intellectually honest to open the books for a public dialogue to see with the gift of new eyes the political choices we have made over the past few decades. It is those choices, most often made without public access to vital tax data, which have left us with a tax code riddled with questionable deals and special treatment. In some ways, until the Court’s ruling, the true weight and cost of those decisions–the opportunity cost of the expenditure of dollars for tax preferences rather than education–has not truly been felt by legislators and interest groups.
Now, opening the door to an honest and transparent public discussion about the financial decisions behind our state’s 650 tax exemptions, incentives and preferential benefits is a measured, responsible step forward.
We can carefully, responsibly establish expiration dates for a majority of the existing tax incentives without pretending it is a political assault upon the foundations of our economy or assuming a stealth strategy to categorically or blindly terminate them.
We as legislators have failed to demand the same level of financial, analytical and intellectual rigor for our tax policy decisions that we expect of our budget and spending decisions.
Harry Truman’s personal humility gave him the courageous honesty to give ‘em hell and do what he believed was right for our nation. Perhaps today’s state legislators, in the corner of our nation, have a sense deeper than traditional politics that this is our time for leadership.
Your partner in service,
The rain tickled my bedroom window, prodding my eyes open hours before the alarm, and I found myself looking out over the city made famous by software, coffee, e-commerce and airplanes. At a moment of ultimate, quiet solitude, looking from my bedroom window at the iconic Space Needle, Mt. Rainier and Elliot Bay, I was somehow pulled outside of my comfort zone as a husband, father, entrepreneur and citizen legislator blessed with good fortune. My shoulders arched and tightened as I thought again of the unknown fate of 276 girls in Nigeria kidnapped by radical Islamists to serve as child brides. I checked the hashtag #returnourgirls and wondered why the social order seems so chaotic and vicious and random.
One day earlier in the Spring the hashtag grabbed me by the throat–mostly as a father of three girls and one boy–and pulled me to consume everything I could find as I hungered to track of the plight of the Nigerian girls.
Somehow, the juxtaposition between my blessed childrens’ safe, pleasant and decidedly traditional life in Seattle and the global darkness of child prostitution, human trafficking and forced marriage physically jarred me awake that morning. I stood silently at the window, and thought of my children’s lives. As I hover as a parent to my own children, I am consumed with concern of those young innocent girls trapped in the desert, so unlike my eldest daughter’s powerful summer of spiritual discovery spent hiking in the desert in Israel, camping under the stars, learning the reality of the grown up cliché that less is truly more.
My children’s family and friends, courses in school, religious school volunteerism, community service and track and field define how they spend their time, but I pray they discover the DNA of their soul, the spirit of their passions, the heart of their convictions—the intangibles of this life—and they learn to listen to the small, still voices within them. That voice calls on them to explore, unleash and connect to lifelong learning and education and discover what they cannot yet see.
I know there is a girl in Nigeria listening to her small, still voice at this very moment in the darkness of despair. Across the world, across silent time and place, holding on with the tips of her fingernails to the dignified idea that she matters. Maybe together, somehow, she and my own daughters and son can unleash a world where equality is more than a song.
She lives in us.
Your partner in service,
Amgen recently jolted the Seattle community with a stunning, unexpected announcement that they are pulling out of Washington State and terminating employment for the remaining 660 employees as part of a downsizing of 2,900 employees or 15% reduction nationally.
My first reaction to the news was pure sympathy for the employees and their families. During a bike ride this weekend in my Queen Anne neighborhood, I quietly looked over Amgen’s stunning research and development facility–a beacon of global biomedical quality–and reflected upon the social contract between the company and taxpayers of our city, state and country and my role as chair of the Finance Committee. And my disappointment turned to frustration, a sentiment that USA Today picked up in their story.
Immunex, an anchor of Seattle’s biotechnology and biomedical community since it’s founding in 1981, was acquired by a main industry rival Amgen in 2001. At the time of the deal worth approximately $16 billion in stock, Immunex had 1,500 employees, a number that was paired down to approximately 750 for the past decade. In addition to the direct employees, Immunex and Amgen generated substantial economic, social, financial and community value as an important part of our state’s civic life–and much good will. Amgen’s political relationships have been stellar and successful, their support for innovative community programs such as AmeriCorp’s City Year have been impressive, and their employees have made our city a better place to live.*
Despite a well established trend in big pharma (Pfizer, Sanofi, Novartis, etc.) that shows companies pulling back from R&D and retreating to primary research hubs, social and traditional media–including the Seattle Times’ normally more critically insightful, intellectually curious Jon Talton–soon raised the question of whether state tax policy played a role in the company’s decision to leave Washington, casually alluding to an operating assumption that the state didn’t do enough to lower the tax burden on the company.
My personal and professional mission as Finance chair is to institutionalize a more rigorous level of analytical, financial and intellectual analysis of our state tax policy to match what we expect of state spending policies.
So let’s go beyond the headlines into the Amgen story and examine it’s relationship with state tax policy.
It’s not public information how much Amgen pays in various Washington taxes, although I seem to recall the company says in its SEC filing it pays approximately 9% effective tax rate in total state taxes. I continue to believe that such information should be transparent at the individual state level for publicly-traded companies which inarguably release much more specific confidential data as part of their SEC filings.
What is public, however, is that the company has since 2004 been the third largest recipient of the high technology sales tax deferral program, a tax credit I have argued should be targeted primarily at small and early stage companies. For early stage and small companies, a modest tax reduction can have a major impact given that we tax on GROSS receipts not net profits and the dollars are usually directly invested in more engineers, scientists and researchers.
The company’s average benefit from the state tax benefit is $3.6 million per year, for a total of $28.5 million between 2004 and 2011. In 2013 the global earnings for Amgen were $18.7 billion, a 8% increase from 2012. The stock is trading at an all time high as the USA Today story duly noted.
Did the $3.6 million annual tax benefit play a role in the company’s business decision to leave Washington?
Don’t kid yourself.
The company told me that Washington state tax policy in no way played any measurable role in this sweeping national business decision.
And, of course, on the surface it’s patently ridiculous to consider that $3.6 million state tax benefit against revenues of $18.7 billion means anything substantial when you consider that: 1) Washington is strictly a R&D facility, so revenues are naturally likely assigned, as with virtually all pharmaceutical companies, out of state or even the country and 2) Colorado has a generous high technology tax credit and yet the company closed their entire operations in that state, too.
It’s important to note that corporate taxes are paid in B&O, property, sales and excise taxes and each company is different. The list of companies claiming this benefit includes many well known Washington State firms. The program is slated to end January of 2015 since it was not renewed by the Legislature. For three years I actively led discussions to renew the R&D tax program for small, early stage companies–those for example where $30,000 tax reduction could help pay for another researcher– while asking large-scale global firms to contribute those tax dollars to higher education and the University of Washington to help produce more electrical, mechanical and industrial engineers. Those negotiations fell apart although efforts are underway to rejuvenate aspects of the program.
Sometimes state tax policy plays a large role in business decisions and sometimes it’s completely irrelevant or secondary at best. But it’s too easy for pundits, lobbyists and elected officials to jump to unsubstantiated conclusions that the most important way to successfully recruit and retain great companies to the state is to lower or eliminate taxes when the data doesn’t support that position.
It’s a tired, shallow argument that doesn’t stand up to analytical rigor, and it’s not based on data or reality.
The relationship between Amgen and Washington has been mutually beneficial and compelling. The people and company will be sorely missed. The Immunex and Amgen journey has been a testament to our city’s creative energy and spirit in the biotechnology and biomedical space, and our future is just as strong as before, but a little sadder with this loss.
The taxpayers of Washington directly subsidized Amgen’s R&D operations in the state through a minimum of the $28 million state tax exemption program and the city’s contribution of $19 million in public infrastructure.
If it was a larger subsidy would they have stayed? If it was smaller would they have left the state earlier than 2014? Did it contribute to an intangible, positive business climate that made a difference? How can we know if we’re not in the private executive offices of the company? We can’t and, not surprisingly, the state tax program had no meaningful metrics or analytics from which to judge success of creating jobs.
That’s why we should openly acknowledge that while small companies are often disproportionately impacted by tax policy, large multinational companies are rarely impacted by state tax policy in ways that drive their major national and global business decisions.
Arguing against this case is the Boeing story which, of course, can be debated at length and state tax policy may have indeed been a central criteria to their siting decision. In that case, nearly everyone blinked and wasn’t willing to take the risk of losing the 777x, 130,000 aerospace jobs and descendent airplanes to test the notion.
What should we do? Let’s stop pretending that state tax exemptions and benefits are central drivers of a vast majority of large-scale global business decisions–or at least let’s require disclosure of the data that would make the case.
Let’s focus our policy efforts at the state level on ensuring Washington has a world-class education system from early learning through higher education, quality public infrastructure and quality of life that attracts and retains the best and brightest entrepreneurs and citizens.
And for what it’s worth, there is also an opportunity cost to the financial cost of tax exemptions. For $3.6 million a year we could have paid for each foster youth that graduates high school annually to attend the University of Washington.
Your partner in service,
* I have received multiple campaign contributions from Amgen, served as a citizen co-founder of City Year, and am a shareholder in the company.
Today’s massive layoffs at Amgen are devastating news for the 660 people who work at the Amgen facility in the Interbay area near lower Queen Anne, the 660 individuals across Washington State, and the 2,400 – 2,900 employees nationwide. I offer my deepest sympathies to them and their families as these impending impacts ripple through personal finances and tightly-knit communities. You are in our hearts during this difficult time.
Amgen has been an extraordinary community partner and was an honorable successor to the Immunex story of innovation. I’m deeply saddened by the business cycle challenges the company is currently facing, a tough reality facing many in the sector as various drug innovations rise and fall with the market and health impacts. Their presence in the heart of Seattle will be profoundly missed, and we all hope the Amgen story can one day soon continue in our state.
Behind every headline of layoffs are real people living real lives. Today’s announcement is not about tax policy, infrastructure of education, it is about the painful decisions that are tied to the business realities facing the company. Neighbors, children, schools, parks and communities are all impacted. We offer our hopes that the Amgen family can rebuild, and that the individual families impacted can move forward in positive ways to build not only the biotech and biomedical community in Seattle, but to continue their powerful work to transform lives for patients across the globe.
Your partner in service,
The sheer irony of today’s oil train derailment under the Magnolia Bridge–in the heart of Seattle– at the very moment a major study is being released blocks away outlining the severe economic, transportation and infrastructure costs to the life of our state is stunning.
I doubt Jon Stewart and Stephen Colbert could dream up a more jolting juxtaposition than today’s events.
The Puget Sound Regional Council released an independent, rigorous, detailed study today analyzing the impacts of the proposed coal exports. If these sweeping proposals are enacted over the objections of millions of our citizens, Washington State is poised to become the number one exporter of coal and oil in the nation. This valuable data directly shows that the economic benefits of the proposals are pennies on the dollar compared to the shockingly expensive costs. The modest, short term benefits are highly concentrated in rural areas of Whatcom County while the costs are trapped in virtually every community from Spokane to the Columbia River to Clark County up through the I-5 Corridor of Thurston, Pierce, King and Snohomish counties.
This report is an important piece of a much-needed apples-to-apples comparison of the net benefits versus the total statewide costs. Twenty three legislators signed a letter to the governor asking for this type of analysis, so we are grateful for PSRC’s leadership to conduct the work directly. For instance, will the increased economic activity outweigh the gate downtimes at crossings, which will increase by an overage of 65% by 2035, some as long as an 1 hour and 45 minutes? To make a truly informed, responsible decisions, we must weigh the total benefits of these projects with the statewide costs.
Thankfully our community was spared any catastrophic consequences during today’s derailment, as no one oil was spilled nor was anyone injured. But this accident is a profoundly important symbolic representation of the reality before us and the need for diligence in moving forward safely.
One of the most important lessons for our state is that we must pass comprehensive safety legislation, The Oil Transportation Safety Act, HB 2347, to responsibly manage the increased threat of oil spills in our backyards.
Oil and coal exports are a 19th Century idea in a 21st Century global community.
We are better than this as a community and as a state. I am personally and professionally committed to continuing to partner with King County Executive Dow Constantine, Mayor Ed Murray and my legislative colleagues and others on this important issue.
Your partner in service,