This is Carlyle’s speech at the ‘power past coal’ rally along the Seattle waterfront. Special thanks to the Sierra Club for organizing.

Washington is on the march toward being a low tax, low service state

Today I am releasing the annual survey and analysis of how state taxes flow into and out of state government each year.

The analysis of the original data, ably conducted at my request by the Office of Financial Management (OFM), provides open transparency into where tax dollars are collected and spent in Washington’s 39 counties for the 2011 calendar year. A previous analysis released with former Rep. Glenn Anderson (R-5th District) was based on 2008 data, and generated considerable attention.

I sincerely and genuinely offer no value judgement in releasing this data: My goal is not for counties to casually boast or feel shame about their tax status, but to open the door to a courageously honest public conversation about how state government collects and spends billions of public tax dollars. This data is relevant and material to a more accurate understanding of how taxes flow because it directly counters some widely held, outdated stereotypes and clichés. And I respectfully suggest the lack of acknowledgment of this data impacts tax policy in Olympia in counterproductive and disproportionately negative ways.

Of Washington’s 39 counties, only 9 contribute more to state coffers than they receive back in benefits. Even then, only 3 (San Juan, Garfield, and King) receive $0.65 or less for every dollar they pay to the state. The other 6 are closer to the edge, receiving $0.90 for each dollar paid. On the other end of the spectrum, 13 counties receive $1.50 or more for each dollar taxed, and 3 (Stevens, Ferry, and Yakima) receive more than $2 for every $1 paid in state taxes.

Overall, according to the U.S. Census Bureau, Washington ranks 36th in the nation in the overall obligation of state and local taxes, at 9.3% of personal income, the lowest levels in decades. Related national data from the conservative-leaning but respected Tax Foundation shows that Washington State is the 13th largest ‘net contributor’ of taxes to the federal government, receiving just $0.88 for each federal tax dollar paid by residents. This comes in spite of a large military presence in the state, Hanford as well as the University of Washington which receives among the largest federal research grant levels in the country.

The state level data is important because some legislators may have distorted or factually inaccurate views of their local tax obligation or burden relative to other taxpayers statewide that impacts their public policy positions regarding taxes.

It is relevant because the current model is politically unsustainable.

The raw, aggregate level of money flowing into and out of counties may help dispel such misconceptions. King County, for example under one model, has an annual state tax contribution to state government of $5.9 billion but just $3.9 billion is reinvested back into the county. The rest, about $2 billion, is distributed for services to communities across the state that have smaller tax bases.

We are one state with one future, but we are on the march toward being a low tax, low service, low quality of life state and unless we understand the importance of investing in everyone’s education and our state’s public infrastructure we will continue to slip in the quality of our schools, parks, community services, transportation and public safety.

There is an argument that we are being forced by anti-tax legislators into an era of ‘local option’ for taxes, and yet this short sighted approach actually hurts a bolder 21st Century strategy of building a strong statewide economy. The people of my own 36th Legislative District and the City of Seattle are net contributors of taxes in every single category of public spending, and yet our busses are full and our schools lack infrastructure. Does that make us better than others or merely fools? Absolutely no to both, but it is insulting and patronizing that legislators from other areas make it next to impossible for us to at least have the freedom to vote–through our local elected officials or even directly–on additional local option taxes that are important to our community.

Being a ‘net contributor’ county should merely gain us sufficient respect, courtesy or deference to local democracy as to be able to allow our own local governments to make independent decisions relative to the services our citizens need that state government cannot or does not provide. And, perhaps, it could engender a bit more gracious rhetoric from those who play into inaccurate and counterproductive negative stereotypes about rural communities subsidizing city life.

There are those who criticize my efforts to bring transparency into the flow of taxes and, to an extent I understand the discomfort. Yet the lack of dialogue in this area contributes to a framework by which legislators who call for reduced taxes overall are simultaneously demanding additional spending for their own areas.

It is counter productive and inequitable for a legislator from an Eastern Washington county that has among the most disproportionate benefit from King County taxes–by way of Olympia–to figuratively wield more effective authority over the quality of bus service in my legislative district than the King County executive elected by the 1.8 million people of the county to run Metro.

Of course at a broader systemic level, taxes and spending should have a link with authentic needs, ability to pay and an evidence-based drive to build up our overall quality of life. The politicization of taxes and spending has, in my view, been driven by those who expect disproportionate benefits while simultaneously demanding overall reduced spending.

I am not politicizing the flow of taxes and spending merely by making the data public and calling for a dialogue.

Those who demand incremental spending in Olympia that disproportionately benefits their own communities while simultaneously leading the charge against broader state government spending are failing the test of common sense.

No one likes taxes, and no one wants to feel that they are paying disproportionately more than others, but the blind retreat into anti-tax sentiment is forcing a policy direction toward a low tax, low service, low quality of life state. We should have this dialogue in the open so that we understand the profound structural implications of disinvesting in education and other important services statewide. We owe it the people of Washington not just to appeal to the lowest common denominator of politics, but to a higher purpose of our children’s children who will not see the quality of life that we treasure in Washington unless we rethink our direction.

It is philosophically inconsistent or, less generously, hypocritical for some key legislators from counties that are among the highest ‘net recipient’ counties in the state to specifically block efforts for major urban counties to add additional ‘local option’ funding for transit services to meet local needs while those same legislators’ constituents enjoy wildly disproportionate benefit from primarily King, Snohomish and Pierce County taxpayers.

We are better than this as a state and we need to engage in a more thoughtful approach to our state’s future to lift us all up.

I know that it is uncomfortable in our state’s gentle political discourse to raise difficult issues that highlight the irony of anti-tax legislators, but our current path is simply unsustainable in the long run.

If, for example, legislation was introduced and adopted to require tax dollars collected in a county to be reinvested in those same communities our state would implode politically and economically. The same idea at the national level would be seen as an assault on the American way of life. But isn’t that, in a figurative sense, rather what is happening today in reverse?

It’s easy for some to righteously demand no new taxes budgets when their constituents enjoy disproportionate benefits from the status quo of how taxes and spending actually flow.

It’s anti-tax, anti-government, anti-public services fantasy living in a pro-tax, pro-government, pro-spending reality.

We are so much more than what we’ve become.

We can do better.

Your partner in service,

Reuven.

In five years I have worked hard to maintain this blog with updated, relevant and meaningful policy discussions. In the past month I have failed to live up to my own expectations by failing to post frequently. The reason, as you might surmise, is my role as chair of the Finance Committee and the hard work of crafting a 2013-2015 biennial budget and revenues needed to fund it.

As a backbencher I had plenty of time to blog. As a chair of a major fiscal committee I find myself particularly slammed and adjusting to the reality of balancing day to day work during the session with my passionate desire to blog frequently. During weekends and late nights when home in Seattle I’ve also redoubled my efforts to be fully present in my kids’ lives instead of sitting at the computer.

Still, as the regular session concludes, I do promise a number of new and relevant posts outlining major inside and outside Olympia issues, ideas and challenges. And I promise to ‘tell the real story’ of what worked, what didn’t and why.

Thanks for your understanding and, once again, please accept my apologies.

Your partner in service,

Reuven.

PS: As a brief side note, I was quoted in The Economist magazine this week in an article about the coal export plans.

A dialogue about tax exemptions

Two thirds of American adults are overweight and, if current trends continue, by 2030 nearly half of American adults could be defined as obese, according to a special report in Economist Magazine (Dec. 15, 2012). The trends here in Washington are in no way immune from this crisis, and our state’s lack of attention and action to this ‘systemic’ issue is one of the great public policy failures of our time.

Nationally 20.6% of the cost of health care is directly related to obesity, according to the Atlanticñ.

While a vast majority of us have a visceral opposition to state (or federal government) nanny state oversight of our weight, it is time to acknowledge that the externalities associated with obesity are central drivers of the unrelenting, unmitigated march of increases in our state health care costs. The cost in health care for public employees, Medicaid recipients and other taxpayer supported services is corroding our financial integrity. As the gray tsunami hits, the cost to taxpayers is on a one-way march upward. Obesity is like a systemic cancer assaulting our nation’s health and taxpayer’s wallets.

As the chair of the Finance Committee, I have been working with colleagues to identify some of the economic efficiency issues associated with externalities. That is, of course, a fancy way to say economic impacts of policies. Externalities around tax policy (which tax exemptions work and which don’t and why), spending policy (can we together tackle the base of spending and not merely look at the edges of new programs) and the need for an intellectually rigorous approach to transparently targeting real cost drivers.

As we move forward in raising the issue of externalities in our budget and tax policies, many of us cannot help but also raise some of the largest and most financially oppressive externalities facing state taxpayers even though it’s overwhelming in scale. And even though no one wants to touch the issue with a ten foot pole. One of the externalities most immune to exposure is the impact of obesity on health care costs.

It is well known that health care costs for public employees, Medicaid and other users of publicly-funded health care systems are impacting our financial health. It is the viscously unrelenting driver of many of our state budget challenges. Obesity is a major culprit but one that has almost no meaningful workplan associated with it. And we know it is so much more than a financial issue in our state government, of course, it is a moral issues, a physical issue and a mental health issue.

But it is also uncomfortable to address from a public policy perspective because it requires us to challenge ourselves as individuals to make real and lasting changes in our lives. (Another example, if needed, is the fact that 46% percent of the entire health care dollar is spent in the last six months of life, according to the AMA.)

The Affordable Care Act is, at its core, insurance reform more than health reform. It is an important step forward and Washington is a national leader in implementing the plan. While we face major technical challenges to implementation by October 2013, a date I do not necessarily believe is logistically realistic due to the size and scale of the IT system integration challenges, we must nonetheless begin planning for the next step. But the Health Exchange is working hard to identify the real issues and openly address the operational concerns.

But perhaps the lack of differentiation across categories of health is the bigger issue, the real issue that remains silent. Perhaps we may one day soon be forced to examine, in a more expansive fashion, obesity as one of the central drivers of health.

Our state should do more than implement the Obama Administration program, we should lead the experiment in innovation. Despite our well regarded program ‘Apple Health’ to provide care for children, for example, we choose not to include actionable plans around obesity in children.

Increasing exercise is naturally tough to regulate, but increasing walkable, dense cities is part of a strategic approach to intelligent urban planning. Reducing sugar, salt and other ingredients in foods, albeit attempts at school lunches continue, is unrealistic at a broad level without community ownership of the work itself. Labeling requirements help to a degree but research suggests only modestly so.

New York Mayor Michael Bloomberg floated the idea of a prohibition on super sized soda pop. He was uncharacteristically unsuccessful. He is often mocked for the effort. I applaud it. I suggest it has been unsuccessful because it is too limited in scope. Go big or go home is probably the only way forward.

Denmark experimented for only a year with a sugar tax before acknowledging that citizens merely went on sugar-buying binges elsewhere.

Outside of taxes on inputs of unhealthy food, the Economist report finds that a ‘crudely designed penalty will do little to change behavior. What works best is frequent prompts, not once-a-year punishment. And strict penalties assume that obesity is due to a lack of willpower, when research suggests it has as much to do with biology and socio-economic conditions.”

We all know that we cannot send a top down policy from Olympia that will effectively and responsibly change behavior—without a clumsy, nanny state overdrive–when governments worldwide have attempted and failed at the same objective.

I know of few ideas that are as economically efficient and responsible as straight financial implications for personal behavior. We need, in my view, to ensure that people are faced with the implications of the cost of publicly-supported health care in their wallet. I do not seek to unfairly punish people for being overweight or low income, merely to ensure that taxpayers reduce the subsidy for a physical life style choice so that overweight citizens realize some of the true financial implications of the issue.

Each year in Olympia there is pressure from certain circles to increase the percentage of health care insurance premium costs that state employees pay. If that does occur this year or in future years, perhaps it’s time for experimentation with a tiered system of different rates that take into consideration the weight of the beneficiary.

To those on Medicaid, it is easy to argue that making health care more expensive is exactly the wrong direction. But surely there is a way to help people own the hard work of weight reduction through a redirection of resources that they pay?

Does this mean to punish those overweight disproportionately? No. It means to courageously surface the externality of cost that we face due to obesity’s ruthless impact on our health care costs.

I am at a loss for answers and find myself distressed at the deafening silence on obesity despite its role as a major cost driver. But I do know that we as a state and nation will continue to struggle to pay more than any other nation and realize a lower quality of health until we find a more aggressive willingness to sunlight the externalities of costs of obesity.

Your ideas and thoughts would be most welcome. This is a tough one.

Your partner in service,

Reuven.

In the interest of good relations between the legislative and executive branches of our state government, I’ve attempted to give the outgoing Gregoire Administration and the incoming Inslee Administration some breathing room before resuming my public discussion of many of the serious systemic issues raised by our state’s weak IT oversight and other important operational challenges. I have, as you can imagine, continued my battles internally and quietly with varying degrees of success but I’ve tried to be a bit less vocal as the new governor has settled in.

As chair of the House Finance Committee I spend my time on large scale issues of budget, taxes, financial strategy and fiscal legislation. Occasionally, however, I am forcefully reminded why my frustration level regarding IT spending, executive agency operations and other issues rarely wanes.

And sometimes the public needs visibility into the inner workings of the inside game.

This summer and fall I worked with foster youth advocates to design legislation for 2013 to better connect schools, Children’s Administration, Office of Superintendent of Public Instruction (OSPI) and outside service and advocacy organizations such as Treehouse, Mockingbird Society, College Success Foundation and others to help more foster youth graduate high school. I approached the Children’s Administration for help early on by sending a first working draft of the bill to senior agency officials, but they choose not to engage or respond substantively to my proactive outreach. As the session progressed, I waited for a response to House Bill 1566.

Recently a ‘fiscal note’–a document prepared by agencies and the Office of Financial Management–reported a need for $150,000 to upgrade the Children’s Administration’s computer system in order to implement the legislation I drafted tracking and supporting the educational outcomes of foster youth.

As you can imagine, I looked closer.

The agency effectively uploads the data from excel, meaning that they are asking for $150,000 to make adjustments to the state system consisting of uploads of three to five additional columns of data. How is it even possible for a modest amount of incremental data from an excel spreadsheet uploaded to the state’s computer system to cost government $150,000? The answer, of course, is that it doesn’t, but the agencies are used to the IT portion of fiscal notes being approved without much technical rigor so its a good bucket to throw random costs in.

The Legislature is not required to fund every request in a fiscal note but it makes it more difficult to secure political support when your proposed legislation carries the perception of a large price tag.

And here our troubles began.

Another section of the bill–requiring schools to proactively meet with foster youth in an effort to more aggressively avoid drop outs (our current high school graduation rate is 46% for foster youth, up from 32% in 2003 but still far below the 76% graduation rate of traditional students)–was a total and complete disaster.

OSPI and OFM apparently decided that improved educational support (there are none today so improved is a generous term) for foster youth services is so new, untested and radical that my little bill should pay the entire cost of the existing institutional infrastructure of support services in schools and within the agency, so they wrote a fiscal note for the state’s 6,434 foster youth in school that sent an unmistakable message.

Here’s the actual language from the fiscal note: “Assuming “proactively support” means meeting with a dependent student weekly to assure the student doesn’t fall behind, and asssuming each meeting takes one-hour; the cost per student per year for meetings with one certificated staff would be approximately $2,700 (36 meetings * $76/hr = $2,733). There were 6,434 dependent students enrolled in public K-12 schools in 2011-12.”

I’ll do the math for you: $17,584,122. All for the adults. Not a penny for the kids in foster care.

According to OSPI, $17.5 million in new costs to local school districts to attempt to motivate our educational system and Children’s Administration to focus on improving the 46% high school graduation rate of foster youth. But the story behind the story is that the Gregoire Children’s Administration leadership opposed my policy vision that they should have a formal role in ensuring their kids graduate from high school. Their job, they argued, is health and safety not education.

Still, Democrat or Republican, urban or rural, government critic or defender, it’s hard not to shake your head in resentment at an institutional infrastructure of government that wants to get paid $17.5 million incremental dollars to do their day job. There are about 450 foster youth who age out of the system each year, so the actual number of students that need hands-on wrap around services is substantially smaller than the entire base of students in out-of-home care statewide.

Eventually the agencies redrafted the fiscal note partially downward, but I barely had time to get the bill out of the Appropriations Committee before a critical deadline due to the confusion it caused and the legitimate angst of fellow legislators wondering what I had hidden in the bill.

No matter how powerful, respected or influential you are as a legislator or a governor, when you promote new policies that the system doesn’t support, it has a way of sending signals respectfully suggesting you get back in line. I wonder how long it’s going to take Governor Inslee to discover this little secret.

For foster youth, no good deed seems to go unpunished.

We are so much more than what we’ve become.

Your partner in service,

Reuven.

In nearly every case I have literally asked the proponents to come back with a business plan–rather than a verbal pitch, memo or bill draft–to make the case for their request. Some of the meetings have gone well and some have been incredibly uncomfortable, as veterans of Olympia seem perplexed as to what a business case actually looks like. To date, my request for business plans has been met with blank stares by most but not all.

I suspect it would be helpful to outline in specific detail exactly what I mean. It is my goal that any tax preference, credit or preferential rate legislation that moves through the Finance Committee must now literally not just figuratively have five key elements to the policy: Transparency, intent, metrics, expiration date and accountability.

TRANSPARENCY

One of the reasons the High Tech R&D Tax Credit has received so much attention is that we have accurate data about which companies receive how much in reduced taxes from the credit. In 2012 I sponsored legislation to reform the tax credit given to high tech companies in order to direct most of the resources into higher education and I publicly released the list of beneficiaries. While it had been available before no one had widely distributed the list. You can read about my proposal in the Seattle Times here, here and on my blog here.

I believe if a company or organization wants the financial benefits of a tax policy they should–in a vast majority of cases– be willing to openly share the vital data so that it is easily accessible to the public for review, study and assessment. It seems obvious but folks might be surprised at the complaints about filling out the paperwork. Without reports and surveys the Department of Revenue, legislators and the public are unable to measure results. It’s a deal breaker.

INTENT

The top criticism of the Joint Legislative and Audit Review Committee (JLARC)–the group we task with measuring efficacy of tax exemptions–of the Legislature’s approach to our 640 tax exemptions is that we fail to adequately articulate the specific goals and objectives of a policy. Thus, nearly a third of exemptions can’t be easily assessed for effectiveness by performance auditors because the Legislature merely created the policy without a clear goal in mind (other, it would seem, than a desire to pass the bill). Instead of “create jobs” I suggest something a bit more measurable. The intent language must be aggressively clear, direct, understandable and simple. A made-up example: “The purpose of this tax credit is to provide additional resources to small, early-stage technology companies to help off-set the upfront personnel requirements of investing in research and development for the first 1-4 years before a company is profitable.”

METRICS

Here is where the rubber meets the road. Of the state’s 640 tax exemptions, credits and preferential rates the honest grade I would assign to the metrics and measurement of results is D- without grade inflation. It’s frustrating and, frankly, infuriating that we hold ourselves to such a low bar of quality assessments. There are sincere and genuine attempts but too often the lack of quality metrics is too difficult even to attempt–or the proponents push hard to avoid being held accountable. And so we don’t even try or too easily give up. We know that in four, five or 10 years, for example, when the tax exemption expires that JLARC will conduct a review. How do we want JLARC to measure the efficacy? What metrics would make a review successful? What data would help ensure a quality performance audit? These seem like simple and obvious questions but, to date, the legislative process has efficiently avoided committing to specific metrics of success or failure.

EXPIRATION DATE

In 2011 I introduced sweeping legislation to require an expiration date for the 251 tax exemptions that currently do not have one. I did not propose to change the date of any exemptions that have one already in statute (such as Boeing), only to require that all exemptions (with a few exceptions for food and prescription drugs) must be reviewed and reauthorized by the Legislature every 10 years. I am convinced this is a compelling public policy proposal and I believe it has merit, and my goal was to begin a serious dialogue about the core issue. Without an expiration date, a tax exemption exists in perpetuity and is literally untouched in terms of assessing whether it provides any value to taxpayers. Even if it clearly does not work. The Seattle Times editorial board has been, perhaps surprisingly, a supporter of this proposal and it generated considerable attention. The reaction from the business community was, however, fierce and borderline politically vicious. I stand by the core idea as a responsible approach to fiscal policy, and welcome a dialogue about how to embrace the idea in a thoughtful fashion.

ACCOUNTABILITY

An easy word to say but difficult to translate into reality if the Legislature is uninterested in making it happen. Accountability of a tax exemption can take a wide range of forms. Often a business interest, city or non profit makes a pitch for legislation based upon the promise of positive indirect financial returns to the public. But I have come to learn that the ‘risk’ of the deal is always–exclusively–held by taxpayers and not the other side. ‘Accountability’ means finding creative ways to reduce the risk profile of the tax exemption for the taxpayer and sharing the burden of the opportunity. For example, a bill might include an accountability provision by which an entity (public or private) needs to ‘match’ the value of the tax exemption by placing resources in escrow and if the goals are not met, the cost to state taxpayers is reimbursed. Another example of accountability is to ‘share the upside’ of the deal rather than asking taxpayers to assume the financial risk of reducing state resources while private interests and other parties such as cities and counties capture an incremental upside of the investment of resources.

In my view these five elements are key to a successful business plan. I am not opposed to tax exemptions and have supported many of them that can prove they work without reservation.

No business person would allow major, multi million decisions to be made without a strong business plan. We should expect no less from the public sector.

We are a consumption-driven sales tax and B&O tax state. It’s understandable that many interests want to be carved out of paying the full freight of sales and B&O rates (and property tax once in a while as well). But just because there is a negative economic externality on an industry because of our tax structure doesn’t mean it makes much financial sense for some taxpayers to get relief above others. Eventually everyone will be carved out.

What it really means is that we need thoughtful, responsible, balanced tax reform to broaden instead of narrow the base and keep everyone inside the tent. We’re all in this together.

Your partner in service

Reuven.

During the 2012 campaign I supported I-502, the marijuana initiative, as did a vast majority of constituents in the 36th Legislative District. It was not a difficult position to take given a widely held belief, evidenced by the vote tally, that it is time to legalize, regulate and tax marijuana in a responsible manner.

As chair of the Finance Committee charged with oversight of tax policy, I have been studying the fiscal implications of the initiative’s tax model in more depth. While I remain unequivocally, 110% committed to the spirit of the initiative, and believe it can be successful, I now believe the letter of the law in how I-502′s tax formula and rates are designed is disconcertingly flawed. Given that the Liquor Control Board (LCB) is aggressively moving forward toward implementing the initiative in the tight time frame required, Washington may be faced with a historic failure of taxation with international implications for drug policy.

Rep. Christopher Hurst, chair of the Government Accountability & Oversight Committee and lead on the implementation of the initiative for the House of Representatives, has advised caution in proceeding too aggressively without objectively assessing the regulatory and policy implications more thoroughly. We all seek to ensure state government does, in fact, responsibly design a regulatory and tax scheme that captures the promise of revenues from the legalization of marijuana. His counsel is not only warranted, in my view, it should be heeded.

Last year the Office of Financial Management (OFM) produced a formal fiscal analysis of I-502 when the initiative claimed a spot on the 2012 ballot. The state agency estimated that revenue from a structured taxation formula would reach $434 million by June 30, 2015. Given that no taxation scheme exists in the U.S. or abroad it’s hard to take OFM’s analysis to the bank, and it’s even more difficult to assign much criticism to attempts to predict at the time how the numbers would pan out.

As a frame of reference, state taxes in Washington from cigarettes in 2011 reached $432 million. The LCB and Department of Revenue have decades of experience in this market and established tax rules, regulations and procedures for tackling black markets and capturing the revenues from this product.

A central concern is that the initiative, generally seen as well written with thoughtful policy analysis and research behind the work, is still crafted with a wide range of complex policy objectives in mind that may have competing implications. For example, while collecting taxes is clearly a primary objective, an obvious secondary objective is to prevent large, out-of-state corporate interests from dominating the market. The annual application and license fees are ridiculously low and invite a robust secondary market. Simply, the tactical boundaries established in the initiative to achieve many of the secondary goals are, in my view, easy to outfox if the financial interests make it worthwhile. And they do.

Given Colorado’s experience with medical marijuana (reflected in dramatic oversupply and falling prices), and our own evolving thinking about how to integrate the approach to medical marijuana in a post I-502 environment, we should recognize that I-502′s fixed taxation levels make predictions of revenues wildly uncertain.

Setting tax rates in the initiative is unwise and inflexible. We should reconsider this approach and allow the LCB, in partnership with the state Department of Revenue, to have the flexibility to adjust tax rates in a more real-time fashion for the first few years in order to prevent under or overpricing the newly available product. Comments at various citizen meetings have loudly complained that the rates are too high and too low to prevent or respond to black markets. We don’t know yet. But we can be assured that without flexibility we are unlikely to adjust rapidly to vital market dynamics.

How we tax marijuana also has implications for who gets into the market. Tribes, which play a major role in cigarette policy, are prohibited under federal law, as I understand it, from participating in this market since marijuana remains a controlled substance. One assumes that is likely to be called into question.

Today, as the Liquor Control Board charges forwards in developing the rules of how marijuana regulation and taxation will be implemented under the strict guidelines of I-502, it’s difficult in my view to shake a growing sense that we are on a collision course for a failure to capture the revenue value of marijuana. At the same time that voters authorized the LCB to establish rules to implement I-502, they rescinded the LCB’s authority to manage the end-to-end liquor business, making it more essential than ever that legislators engage in this process before we ‘go live.’

It is now the job of the Legislature to ensure Washington designs a well structured regulatory and tax policy for marijuana. Of course we didn’t get the assignment until the people gave us a much needed push forward. The message was fortunately received loud and clear, but now we should do our part and take the time to construct the operational, technical and financial issues with a more sophisticated integration with our existing systems.

The initiative process worked. It pushed our state forward. It challenged the status quo and reaffirmed the powerful role of citizens as leaders and lawmakers. The Seattle Times Editorial Board, The Stranger and other media outlets certainly led the way to provide cover for politicians, but leaving the logistical and operational design of the entire system to media outlets, proponents, activists or others abdicates the Legislature’s long-term responsibility to integrate the taxation of marijuana into our liquor, cigarettes and related products that have public policy implications.

I suggest we pass legislation during the 2013 Legislative Session–a bill that would rightly require a 2/3 majority under our state constitution to adjust initiatives within the first two years of passage–to postpone the implementation time frame for up to one year. This would give the LCB, legislators and stakeholders sufficient time to create a system that is well regulated, sufficiently taxed and economically efficient and based solely on the broad public interest.

In this case, given the profound international implications to marijuana taxation, the spirit of the law is more important than the letter of the law and we should double down to get it right.

A perfect balance and partnership between direct and representative democracy–citizens and legislators–is exactly how it’s supposed to work.

Your partner in service,

Reuven.

In 2011 I sponsored the most sweeping reform of higher education finance in a generation. In exchange for a commitment by the universities to focus on outcomes around student access, affordability and quality, the Legislature granted universities local tuition setting authority.

The bill was a heavy lift necessitated in part by the state’s systematic disinvestment in higher education over the previous two decades. On a positive note it brought to the surface the failed policy of treating, funding and regulating our state’s six universities in virtually the exact same fashion despite their wide ranging differences. It was a shift away from one-size-fits-all to a policy of differentiation to recognize the unique roles and qualities of each of our six public universities. I’m proud of the bill and the work of the team of dedicated legislators (led by Higher Education Committee Chair Larry Seaquist), trustees and regents, students, administrators and others who made it happen.

Included in the bill was authorization to experiment with differential tuition internally within a university among programs. I believe flexibility to innovate and experiment is critical to change, and I believe in the systemic value of experimentation made possible by differential tuition. There is today a wide spread model of cross subsidization between various programs (for example liberal arts degrees subsidize higher cost STEM degrees). The bill was in large part striving to bring those types of subsidies to the surface rather than allow them to continue to be known only to the administrators working on internal accounting.

What I did not fully appreciate at the time of sponsoring this provision of the bill was the substantial risks that differential tuition poses to the stability of the GET program.

For two years the Legislature has studied the GET program’s solvency, stability and long-term prospects to ensure we are responsibly managing this important program. The recommendation of the working group is to phase the program out either through outright termination or a slow modification.

I strongly disagree with the desire to close the program because I don’t accept the premise that it is a crisis of debt.

Admittedly the popular college savings program where 120,000 accounts see the purchase of credits at today’s prices to guarantee funds for tuition and mandatory fees was a smoking hot deal for families as tuitions rose above the rate of inflation and greater than traditional stock market investments. The jump in tuition was driven by cuts from Olympia. Today it is less of an obvious deal for families since huge jumps in tuition have slowed but it is valuable as an insurance policy and a tool to continue investing over time.

In my view, GET as an insurance policy for families has value in and of itself.

It also allows a middle class family to communicate about college. Imagine a family discussion at the dinner table: “Honey, we have saved a little bit of money each month since you were little to help pay for college. We’re proud of you and now it’s time to talk about college.”

In full disclosure, there are some legislators who also oppose GET because it is seen as being accessed by families of above average financial means and is therefore seen as a subsidy of the ‘wrong’ kids. I reject this view based on the fact that there are not large numbers of families that purchase the entire amount up front. And I reject it philosophically.

Realistically the troubling financial risk to taxpayers to GET is, in fact, not the overall debt level (since there’s no chance all students will redeem their GET credits at same time) but rather the uncertainty and lack of stability associated with the prospect of differential tuition. It’s time for me to acknowledge that the policy I have championed is not a realistic tool given the implications for GET. Therefore, I propose a deal: Keep GET in exchange for rescinding differential tuition authority.

Washington’s GET program is ‘generous’ in that it guarantees that tuition and mandatory fees will be paid in tomorrow’s dollars. Is it such a crime to have a ‘generous’ deal that benefits 120,000 kids from the middle class so long as responsible steps are taken to minimize risks to taxpayers? Let’s make modest, responsible changes to GET–primarily eliminating the financial dangers associated with differential tuition–before taking the radical step of eliminating such a valuable college savings program.

And the political pressure is actually (perhaps counter intuitively) the only meaningful financial pressure on the Legislature to fully fund higher education after years of disinvestment. It’s not a secret: We can stop the tuition increases both by working more closely with universities AND by reinvesting in higher education in the operating budget.

The financial risks to taxpayers brought about by GET can be easily and carefully managed. The two key actions–eliminating differential tuition and funding higher education–are entirely within the Legislature’s grasp.

Your partner in service,

Reuven

DISCLOSURE: My family purchased GET credits for our children in 2009.

As I begin my third term as your state representative, I’ve been reflecting upon the inevitable maturation of my perspective about public issues and politics since first assuming office in 2009.

My view of the inside game has changed considerably on many levels. I have come to appreciate, more than ever, at a visceral, intellectual and political level that the public’s engagement and ownership of the hard work of real and lasting “systems” change is the central driver of successful progress. There is no inside game without an outside game. The Democratic Party, Republican Party and the institution of government itself cannot breathe without the forceful introduction of oxygen from the public.

As we approach the systems work of seeing the linkages of public policy, we need to focus more on outcomes and results than inputs and process. Easy to say but amazingly tough to convince the interests within government to accomplish. Really tough. When government acts and thinks like a monopoly, trouble follows. Healthy competition is not really about contracting or inside Olympia policy, it is about empowering the people who engage in the hard work of service to our state. We also need to empower our state employees to make more mistakes, not less, to question decisions not blindly follow them, to stay on the cutting edge of their categories not fall behind on thought leadership. There is dignity and honor in public service, but it must be earned everyday to build the respect of the people who pay the bill. Labels rarely help.

As the 2013 Legislative Session formally starts, my gut check is that it’s not as distressing as the political-insider-nervousness seems to imply. In fact, I continue to be inspired by the opportunity of the Legislature to rise to the occasion and move our state forward.

A handful of issues are front and center.

Our first obligation is to design a responsible 2013-2015 biennial budget. The $32.5 billion spending plan is complex not only because we have the Inslee Administration finding its way and a divided Senate but because there is a backlog of other issues influencing the budget process. Essentially the nuance of the political interplay between the operating, transportation, capital budgets along with McCleary funding, gun safety regulation, Affordable Care Act implementation and other issues are difficult to consider in isolation from one another.

The second vital deliverable, a plan for the McCleary lawsuit, is even less clear at this stage. Many of us are committed to making meaningful progress that upholds the spirit of the Supreme Court ruling. I say “spirit” not as a backtrack from real resources but as a reflection of the need to include early learning and higher education in a broader strategy–a systems approach.

There remains an undercurrent of concern in Olympia–one that I share–regarding the prospect of a heavy lift for tax reform to support McCleary that does not directly link those resources with measurable outcomes.

Specifically, my magic wand goals would be: 1) to be in the top five states in the nation of kindergardeners ‘ready for school’ (the ROI for early learning is off the chart in terms of value); 2) to be in the top five states in the nation in 3rd graders reading at grade level (evidence-based proof as a critical measurement of success); 3) to be among the top five states in the nation in high school graduation (our current ranking of 32nd in the nation is beyond humiliating). A key aspect of this plan, in my view, would be to lead with all day kindergarden in terms of funding from Olympia and then measure an approach to empowering our 295 school districts to meet those goals through more targeted flexibility not less. To me that means measuring outcomes and results not input and process.

In my new role as chair of the Finance Committee, I’ve quickly come to appreciate that tax reform is a short, medium and long term element of our state’s broader work plan. I will outline my approach to these systems issues in the coming weeks. Regardless of the details, a systems approach is the only path forward because of the interconnectedness of our economy. Here are some thoughts, with more to come soon.

This past weekend I stood and marched with thousands of engaged citizens–and a contingent of NRA members taping our event–to call for real action on gun safety. While the complexities of the issue are well known in communities across this country, the opportunity in our state for a thoughtful approach to legislation begins now. The moral imperative is now. The political momentum is now. We need an incremental strategy that brings people along and unites our state. We must take a step forward this year.

Many other issues are joining the agenda and need attention. I will outline a more detailed approach to my 2013 agenda soon. In the meantime, please share your thoughts.

I welcome your emails to reuven.carlyle@leg.wa.gov, comments here on my blog, on Facebook or follow me on twitter at @reuvencarlyle.

It is not possible to pack up my car and drive to Olympia without reflecting upon the blessings of our state and the amazing opportunity to serve as a citizen legislator.

Representative democracy is imperfect, infuriating and seemingly easy to manipulate with the force of money. It is riddled with inconsistencies. But it’s also amazing, beautiful, awesome and courageous.

Your partner in service,

Reuven.